[Congressional Record Volume 143, Number 150 (Friday, October 31, 1997)]
[Senate]
[Pages S11515-S11516]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




               RESTRUCTURING THE INTERNAL REVENUE SERVICE

  Mr. KERREY. Mr. President, I was very encouraged to read in this 
morning's newspaper the majority leader's comments about the agenda for 
the rest of the session. An agreement has been reached on bringing up 
campaign finance reform next year.
  On the list of things that the majority leader had was taking action 
to restructure the Internal Revenue Service. It was a very 
controversial debate over one proposal that Congressman Portman, 
Senator Grassley, Congressman Cardin, and I introduced a couple of 
months ago dealing with a proposed public board of directors. A lot of 
attention was paid to that. Unfortunately, in the process of paying 
attention to that, we lost sight and a lot of people lost sight of some 
of the other things that we are going to legislate on that are terribly 
important.
  I was pleased to see, since the House has passed it, that the 
majority leader indicated that is one of the things he is going to try 
to get done sometime during the rest of the year. There is broad 
consensus on some of the things which we know will improve the 
operational efficiency of the Internal Revenue Service.
  Chairman Roth's Finance Committee had 3 days of hearings on a 
separate set of issues dealing with privacy, dealing with the power of 
the Internal Revenue Service to demand action on the part of taxpayers.
  These are very important issues, and the chairman has indicated his 
desire to take up next year the consideration of those issues. I have 
great respect for Chairman Roth and his desire to bring attention to 
the Internal Revenue Service. His intent and his sincerity lead to, I 
believe, the citizens of the United States seeing that change is 
needed. However, I believe action is needed yet this year in order to 
give the new IRS Commissioner, Mr. Rossotti, the authority he needs to 
be able to manage this agency.
  One of the things we found in our restructuring commission when we 
began in 1995 was that the General Accounting Office disclosed that 
nearly $4 billion worth of modernization and purchase of computers and 
software had not produced the desired result and had essentially been 
wasted. We began our effort in 1995. We held hearings in 1996 and 
1997--12 public hearings, thousands of interviews with current 
employees and taxpayers and professionals that help and assist 
taxpayers.
  We reached our decision in our restructuring commission that the 
current law was unacceptable, that it would not allow us to go from 
where we are today to where citizens need to have us go.
  Today, 85 percent of Americans voluntarily comply with the Tax Code. 
That is down from 95 percent 30 years ago. The real test is what does 
the taxpaying citizen think of the existing system? Their confidence is 
deteriorating rapidly, and it is deteriorating as a consequence of the 
law. The law makes it impossible for the Commissioner to manage that 
agency the way we all want the Commissioner to be able to manage the 
agency.
  We proposed legislation. The legislation has now been passed by the 
House and has the full support of the President. The President is now 
calling upon us to take action. As I said, I am hopeful that the 
majority leader's comments in this morning's paper are an indication 
that there is still a chance that we can get this done.
  We found in our commission deliberations a number of problems that 
are addressed in this legislation.
  First, as I said, the Commissioner can't manage the agency. He can't 
make decisions to fire. He can't make decisions to reward based upon 
performance. He can't make decisions to reorganize. He can't make 
decisions to run the Agency. The law doesn't allow it. You can get 
whoever you want to come in--and I think the President has found an 
exceptional individual from the private sector who understands 
technology and who understands how to manage an organization--but the 
law does not give Mr. Rossotti the authority that Mr. Rossotti is going 
to need to manage the Agency.

  We also found that there is inconsistent oversight both from the 
executive branch and from the legislative branch. So we propose not 
only a public board of citizens that would have responsibility for 
developing a strategic plan, but we also propose to create twice a year 
a joint hearing of appropriations and authorizers and government 
operations people to give not just the oversight but give us an 
opportunity to achieve consensus on what the strategic plan is going to 
be. Twice a year that would be required in order to achieve consensus 
and, most importantly, achieve consensus for the purpose of being able 
to make the right investments in technology, being able to sustain the 
effort over a period of time to do the improvement of operations that 
are necessary.
  It is very difficult to operate the IRS with 200 million tax returns 
a year. We are heading into the filing season right now. It is an 
unimaginable problem to try to manage this Agency and satisfy all of 
the various demands and answer all of the various questions that 
taxpaying customers have as well as being able to go out and enforce 
the law against a relatively small percentage of people who are not 
willing to voluntarily comply with the law; not to mention as well the 
difficult challenge of adjusting the software and rewriting software 
for the millennium problem that needs to be solved in the next 18 
months in order to be prepared on December 1, 1999, for what will 
occur, which is the computers will no longer recognize 99 as being 
1999--a very big problem for a small agency, and an enormous problem 
for an agency like the IRS that will be in the middle of a filing 
season, if their computers go down and they are unable to recognize 
that number.
  So there is an urgency to get this law changed so that this 
Commissioner can have the authority to manage, the authority that is 
needed so the Commissioner has the kind of oversight that is needed, 
and in order to have any chance at all of being able to manage this 
Agency, to reduce the current problems and avoid future problems as 
well.
  The legislation provides incentives for electronic filing. We found 
in our

