[Congressional Record Volume 144, Number 15 (Wednesday, February 25, 1998)]
[Senate]
[Pages S1003-S1006]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. HUTCHINSON (for himself, Mr. Brownback, Mr. Nickles, Mr. 
        Domenici, Mr. Abraham, Mr. Coverdell, Mr. Smith of New 
        Hampshire, Mr. Inhofe, Mr. Allard, Mr. Ashcroft, Mr. Sessions, 
        Mr. Craig, Mr. Gregg, Mr. DeWine, Mr. Coats, Mr. Lott, Mr. 
        Mack, Mr. Santorum, Mr. Shelby, Mr. Grams, Mr. Gramm, Mr. 
        Murkowski, Mrs. Hutchison, Mr. Smith of Oregon, Mr. Burns, and 
        Mr. Faircloth):
  S. 1673. A bill to terminate the Internal Revenue Code of 1986; to 
the Committee on Finance.


                      the tax code termination act

  Mr. HUTCHINSON. Mr. President, I join Senator Brownback in the 
introduction of the Tax Code Termination

[[Page S1004]]

Act today and will explain a little bit about our motivation and our 
rationale for what I think will prove to be very historic legislation. 
I heard it said that a tax form is a lot like a laundry list, either 
way you are going to lose your shirt; and a lot of folks have lost 
their shirts dealing with this code right here, the Tax Code that we 
believe needs to be terminated, needs to be eliminated, needs to be 
pushed over the cliff, giving us a clean slate to start over again.
  Today's laundry list of tax provisions which now comprise 480 
separate tax forms, requiring an additional 280 supplemental, 
explanatory pamphlets, is causing taxpayers to not only lose their 
shirts but to lose their patience. So what we have here is only the 
beginning. Because, in addition to this, there are the tax forms and 
there are the 280 supplemental explanatory pamphlets that accompany and 
explain and try to make rational, try to make understandable, what to 
most is incomprehensible.
  Taxpayers are frustrated that they must spend a combined total of 5.4 
billion hours complying with the provisions of this Tax Code--5.4 
billion hours. That's just a number to most people. Most people can't 
conceive of the number ``billion'' or exactly what that means. It is 
the equivalent of 20 hours a year for every man, woman, and child in 
America to comply with this Tax Code. A family of four will spend the 
equivalent of 2 work weeks, just for Tax Code compliance. I think you 
begin to understand how expensive it is, what a drag it is upon the 
American economy, and how much wasted time there is for productive 
Americans who could be using that time in better ways.
  The American people are troubled that mere compliance with tax laws 
is costing the economy over $157 billion a year, and they find it 
absolutely incredible that the Federal Government itself spends $13.7 
billion per year enforcing this code, enforcing the tax laws. Yet, in 
spite of the fact that we are spending, on the Federal level, $13.7 
billion enforcing the tax laws, one out of every four calls to the IRS 
will get a wrong answer. The Internal Revenue Service itself doesn't 
understand this Tax Code that we are asked to operate under.
  Unfortunately for taxpayers, and even for overburdened IRS employees, 
the Tax Code continues to grow and become more Byzantine every year. As 
the chart to my right shows, the number of words comprising the Tax 
Code grew from 235,000 words back in 1964, to almost 800,000 words in 
1994. That is an increase of over 300 percent. This complexity has led 
to a veritable cottage industry of high-priced lobbyists. In fact, it 
is interesting, as you look at the chart, to see the parallel between 
the increase in lobbyists--in 1964, about 10,000, between 10,000 and 
20,000--to almost 70,000 lobbyists that we have in Washington, DC now. 
So as we have seen the explosion in the words of the Tax Code, we have 
likewise seen an explosion in the number of the lobbyists up here who 
are lobbying on behalf of one particular provision or another that 
benefits their particular special interest.
  Even the Taxpayer Relief Act of 1997, which I supported because of 
the sizable substantive real tax cuts that it provided to middle-income 
families, continues the trend to complexity of the Tax Code. This act 
added several new forms and resulted in over 830 changes to the Tax 
Code. So it is no coincidence, when the Taxpayer Relief Act was signed 
into law last year--a bill that I voted for that provided the first tax 
cut in 16 years--but when it was signed into law, H&R Block, the 
national preparation service, saw their stock jump 20 percent. Since 
then it has increased 50 percent; to a great extent, I think, because 
of what we did here in Congress in the passage of a bill that further 
complicated an already overcomplicated Tax Code.
  Worse yet, as this chart indicates, the marginal tax rate for typical 
families with a child in college varies widely under the current Tax 
Code. As it was pointed out by two economists for the American 
