[Congressional Record Volume 144, Number 52 (Friday, May 1, 1998)]
[Senate]
[Pages S4137-S4139]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      THE INTERNAL REVENUE SERVICE

  Mr. DORGAN. Mr. President, let me go to a couple of other issues.
  About the Internal Revenue Service hearings that are being held in 
the Senate Finance Committee this week, let me say first that I think 
those hearings are appropriate. I think anywhere you find abuses of a 
taxing agency, they are repulsive and disgusting. Those who commit 
those abuses ought to be summarily fired and penalized in any other way 
the agency can do so.
  It is clear to me from the hearings that have been held that there 
has been mismanagement at the Internal Revenue Service and that some of 
the circumstances of abuses they should have known about, they didn't. 
On some of misconduct that they did know about, they didn't take 
appropriate action. And if these hearings accomplish anything, I hope 
it is that this agency simply cannot ever treat lightly the abuse of 
the American taxpayer. It is ugly and disgusting and must never happen. 
All tax agencies have a special responsibility to make sure it doesn't 
happen.
  I ran a State tax agency for some long while in a State capital, and 
I understand about it. We were the repository of hundreds of thousands 
of income tax returns having sensitive financial information of all the 
folks of our State. I understand the responsibility of taxing 
authorities to make certain that the agency behaves appropriately with 
taxpayers. And I am appalled by some of the stories that have come from 
these hearings.
  We ought to stop in its tracks any abuse that exists anywhere, 
anytime in the IRS, and we ought to do it now. And I will support the 
legislation that comes to the floor of the Senate dealing with changing 
some of the procedures down at the Internal Revenue Service.
  But I want to tell you something else we should stop, and we should 
do it now. We should stop the fundraising that goes on surrounding 
these issues. I hold in my hand a fundraising letter by a Member of the 
Senate. It was sent to people across this country, coordinated, I 
assume, to be timed with the IRS hearings in the Senate Finance 
Committee. It is, I understand, the second such fundraising letter that 
has gone out, possibly the third. The letters have been timed, I 
think--at least I am told--to coordinate somehow with the hearings on 
the IRS.

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  This fundraising letter for a political party, signed by a Member of 
the Senate, talks about ending the IRS reign of terror. It goes on and 
on and so on. It says: We are on the right side. If you will just send 
us $25, $50, $100, $250, $500--if you will just send us some money, we 
will be your pen pal for life. We will keep sending you these letters. 
We will work hard in Congress on all the right things. I think it is 
the right thing to do to hold hearings in the Finance Committee about 
IRS abuse. It is not the right thing for the party that schedules those 
hearings to use the opportunity to send fundraising letters all across 
this country. In some cases, they have even boasted about the money 
they have raised in the first round of fundraising letters with respect 
to the hearings they held. What that suggests is, this is a lot more 
than public policy. It is a very heavy dose of money politics.

