[Congressional Record Volume 144, Number 5 (Tuesday, February 3, 1998)]
[Senate]
[Pages S305-S306]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                               IRS REFORM

  Mr. KERREY. Mr. President, first, let me thank both the majority 
leader and the Democratic leader for resolving this. I thank, as well, 
Chairman Roth of the Finance Committee, Senator Grassley, and others 
who have worked on this. Getting it done by the end of March means 
that, prior to the 15th of April, taxpayers will have substantially 
more power. I know that Senator Roth is looking at some additional 
things that he might add to the bill.
  Let me identify a few that are in this bill that, if we can get it 
passed before April 15, taxpayers will have. Under current law, the IRS 
can come out and try to collect money from a taxpayer that they think 
owes money and, if they make a mistake, tough luck, there is no 
sanction against them. Under this changed law, if the IRS goes out and 
does this and it is discovered that they are negligent, they can be 
responsible for $100,000 in punitive damages to be paid to the 
taxpayer. And if it is discovered that they were wrong, they have to 
pay the legal fees and other expenditures that the taxpayer would have 
been out. It puts the burden on the IRS to make certain that they don't 
send out a collection notice unless they are certain there is a 
collection there. Today, they have no negative sanctions at all. This 
will shift a substantial amount of power to the taxpayers, which I 
think is needed.

  Chairman Roth has used what is called section 6103 to look at some of 
the privacy problems, and he has some additional ideas he may want to 
add in this area. Just with what the House has passed and what we have 
in our bill right now, there is a substantial amount of new power that 
the taxpayer will have. We will make the taxpayer advocate more 
independent. Senator John Breaux and others--and I believe Chairman 
Roth supports it--will make the taxpayer advocate even more independent 
by removing them from the IRS. They do a relatively good job, but there 
is a conflict of interest and they have a difficult time being able to 
be a powerful advocate for the taxpayers.
  There are lots of other things that this piece of legislation does, 
and to be able to get it done by the 15th of April, I think taxpayers 
are going to like it a lot. Here are some more examples. We all know 
the code is complicated, and we all know that one of the cheapest ways 
to get an audience to their feet and to appreciate this is to propose 
some tax break, a deal that we favor. And everybody around here has one 
that they like. If we have a reconciliation bill or a tax bill we are 
going to move through this bill, this law would say that the IRS 
Commissioner has to be at the table when that is being discussed, and 
then to say this is what it is going to add to the taxpayer burden.
  It has been estimated now that it costs somewhere between $100 
billion and $200 billion a year to comply with

[[Page S306]]

the code. This would put the Commissioner at the table and give the 
commissioner a sufficient amount of independence to say this is what it 
will cost, or that it requires an index and some measure of cost to the 
taxpayer.
  We heard Mr. Rossotti talk about his need for power. It's surprising 
how little management authority the Commissioner has, though you will 
not likely see that having an impact immediately. Long-term, there is 
no question that is going to have an impact. My guess is that most 
Members have heard complaints coming from citizens that they know have 
to go to a regional office to get an answer to a question or get a 
problem solved. That is because what IRS has done is increasingly 
centralized the decisionmaking process. And what Mr. Rossotti, 
correctly, is trying to do is decentralize that process, so you have 
human beings in offices at the local level helping to make decisions. 
The way he is proposing to do that is to end the stovepipe stricture 
that exists and create functional structures. He needs the law to be 
changed in order to have the management authority to get that done.
  So I thank the majority leader very much and the Democratic leader, 
Senator Daschle, for their determination to get this done. I thank 
Senator Grassley and Senator Roth. And before I leave the floor, I also 
want to thank Secretary Rubin. There was an awful lot of attention paid 
to a conflict that Congressman Portman, who was cochair of this effort, 
and I had having to do with an independent board for the IRS. We worked 
out those disagreements. Lost, unfortunately, in the process of 
debating that is another change we put in place, which was to require 
some consolidated oversight on Congress' side and the purpose of both 
is so that we can get to a point where you have a shared agreement, you 
have consensus between the executive and legislative branch about what 
you want the IRS to do. It is impossible to make technology decisions.
  The administration is asking for another $400 million for tax system 
modernization. Without this piece of legislation in place and Mr. 
Rossotti with the power and consolidated congressional oversight, I 
would vote no on that.
  This process began with Senator Shelby and I on the floor adding 
money for the creation of this commission. Congressman Lightfoot and 
Congressman Hoyer, the ranking member of the Subcommittee on the 
Treasury, were involved in the House. It began because Senator Shelby 
and I saw that the General Accounting Office had said that nearly $3 
billion of money had been wasted trying to modernize the information 
systems at the Internal Revenue Service. Unless you can get an 
environment where the legislative and executive branch say we agree on 
the plan, we support the plan, we support what we are trying to do--
everybody from the private sector and the public sector said, take 
another $100 million, or $400 million, or whatever you can, to put into 
technology and it is going to be more money down the rat hole.

  To get this done by the 15th of April gives us an opportunity to 
increase confidence that when we give the IRS the technology money they 
need to modernize their system, it is likely to be that they will do 
the right thing. I also predict, Mr. President, that there is a title 
in here that hasn't been given a lot of attention because it is not 
very controversial. I think that 10 years from now it may be seen as 
one of the most significant parts of this legislation, and that is 
powerful incentives to move to the electronic world, electronic filing, 
and the removal of the some of the disincentives in place right now to 
electronic filing. I don't want to talk about the information 
superhighway, but the air rates for electronic filing is less than 1 
percent; for the paper world it is 22 percent. The cost to the taxpayer 
to run the IRS, as well as the cost of the taxpayer to comply is 
substantially higher in a paper world than an electronic one.
  Since the IRS deals with 100 million households on an annual basis, I 
also would forecast that if we can get the IRS into the electronic 
world so taxpayers will know with certainty what their bill is--for 
most families, it is one of the largest bills they have to pay. In 
Nebraska, for just the Federal obligation in taxes, the average 
individual contribution to Washington on an annual basis is $4,600 a 
year. So for most families, their tax obligation is one of the largest 
obligations or bills that they have to pay, and uncertainty about that 
can make it difficult for them to do financial planning.
  I forecast that the electronic filing section of this bill is going 
to be something that is going to benefit taxpayers in lots of ways, and 
I also believe that it is going to be the sort of thing we will have to 
do in lots of other areas of Government if we are going to get the unit 
cost of Government down and the efficiency of the operation of the 
people's Government up.
  So I appreciate very much knowing now with certainty that this bill 
will be brought to the floor prior to the 30th of March and, more 
importantly, prior to the 15th of April, because I think the American 
taxpayers have waited for this all too long.

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