Enterprise Institute, for typical families with incomes between $10,000 
and $120,000, the marginal tax rates bear a strong resemblance to the 
New York City skyline. If you use your imagination, you can see the 
skyline of New York City in this chart.
  The results of this system are unacceptable. Taxpayers making between 
$11,000 and $30,000 should not pay higher marginal tax rates than those 
earning between $30,000 and $40,000. Likewise, taxpayers making between 
$80,000 and $100,000 should not pay higher marginal tax rates than 
those earning above $120,000. It is fundamentally unfair. Yet, while we 
in Washington debate the merits in the flat tax, the tiered progressive 
tax, the national retail sales tax, the modified flat tax, the VAT tax, 
all the various tax proposals that have been presented to Congress with 
all their various advocates and all their pros and cons, the New York 
City skyline tax continues unfettered.
  Today, I am glad to join Senator Brownback in the introduction of 
legislation that will force this Congress to address this inequality. 
Like a city block that has fallen into disrepair well beyond the 
patchwork repairs of urban developers, our legislation would level the 
current skyline tax and leave a clean slate on which to build a new, 
fairer, and simpler Tax Code. It is not enough for us to continue to 
tinker with this Tax Code. It is not enough for us to merely pass IRS 
reform legislation, though I support that and I will support further 
legislation to protect the rights of American taxpayers. But all of 
that is really incremental. All of that is really just nibbling around 
the edges. We must be much more fundamental in our approach to 
comprehensive tax reform, and it begins with establishing a sunset 
date, a date certain in which the American people can with certainty 
understand and realize that the unfairness and undue complexity and 
Byzantine nature of the current Tax Code will be eliminated once and 
for all.
  Many have claimed that this national movement to terminate the Tax 
Code is irresponsible, in spite of the fact that millions of Americans 
have joined this movement. Hundreds of thousands have already signed 
petitions, called, e-mailed, written letters to their Representatives 
demanding that we terminate this Tax Code or ``scrap the code,'' as 
some have said, or ``explode the code,'' as others have even more 
graphically expressed themselves.
  There are those who would say that in spite of that, that the move to 
terminate the existing Tax Code is an act that is irresponsible. These 
critics have warned that the Government cannot just scrap its Tax Code 
without knowing how it is going to be replaced. I believe what these 
critics fail to realize, is that almost every major spending program of 
the U.S. Government terminates every 5 or 6 years. Part of the wisdom 
of how we operate in this Congress is that when we establish a spending 
program it is for a certain period of time with a termination date, a 
sunset date; and subsequent to that termination date, it follows that 
there will be a debate and there will either be reauthorization or the 
termination of that program. Whether it's Head Start, whether it's the 
school lunch program, the student loan program, or the Intermodal 
Surface Transportation Efficiency Act, ISTEA legislation, which we are 
going to right now on the reauthorization--all of them expire, all of 
them terminate, and must be reauthorized. So, far from being 
irresponsible, this termination process forces Congress to reconsider 
the effectiveness and efficiency of these major spending programs 
before they can be replaced.
  In short, the Tax Code Termination Act places Federal taxes on the 
same footing as Federal spending. It will allow us to clean the slate, 
and on that clean slate, Congress will be able to write a smaller, 
simpler, fairer Tax Code for the American people. In the end, the Tax 
Code will be taken to the cleaners and the taxpayers will get to keep 
their shirts.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1673

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Tax Code Termination Act''.

     SEC. 2. TERMINATION OF INTERNAL REVENUE CODE OF 1986.

       (a) In General.--No tax shall be imposed by the Internal 
     Revenue Code of 1986--

[[Page S1005]]

       (1) for any taxable year beginning after December 31, 2001, 
     and
       (2) in the case of any tax not imposed on the basis of a 
     taxable year, on any taxable event or for any period after 
     December 31, 2001.
       (b) Exception.--Subsection (a) shall not apply to taxes 
     imposed by--
       (1) chapter 2 of such Code (relating to tax on self-
     employment income),
       (2) chapter 21 of such Code (relating to Federal Insurance 
     Contributions Act), and
       (3) chapter 22 of such Code (relating to Railroad 
     Retirement Tax Act).