[[Page S11516]]

examination of the Internal Revenue Service that there was a 25-percent 
rate of error in the paperwork. In electronic filing the rate of error 
was less than 1 percent. Errors mean dollars both to the filers as well 
as the organization that is being operated. There is a tremendous 
opportunity for saving money both from standpoint of the taxpayer in 
what it costs to comply with the code as well as the taxpayer from the 
standpoint of operating the IRS.
  We believe, and everybody who has looked at it believes, that 
electronic filing is a tremendous way to save money and satisfy the 
demand of the customer to close this breathtaking gap that currently 
exists between what a private sector financial service agency can do 
and what the IRS can do. All of us understand what an ATM card is. All 
of us have seen what the private sector has done to reduce the amount 
of time needed to do a transaction with a financial institution. The 
IRS has been unable to keep pace with what the private sector is doing, 
and we think that electronic filing is not only likely to save money 
but will also increase people's confidence that the IRS is closing the 
gap between what the private sector is able to do and what they are 
able to do.
  We have a section in there on taxpayer rights. We do not address the 
so-called 6103, the privacy issues, that Chairman Roth and Senator 
Moynihan did with the Finance Committee, but there are a number of 
things where we are absolutely certain that, if we make some changes, 
the taxpayer will have increased authority. We give the taxpayer 
advocate more independence, moving them outside the IRS; it is very 
difficult to imagine that person doing the job they need to do if, 
after they criticize the IRS, they then depend on the IRS personnel 
system in order to be advanced.
  We make some additional changes on the burden of proof. We think 
having modified it slightly does not produce a situation that will 
result in a deterioration of our ability to get voluntary compliance or 
impose a burden upon individuals who are willing to comply in a 
voluntary fashion.
  We provide as well, Mr. President, some changes that will I think 
address the problem of a complex Code, not by reforming the Tax Code 
but by putting the Commissioner at the table and giving the 
Commissioner the authority to comment either on proposals made by the 
President or by the Congress as to the cost of compliance and putting 
in a complexity index that would give us some kind of idea of cost 
anytime we have some new change we want to make.
  Over and over and over we heard from witnesses coming before the 
Commission who said to us almost nothing is going to work if Congress 
continues to make the Code complex. If we continue to add provisions 
that add to the already estimated $200 billion that the private sector 
taxpayer pays in order to complete their forms, if we continue to make 
the Tax Code more and more complicated, it is going to be very 
difficult to manage the Agency for the purpose of reducing the customer 
dissatisfaction and increasing the voluntary compliance with the 
system.
  Mr. President, I am very encouraged, and I hope we are able, in 
fact--there is now 13 of the 20 members of the Finance Committee who 
are supportive of this legislation. My guess is it will pass the Senate 
with a very large number. I have heard very few people raise objections 
now that we have reached agreement with the administration. I have 
heard very few people say this legislation would not help an awful lot. 
There will be 200 or more collections notices a day going out between 
now and the time that we act, 800,000 notices of either audits or other 
kinds of requirements sent to the taxpayers every single month. There 
is an urgency to act on this.
  Are there other things that need to be done? The answer is yes. Will 
it solve every problem? The answer is no. But it will give the 
Commission the tools the Commissioner needs to manage the agency. It 
will change the oversight and make it possible for us to get shared and 
agreed consensus on where it is we are going to go. It will give the 
taxpayer more authority and more power than they currently have. And it 
will enable us to assess whether or not some new tax idea that we have 
is going to cost us more to implement than we are going to generate in 
revenue as a result of the change in the Code.
  So I am very encouraged by the majority leader's comments in the 
paper this morning, and I am hopeful in that bipartisan way, in a big 
bipartisan way we can pass in the Senate, conference with the House, 
and send to the President for his signature a change in the law that 
would give taxpaying citizens increased confidence not only that they 
are going to get a fair shake but that Government of, for, and by the 
people works.
  Mr. President, I yield the floor and I suggest the absence of a 
quorum.
  The PRESIDING OFFICER (Mr. Frist). The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. BOND. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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