[Congressional Record Volume 144, Number 41 (Thursday, April 2, 1998)]
[Senate]
[Pages S3117-S3118]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




              CONGRESS SHOULD PASS IRS REFORM BY APRIL 15

  Mr. FAIRCLOTH. Mr. President, I rise to make a few remarks about 
legislation to reform the Internal Revenue Service.
  Mr. President, April 15 is just around the corner, and I would guess 
that sometime between now and then, many a taxpayer will curse the IRS, 
and quite probably the Congress, too, for the tax bill they face. The 
American people are taxed too much, and they are due for some tax 
relief this year.
  Even figuring out how much tax to pay has become a nightmare. At 
17,000 pages, the tax code and regulations are so complicated that no 
one but a few tax attorneys and accountants who make their living off 
that tangle of laws can ever hope to understand it, let alone the 
average working family.
  Mr. President, it looks increasingly like the Senate will fail to 
pass legislation to reform the IRS before adjourning at the end of this 
week for Easter recess. I am deeply disappointed that we appear 
unlikely to pass such legislation before April 15. Last week, I asked 
the Senate leadership to pass IRS reform legislation before April 15. 
In just a moment, I will describe some of the features I think should 
be included in such a bill.
  The American people deserve an IRS Reform bill as soon as possible. 
Last December, I held a hearing in Raleigh, North Carolina on IRS abuse 
of taxpayers. I was shocked at some of the stories I heard. In 
response, I introduced legislation to create an all private citizen 
oversight board for the IRS. My bill would give the oversight panel the 
authority to delve into the auditing and collections practices of the 
IRS which have lead to well documented abuse of taxpayers. The board 
would also have oversight of IRS procurement practices. That should 
help ensure that we never see the IRS waste another $4 billion, as it 
did trying to develop a failed computer system.
  Why is the Senate about to recess without having passed an IRS reform 
bill? In the crazy world of Washington, D.C., it seems that when the 
Congress tries to stop the IRS from improperly collecting taxes, budget 
rules require that the ``loss'' of revenue be offset with more taxes, 
making it almost impossible to clean house at the IRS. And so the 
Senate has now been diverted over the question of how to ``pay'' for an 
IRS reform bill, and which tax increases are least objectionable to use 
for that purpose.
  The referee in such matters is the Joint Committee on Taxation. The 
accountants and tax experts at this committee review all tax proposals, 
and make a determination as to which measures result in a loss of 
revenue, and which are revenue neutral.
  No matter what the green eye shade experts say, it just seems wrong 
to ask the American people to pay for IRS reform. IRS reform 
legislation should not impose new taxes. Fortunately, there are a great 
many good ideas for reforming the IRS which even the Joint Committee on 
Taxation staff have said can be enacted without the need for new taxes.
  First among these is the creation of an IRS oversight board, such as 
the one I have proposed in my own IRS reform legislation, S. 1555. 
There are a number such reforms which can be implemented without any 
need for offsetting revenues, including: a requirement that IRS agents 
explain taxpayers' right to them in interviews; low-income taxpayer 
clinics; archiving IRS records so that Congress can delve into the 
inner workings of the agency; cataloging complaints of IRS employee 
misconduct; prohibiting the IRS from seizing taxpayers' homes in small 
deficiency cases, among others. One idea that would impose no 
additional cost, but which I am sure would make a big difference for 
frustrated taxpayers who struggle to find a person to talk to in within 
the massive IRS bureaucracy: require that all IRS notices must contain 
the name and telephone number of an IRS employee to contact.
  In fact, of the 75 separate reforms currently being considered by the 
Senate Committee on Finance, over 50 are revenue neutral, according to 
the Joint Committee on Taxation. At a minimum, these reforms should be 
considered as soon as possible. If any revenues are needed to pay for 
additional reform, I suggest that Congress look first to the IRS's own 
budget before turning to the American people.
  For those who worry that the IRS will not have enough resources to 
collect taxes, it is worth noting that the IRS budget has grown by a 
whopping 71 percent in real terms since 1981. Many working families 
haven't been so fortunate. Simply freezing the IRS budget at 1998 
levels would generate an additional $500 million in savings, which 
could be applied to offset more costly IRS reforms. That would also 
help make it clear that Congress considers taxpayers to be at least as 
important as the IRS bureaucracy.
  Mr. President, I recently wrote an editorial for the Wall Street 
Journal on the subject of IRS reform, which appeared on March 31, 1998. 
I ask unanimous consent that this article appear in the Record at the 
conclusion of my remarks.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See Exhibit 1.)
  Mr. FAIRCLOTH. In conclusion, Mr. President, I believe that the 
Senate can and should pass IRS reform legislation before April 15. I 
hope my colleagues will join me in pushing for such a reform bill as 
soon as possible.

                               Exhibit 1

             [From the Wall Street Journal, Mar. 31, 1998]

           Will IRS Reform Get ``Scored'' Into Tax Increase?