     SEC. 3. NEW FEDERAL TAX SYSTEM.

       (a) Structure.--The Congress hereby declares that any new 
     Federal tax system should be a simple and fair system that--
       (1) applies a low rate to all Americans,
       (2) provides tax relief for working Americans,
       (3) protects the rights of taxpayers and reduces tax 
     collection abuses,
       (4) eliminates the bias against savings and investment,
       (5) promotes economic growth and job creation, and
       (6) does not penalize marriage or families.
       (b) Timing of Implementation.--In order to ensure an easy 
     transition and effective implementation, the Congress hereby 
     declares that any new Federal tax system should be approved 
     by Congress in its final form not later than July 4, 2001.

  Mr. BROWNBACK. Mr. President, I rise today to make a few remarks on 
our current Tax Code and the Tax Code Termination Act which Senator 
Hutchinson from Arkansas and I are introducing today, along with 24 
cosponsors here in the Senate and the entire Senate leadership.
  We just held a press conference on this topic, and Senator 
Hutchinson, I believe, will be joining me shortly to talk about this 
provision.
  Mr. President, with this bill we will pull the current Tax Code up by 
its roots. And that is no small feat. This is a Tax Code that has roots 
that are down deep in the soil. I think they are hooked into bedrock. 
Some people believe they are there and cannot be pulled up. But they 
can, and they need to be for us to create another American century.
  We heard last fall, when the Senate Finance Committee held its 
hearings on IRS reviews, a horror across the country as people stood up 
to say that is what happened to them--``Let me tell you what happened 
to me''-- with the IRS abuses that have to be changed. But underlying 
the IRS is the Internal Revenue Code. The Internal Revenue Service 
complies with the Revenue Code. The Tax Code of this land has nearly 3 
million words. These are words that govern our lives. They are words 
that micromanage our economic and personal decisions. These are the 
words of Washington causing us to do certain things, or not to do 
certain things. There is too much social manipulation involved in the 
Tax Code.
  One of the leading ways that Washington uses to manipulate people's 
lives is the tax policy that we have. There are three basic ways. One 
is by regulation; another one is by subsidy. You can either regulate 
something to stop it, or you can subsidize something to try to grow it, 
or tax it, or to try to create an exception for somebody to try to fit 
their lives into it so they can get this economic treat at the end, or 
tax it here to stop people from doing something, to the point that our 
Tax Code now is more about social manipulation than it is about raising 
revenue for the Federal Government.
  To prove that point, you can just look at the cost of compliance with 
this Tax Code--this 2.8-million-word Tax Code that is backed up by 10 
million words of regulation. It costs over $150 billion a year just to 
comply with this Tax Code. That is before a single cent is paid on 
taxes. It costs over $150 billion a year to comply with this Code.
  To give people an idea about how much that is, basically, if we took 
every car made in America and drove them into the ocean, that would be 
about the equivalent of what takes place with this. That is how much 
economic activity we are talking about; not that we should begrudge 
those people who make their livelihood by figuring taxes. They are 
good, honest, hard-working Americans. We shouldn't have so many people 
involved in that, and we shouldn't have a Tax Code that requires so 
much that people live in fear of it.
  I want another American century. I want it for my children who are 
11, 9 and 7. And I think we have the time and the moment in history now 
to start creating, to build that next American century. I don't think 
you can do it with this Tax Code which micromanages economic and 
personal decisions out of Washington. Let people in Kansas decide how 
to invest their money and decide how to take care of their families 
instead of taking all their money from them. They can make better 
decisions than people in Washington. It is a fundamental premise upon 
which I have run, and there are a lot of people associated with this 
body that have run on that--that people make better personal decisions 
than, as in a lot of times, the Government forces them to make through 
the Tax Code.
  We need to get back to a Tax Code that is fairer, simpler, flatter, 
and, I might add as well, freer as far as allowing more freedom to the 
average American to be able to make their own personal decisions--
making the decisions about what is best for them.
  The bill that Senator Hutchinson and I am introducing is to sunset 
the current Tax Code. It does not say what we should go to from this 
point. There are a lot of options that are out there. You can look at a 
national tax. You can look at a consumption-based tax. You can look at 
a national sales tax. You can look at some sort of tax simplification, 
although I have to say when I go around Kansas talking about tax 
simplification, they say, ``I get that joke. You tried that one on us 
before and it didn't simplify anything.'' But there are options, I 
think some of which we can still consider, that are out there.
  By this bill, we are not saying which options should be taken. We are 
simply saying by this bill, let us start the great national debate 
about what sort of tax system we ought to go to and do away with this 
one; let us drive a stake through heart of this one; let us salt the 
soil around where the plant grew up so it cannot grow back again; and 
let us debate what other sorts of systems can we go to.
  It is a very similar proposal that we made when we started to balance 
the budget 3 years ago. We said at that point in time, let us balance 
the budget within 7 years. There are lots of different plans out there 
on how to balance the budget. We did not identify at the outset that 
this is the way we are going to do it or that is the way. We say, by 
this date we will have balanced the budget. Let us start the great 
national debate about how we get there. It is the same thing we are 
doing here. We are saying by the end of the year 2001--we hopefully 
will have a balanced budget this year--by the year of 2001, let's have 
a new Tax Code and let's start the great national debate.