  There is no question that this country's Tax Code is in desperate 
need of change and repair, and we have more ideas to change it than 
there are Members of Congress. We have people who say, let's have a VAT 
tax, let's have a flat tax, let's have a national sales tax. There are 
dozens of variations on each. It is interesting that those who complain 
the loudest in this Chamber about the complexity of the Tax Code are 
those who have hauled the heaviest loads of legislation on the floor of 
the Senate to complicate the Tax Code.
  I believe the first tax form and return and instructions were a total 
of something like seven pages, with everything. Now it is like a huge 
mail order catalog, with all of the forms and all the instructions. I 
understand that people can't deal with that complexity and should not 
have to. This Tax Code is Byzantine. It is way out of whack. We ought 
to change it. We ought to simplify it. It is interesting that those who 
have made it complex have done so because they've wanted special deals 
for themselves, carving out special tax breaks for a few while others 
are asked to pay more.
  It wasn't too long ago that we would read stories about a corporation 
in this country that made $4 billion of income in a year. Do you know 
how much they paid in income tax? Zero, nothing, no tax. They were tax 
exempt. So we made some changes in the Tax Code to see if we couldn't 
get them to pay taxes like other Americans. All of those changes in the 
Tax Code changed the circumstances of the code to add lines to the code 
and make it more complicated. I understand all that.
  I am going through a list of things I think we can do to dramatically 
simplify the Tax Code. I have proposed some legislation that I think 
would allow up to 70 million Americans to never have to file a federal 
income tax return again. I will go through that and explain how I think 
that can occur.
  But I must say, I find it interesting that in this climate, what we 
have is fundraising letters coordinated with hearings designed, I 
think, to pave the way for a tax system to say to the American people, 
``What we would like to do is change your tax system so there is one 
rate for everybody.'' Steve Forbes says that. I spoke at a banquet once 
when he was sitting in the audience. I said, ``You know, only in 
Washington, DC, would a billionaire proposing a significant tax cut for 
himself be considered having a bold public policy statement.'' Only in 
Washington, DC, could that happen. A single rate, so the richest 
American pays the same tax rate as the lowest person on the income 
scale when they file their tax returns? I don't think so. It doesn't 
make sense to me.
  It seems to me the person who is making $20 million a year can afford 
to pay a couple of percent more than somebody who is making $22,000 a 
year and trying to raise a couple of kids. So, should we have a one-
size-fits-all, one-rate-fits-all tax system? I don't think so.
  How about a national sales tax? We have people over there on the 
other side who are offering national sales taxes. In fact, I was down 
at the Brookings Institution a while back and spoke. I saw a study they 
have just done that says if you have a national sales tax in this 
country, you are going to have to tax almost everything with this sales 
tax and you are going to have a rate that is in excess of 30 percent--
30 percent, to raise the same money the current system uses. Wouldn't 
it be interesting to see how people would react if they said, ``Oh, you 
are going to buy a home? Yes, that's the price, but there is one more 
little thing: You have to pay a 30 percent sales tax on the home.'' How 
long do you think the American people would stand for that? It might 
sound kind of simple. The fact is, a 30 percent sales tax, or 35 
percent sales tax, added on top of the local sales tax of 4, 5, 6, 8, 9 
percent in some parts of the country--I wonder if people are going to 
think that is a pretty healthy tax program. I don't think so.
  There is, it seems to me, an opportunity to do a couple of things.
  (Mr. HAGEL assumed the Chair.)
  Mr. DORGAN. Mr. President, we can pass some legislation that will be 
brought to the floor of this Congress that deals directly with some of 
the abuse that has been disclosed at these hearings.
  I agree with one of the other Senators this morning who said there 
are a lot of folks at the Internal Revenue Service who do good work and 
good public service. I received a letter the other day from a fellow in 
North Dakota, a conservative Republican businessman who is very 
successful and has done very well for many years. He said, ``I don't 
want you to tell anybody that I told you this, but I am watching all 
this IRS stuff, and I have been in business for 35 years and have had a 
lot of dealings with the Internal Revenue Service. And I have never 
dealt with any one of them who weren't good, honest people and easy to 
deal with.'' He had nothing but good to say. I jotted a note back and 
said, ``Good for you.''
  That is probably the case for a lot of people. I think most people 
find their experience with the Internal Revenue Service is fair, but 
when they find it is not, when they find abuse, we have a 
responsibility to stop it, even if it is just the exception.
  We intend to pass a piece of legislation--and I intend to vote for 
it--that responds to that. Last November, the House of Representatives, 
incidentally, passed similar legislation by a vote of 426 to 4. We 
could have passed this legislation last November, or at the very latest 
in January when the Congress returned, but we did not. Delay, delay, 
delay and more delay, until now. We are probably ready to have the 
legislation brought to the floor next week. As I said, I will be 
supportive of it, but we could have passed this legislation long, long 
ago. I worry--and I hope I am not right--that it had a lot to do with 
these fund-raising letters that have gone out in some concert with 
these hearings.
  Let me describe just for a moment what we could do to the tax system. 
We could do something positive for tens of millions of Americans. I 
want to describe it. It is called the Fair and Simple Shortcut Tax plan 
or ``FASST.'' I have worked with some of my colleagues on it in both 
the Senate and House.
  The proposition is this: Many Americans have as their only income the 
wages they earn at their workplace. They ought not have to file an 
annual federal tax return. Some 30 countries in the world have some 
kind of income tax in which you don't have to file an annual return.
  For someone who gets most of their money from their wage or salary at 
work, we can say to those folks, ``Your tax withholding at work can be 
modified slightly so that it becomes your actual tax liability when it 
is sent to the IRS by your employer. You don't have to worry about 
filing any tax return.'' No April 15 deadline. No waiting in line at 
the post office. No getting your records together. You don't have to 
file an annual tax return. Up to seventy million people, I estimate, 
could be taken off the tax rolls in this country with the returns that 
are now filed if we used a plan like this. Let me describe the plan to 
you.
  The plan would say that if you are a family earning up to $100,000 a 
year in wages, or a single taxpayer earning up to $50,000 in wages 
annually, and if your other income, that is non-wage income such as 
capital gains, interest and dividends is less than $5,000 for a couple, 
and $2,500 or less for a single person--then you simply fill out a W-4 
form, as you now do at your place of employment. On your W-4 form, we 
will make a couple of other check marks. You change it very little. 
There