                          (By Lauch Faircloth)

       In the crazy world of Washington, D.C., legislation to 
     reform the Internal Revenue Service is beginning to look more 
     and more like a bill to increase taxes by several billion 
     dollars. This outrage must be stopped, and soon.
       Last fall, the House of Representatives passed legislation 
     based on the recommendations of the National Commission on 
     Restructuring the IRS, the so-called Kerrey-Portman 
     Commission. Most of the provisions of that bill are good, 
     commonsense measures that will make the IRS more accountable 
     to the public and reform the way the IRS conducts its 
     business. Some of the ``taxpayer bill of rights'' provisions, 
     however, have been ``scored'' by the Joint Committee on 
     Taxation as costing the government revenue. In Washington-
     speak, this means that these provisions require an 
     ``offset''--better known to most Americans as a tax increase.
       House bill drafters were creative in finding a ``loophole 
     closer'' for their IRS reform bill's offset. Their idea is to 
     clarify the deduction for accrued vacation pay, which would 
     net an additional $2.85 billion over five years. In this 
     case, the loophole closer probably is just that; it's 
     arguable that federal tax court decisions have strayed from 
     the intent of Congress in 1987 legislation concerning the 
     proper treatment of the taxation of vacation pay as deferred 
     compensation. But there are precious few other true loophole 
     closers where that one came from. Virtually every other 
     potential ``revenue offset'' on the table would come from one 
     of two sources--a laundry list of 43 tax increases proposed 
     by the president, or unspecified tobacco tax settlement 
     money. Either way, they are tax increases.
       And there's another problem: The Senate version of IRS 
     reform is shaping up as two to three times more expensive 
     than the bill passed by the House last fall, according to 
     staffers of the Senate Finance Committee. That means that 
     congressional staffers drafting the revised bill must dip 
     into their bag of ``loophole closers'' (translation--tax 
     increases) suggested by the president to pay for the 
     additional lost revenue to the government.
       I find it patently offensive that any reform of the 
     Internal Revenue Service should impose a cost on the American 
     people. After all, the IRS employs more than 100,000 people, 
     46,000 of whom work in enforcement, with a total budget of 
     over $8 billion. The entire Drug Enforcement Administration--
     our frontline defense in the war on drugs--has a staff of 
     only 8,500. The IRS can audit any American at any time, but 
     drug traffickers

[[Page S3118]]

     would have nothing to fear under the present administration's 
     priorities.
       What is the solution? For one thing, the omnibus approach 
     to IRS reform--cobbling together many reforms into one large 
     bill--should be reconsidered, Many worthwhile tax reforms 
     have been ``scored'' as resulting in no lost revenue to the 
     government. In other words, they don't cost a thing. They 
     should go forward on their own.
       Chief among these provisions is an oversight board for the 
     IRS. The House IRS reform bill included such a board, Recall 
     that Treasury Secretary Robert Rubin originally opposed that 
     idea, until the president gave it his surprise endorsement. 
     What followed was a series of negotiations between Congress 
     and the administrations over the makeup of such a board. The 
     board is still too weak, and I have offered my own 
     legislation to create a board of nine members, all private 
     citizens. I do not think the Secretary of the Treasury, the 
     Commissioner of the IRS or the IRS employees' union 
     representative should be on such a board, as they would be 
     under the House version. That's just too much like the fox 
     guarding the hen-house.
       Other provisions that do not result in lost revenue to the 
     federal government include strengthening the office of the 
     taxpayer advocate; prohibiting executive branch influence 
     over taxpayer audits; changing the way IRS records are 
     archived to provide greater oversight; establishing low-
     income taxpayer clinics; and reforming certain sections of 
     the tax code that were intended to provide taxpayer privacy 
     protections, but that IRS attorneys have instead used to 
     shield the IRS's inner workings from congressional oversight.
       If offsets are needed, let's look first at the massive $8 
     billion budget of the IRS itself before turning to the 
     taxpayers. That budget has increased 71% in real terms since 
     1981. Merely keeping the IRS budget at last year's levels 
     would yield half a billion dollars. Also, don't forget that 
     the president's own budget plan has a list of more than $30 
     billion in suggested spending cuts. That would more than pay 
     for even the most ambitious tax reform, as long as Congress 
     holds the line on new federal spending. And before we dismiss 
     waste and fraud as a source of savings, recall that the 
     Social Security Administration has just uncovered a very 
     expensive scam--prison inmates have been receiving as much as 
     $3.46 billion in improper Social Security checks each year. 
     That money could help save Social Security and clean up the 
     IRS.
       The bottom line is this: The American people should not be 
     asked to pay for IRS reforms. Congress should focus on 
     trimming the IRS budget, or using the savings from federal 
     spending cuts suggested by the president to clean house at 
     the IRS. That way, Congress can offer the American people 
     some much-needed relief, without a dose of castor oil.

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