  Should it be a national tax? Should it be a sales tax? Should it be a 
simplified system? Should it be another option that is yet to be 
identified? And let us have that out there aggressively being talked 
about. We do not do anything to Social Security or Medicare chapters 
within the Tax Code; we leave those alone. That is a debate for another 
day in another arena. But, otherwise, let us have this great debate 
talking about what we are going to replace this onerous, complex 
burdensome, system with.
  The Tax Code has had its place in history. This Tax Code has. Now 
let's make it history. Americans are ``taxed to the max.'' I believe 
that we need to start the clock on the Tax Code and start the process 
of providing Americans with that flatter, simpler, fairer, freer Tax 
Code system based upon which they can make a lot more of their economic 
decisions.
  I think it is fundamental for us to create this next American century 
by having a different system than the onerous one we have today which 
people cannot understand--that regularly each year Money magazine will 
send a hypothetical taxpayer to 50 different accountants and get 50 
different answers; or, you can ask an IRS agent. Call five of them up 
on the same question, and you will get five different answers. It is 
not that these people are not intelligent; it is that the Tax Code is 
unintelligible.
  I have to admit that I went to law school. I have to ask forgiveness 
for that of a lot of people. I took every tax course, except one, that 
I could in law school. This Tax Code is unintelligible. My tax law 
professor, the Dean of the Kansas University School of Law, had the 
case for driving a stake through and giving capital punishment to this

[[Page S1006]]