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will be a couple of additional check marks--one for child credit and 
the second for home ownership.
  When you complete that W-4 form at work, if you choose the option of 
using the Fair and Simple Shortcut Tax plan, then you don't have to 
file a federal income tax return. Your employer, working from a table 
prepared by the IRS, will determine what your withholding is. When your 
employer sends in that withholding to the IRS that is your exact tax 
liability, no tax return is needed.
  Up to 70 million Americans would be able to do that easily, quickly, 
with no tax return filed and no records to be gathered. In addition, up 
to $5,000 in other income would be exempt from taxation because you are 
not trying to trace every nickel and track down every dime of some 
other income stream in order to have withholding from it.

  It is a wonderful incentive at that point because there is an 
incentive for interest and capital gains at the bottom that is 
nontaxable. The incentive for the rest of your wage income is to say 
that you are going to pay taxes at a 15% after claiming several 
important deductions. And you are not going to have to file a tax 
return. The W-4 is modified slightly so that you are still able to get 
credit for home ownership and a deduction for interest payments on a 
home mortgage.
  All of that can be done today. It can be done in Congress now. It is 
not complicated. Some 30 countries have some modified approach to this 
no-return filing system.
  Is it as aggressive as some saying, ``Let's just get rid of the 
entire Code?'' No, it is not. In fact, my plan would say every taxpayer 
has the choice. The choice is do you want to use the Fair and Simple 
Shortcut Tax plan and not file a return or they can say, ``I really 
don't want to do this. I fit the income requirements, but I don't want 
to do it. I prefer to file a return every year. I prefer to go 
searching for my records. I prefer to wait at the post office because I 
enjoy that. I just prefer to do it the hard way. I prefer the current 
system.''
  I don't think many would do that, but my point is this would be a 
choice for most taxpayers. However, those who do not fit in this system 
would file, as they do now, under the current system. I would make some 
changes to help simplify things for them too.
  I would eliminate, for a fairly sizable part of the population, the 
alternative minimum tax calculations which have become very complicated 
and were never intended to harness a bunch of taxpayers who are making 
$80,000 or $150,000. The alternative minimum tax calculations were 
designed to try to get the largest enterprises in the country that were 
making tens of millions of dollars and paying nothing, to start 
becoming taxpayers once again.
  I also propose for those who want to use the old system that they get 
a tax credit to help offset the cost of tax preparation. Businesses 
would get a tax credit to offset the cost of preparing the W-4 forms. 
There would be almost no added cost here for businesses, but I would 
provide some incentive for them.
  Again, this is an approach that can be done, and it can be done 
quickly and easily. This Congress could embrace it. It is the only plan 
that I am aware of that really relates to honest simplification of the 
Tax Code. Taking 70 million people out of the loop of having to file an 
annual income tax return is a huge step forward toward simplification.
  I hope, Mr. President, as we begin talking about what we do about 
this frightful complexity in the Tax Code, that we will decide as a 
Senate and a Congress that this is a plan that we can embrace.
  William Gale, a senior fellow at the Brookings Institute says:

       Roughly half of the U.S. taxpayers could be placed on a no-
     return system with relatively minor changes in the tax 
     laws.''

  A no-income-tax-return system.
  The GAO says:

       No-return systems are proven. More than 30 countries, 
     including Germany, Japan, and the United Kingdom use some 
     form of the no-return system.

  I hope that some of my colleagues will join me as I begin to discuss 
some of these issues in the context of tax reform in this Congress.
  Mr. President, I have a couple of other items that I wish to discuss 
today briefly. There was a substantial amount of discussion this 
morning about a range of issues, most of them dealing with taxation. I 
just wanted to cover a couple of other items--one, that I have spent a 
lot of time talking about on the floor of the Senate, but then I want 
to talk about the larger agenda issues those of us on this side of the 
political aisle in the Senate want to see brought to the Senate for 
debate.

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