Tax Code, because he says, ``Look; I have spent 20 years studying this 
thing, and it still doesn't make sense, and it is still something that 
is far too burdensome, and people don't understand it, nor is it free 
of the American people.''
  You have to wonder why we have evolved such a system. But it is 
because we have taken into this Code far more the notion of behavior 
modification than we have of raising revenue for the Federal 
Government--that behavior modification that seems now to drive more of 
our tax policy than for what we need to raise revenue for the Federal 
Government. It comes from both the left and from the right.
  So, Mr. President, as the current Tax Code is anti-American and anti-
government, it needs to go the way of history. Let's start this great 
national debate about which way we need to go. Let's involve all the 
people across this great land on what they think we need to do.
  I might add one other point. A number of people are concerned, who 
say, ``OK; if you accept this Tax Code, I have made decisions based on 
this Tax Code, and some of these are 15-year or 20-year decisions.'' 
They involve depreciation schedules; they involve investment decisions; 
they involve any number of factors. I think we will probably have to 
put in place substantial transition mechanisms similar to what we did 
on the farm bill when we changed the farm bill and we had a 7-year 
transition period. When we go into trade agreements, a lot of times we 
have 10- to 15-year transition periods, so that people that have made 
decisions based on this Tax Code are allowed the opportunity to say, 
``OK; I have a transition time period that I need to get to something 
else.'' So they need not fear that they are going to be driven into 
some sort of economic chaos or that the country will by changing the 
Tax Code. We need to have a long and appropriate period for transition 
so we do not create that economic difficulty or chaos.
  This needs to be a very thoughtful and a very learned debate. And 
that is why Senator Hutchinson and I have introduced this bill, along 
with 24 cosponsors, that simply says sunset it by the end of the year 
2001 so we can have plenty of time to talk about a different system to 
go to. And it is time. I would love to give to my children in the next 
millennium, as they go into it, a Tax Code where they don't have to 
worry, regarding every decision they make, what are its tax 
implications. But, rather, they just have a certain level of burden 
that is fair, that is low, that is appropriate, and that is one that 
they can feel is a system that leads to some justice.
  I am delighted we introduced this bill and I am delighted to join Tim 
Hutchinson in this effort to sunset the Tax Code, and I encourage all 
of my colleagues to join me in this effort and on this bill to sunset 
the Tax Code.
  To reiterate, this is a tax code that the annals of history will 
record as one of the most onerous burdens ever faced by the American 
people. Our bill aims to make this code history, and by moving our 
legislation we will take the first steps in sunsetting a tax code that 
has become a method by which policy makers have confiscated family 
income and attempted to redistribute it for the sake of big government. 
This must come to an end.
  I am convinced that we cannot have another American Century with this 
tax code. It is anti-family and anti-growth. It cannot be saved--it 
must be scrapped.
  Americans demand tax reform, we have promised tax reform, and now is 
time to deliver on that promise to the American people. Some, of 
course, will argue that we have to be careful about any radical changes 
to our tax laws.
  I agree.
  I believe that we must carefully weigh alternative plans, debate the 
macro and micro effects of each, and then arrive at a thoughtful and 
reasoned solution that is equitable and just. However, as it should be 
clear to anyone, what we now have in place is neither just nor 
equitable. If, as is often said, our tax code is fair why are the 
defenders so quiet? Let's have the debate.
  The bottom line is this: The tax code we now have in place punishes 
good investment decisions and distorts the labor market as well as our 
rates of national savings. It manipulates behavior by adding incentives 
to do one thing while punishing those who do something else.
  A quick look at some of the inadequacies in our code should make the 
case for reform clear. For example if your are a chronic gambler you 
can deduct your gambling losses. But if you are a homeowner who made an 
unlucky investment and the value of your home declined you have no 
recourse to the tax code because you cannot claim a deduction for a 
capital loss. The question is: why can someone deduct a loss associated 
with a bad game of blackjack but not a loss associated with their 
primary residence in which they were the unfortunate victim rather than 
a willing participant?

  The code is full of inconsistencies like the one I just mentioned. 
Sure, we could try and fix these problems within our tax code--and we 
should--but the fact of the matter is our tax code is riddled with 
these inconsistencies which leads me to the conclusion that we cannot 
reform our code, we must get rid of it.
  The bill I am sponsoring today will move us in the direction of 
making some of these basic changes.
  We must move to a tax system where individuals are not punished for 
their investments and where the national rate of savings is not 
distorted through unintended consequences. It is often argued that the 
federal government has an economic obligation to correct for market 
externalities where the marginal social cost exceeds the marginal 
social benefit. Unfortunately, the government has become a marginal 
externality and in so doing has created deadweight economic loss 
through policies which distort economic behaviour and shift incentives 
away from savings and investment. Economically this just doesn't make 
sense. In fact, I challenge anyone within hearing to find ten credible 
economists who will defend our current tax code. A tax system should 
not discriminate against the only component of our national income that 
provides for future economic growth--Investment. But ours does.
  Some will disagree. But this is the precise issue upon which we must 
focus our debate. We must decide where we want the tax to be imposed; 
and further, we must fully understand what effect the imposition of the 
tax will have on the health of the economy.
  However this debate takes shape we should have as our goal a tax 
system that does not distort behaviour and create deadweight loss, 
rather we must have as our goal a pro-growth tax system that encourages 
growth and increases in our national rate of savings--the true vehicle 
to long-run sustainable growth. We should have as our model something 
that is simpler, fairer and yes, flatter.
  The Hutchinson-Brownback Tax Code Elimination Act will start the 
great national debate on how best to change our tax code in favor of 
one that is more equitable to all taxpayers and less complicated for 
everyone. Also, our bill will enable this debate to take place outside 
of the realm of petty demagoguery because it protects the important 
funding mechanisms for Social Security and Medicare. I believe that we 
have a commitment to ensure that we have a full, honest and open 
debate--our bill will give the Senate that opportunity.
  I look forward to this important and historic debate as we prepare 
for the millennium and to a new century that I hope will provide the 
American people with a renewed sense of the American dream, with a 
renewed sense of what it means to be an American and what it means to 
live in America.
  And now as we begin this process we should keep one other thing in 
mind: America is watching.
                                 ______