[Congressional Record Volume 144, Number 54 (Tuesday, May 5, 1998)]
[Senate]
[Pages S4251-S4252]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


[[Page S4251]]
     INTERNAL REVENUE SERVICE RESTRUCTURING AND REFORM ACT OF 1998

  The Senate continued with consideration of the bill.
  Mr. ROTH. Mr. President, I ask unanimous consent that the debate on 
H.R. 2676 continue for debate purposes only until 4:30.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. ROTH. I suggest the absence of a quorum.
  The PRESIDING OFFICER (Mr. Gorton). The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Ms. MOSELEY-BRAUN. Mr. President, I ask unanimous consent that the 
order for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Ms. MOSELEY-BRAUN. Mr. President, I am a member of the Senate Finance 
Committee, so it gives me special joy that we have at last turned the 
Senate's full attention to revamping the Internal Revenue Service.
  Should we have acted earlier? Of course, we should have. The House 
overwhelmingly passed its version of this bill months ago by a vote of 
426 to 4, and so the reason that we have delayed, frankly, is 
inexplicable given this bill enjoys such broad-based support in both 
Chambers of the Congress.
  The Finance Committee unanimously reported this bill out for action 
in March, and so I am no less encouraged, however, that we are only 
this week acting on the bill. As you know, we had a subsequent set of 
hearings which spoke to and gave voice to additional problems with the 
Internal Revenue Service, and that had something to do with the delay. 
I think the American people would have liked to have seen us pass the 
legislation before the tax filing date in April. Nonetheless, we are 
here today in May to pass this bill, and I am hopeful that we will do 
so.
  Also, I am very pleased by the way that we have in the interim, since 
the beginning of these hearings and investigations, put in place a 
Commissioner of the Internal Revenue Service who has demonstrated his 
willingness to act. I am thankful, also, that in the additional 
hearings that we had in the Finance Committee, any additional 
information that came out will provide that Commissioner with the 
information he will need to take immediate action to, one, uncover 
abuses, two, rectify them, and three, to protect those good employees 
in the IRS who have been trying to help with the reform of that agency.
  Over the last 8 months, I, along with a number of my colleagues on 
the Finance Committee, have heard horror story after horror story about 
the abuses inflicted on taxpayers by unsupportable activity within the 
IRS. We were all outraged by the stories of armed raids on innocent 
taxpayers' property, unauthorized and unnecessary audits of working-
class families, and excessive fees and penalties charged to taxpayers 
who are just trying to pay their tax bills on time and in a responsible 
manner. The tales told at those hearings were appalling, but, frankly, 
they were nothing new to the American taxpayers who know too well what 
can happen when an agency with the powers of the Internal Revenue 
Service goes out of control.
  Unfortunately, these stories were not the first that we had heard 
about these abuses. In fact, if anything, the Congress was called upon 
to act precisely because of the taxpayers and citizens who were raising 
the point with all of us as elected officials and demanding action from 
us. So, finally, we now have an opportunity to respond to them. The 
calls that we had in my State of Illinois were from Illinoisans who had 
been verbally abused or harassed by auditors, people who had grown 
frustrated with not being able to get a simple answer to a simple 
question, or a nice answer to a simple question. All of those things, I 
think, reach critical mass. And finally the Congress is going to act on 
this matter. I think it is not a moment too soon. We all have a 
responsibility and a duty to correct the abuses and an obligation to 
put the ``service'' back into the Internal Revenue Service.

  I would like to point out that it has been some 40 years in the 
making since Congress has considered significant reforms to the IRS. 
With this bill we therefore have a historic opportunity to overhaul 
this agency and to transform it into an efficient, modern, and 
responsive agency that is focused on doing its job and not abusing the 
American people. The IRS interacts with more citizens than any other 
Government agency, or, frankly, any other private sector business. It 
collects fully 95 percent of the revenue which is needed to fund the 
national Government. It is, therefore, unfortunate that it has become 
one of the most feared and most hated agencies in the country.
  But the blame, frankly, does not lie solely with the IRS. My mother 
used to have an expression: ``When you point one finger, you have three 
fingers pointing back to yourself.'' I think, frankly, that Congress 
bears a significant amount of the blame for not exercising its 
appropriate and responsible role in oversight of the agency, but also 
for creating the chaotic tax collection system that we now have. I 
think, indeed, Congress bears the greatest blame for creating a Tax 
Code that is burdensome and is so complicated that the transaction 
costs to ordinary citizens are very often overwhelming. People who 
should otherwise be able to file a simple tax return find themselves 
frightened into going and paying tax preparers simply because the Code 
is so complex that they are afraid they can't make their way around it.
  In addition to the awful state of affairs at the IRS, our tax system 
has also presented a series of tax loopholes for dishonest citizens. 
You have the worst of both possible worlds. You have on the one hand 
complications that honest citizens have a hard time finding their way 
around, and loopholes that dishonest citizens find too readily.
  Last week, it was announced that a ``tax gap'' existed, which is the 
amount of nonpaid taxes that people avoid by taking advantage of the 
loopholes or the complications in the Code. That tax gap amounts to 
some $195 billion a year. In other words, honest citizens pay $1,600 a 
year per year forever in the taxes they pay because of tax avoidance. 
While our hearings did not go far enough in talking about this issue of 
tax compliance, it certainly, I think, heads in the right direction if 
we can restore some sense of fairness, and if we can restore some sense 
of confidence with the American people in the operation of this agency.
  Mr. President, additionally I hope that after we have passed this 
bill we will also begin to address the issue of tax complication. Just 
last month, some 120 million Americans sent out some form of tax return 
to the IRS. Of these taxpayers more than 40 percent of them filed 
either the short tax form known as the 1040EZ or the 1040 long form. 
These two forms--one of which is only one page long--are designed to be 
simple and easy to complete. But each year, again, millions of 
Americans paid millions of dollars to tax preparers to fill out these 
forms because they are afraid of making a mistake and facing the wrath 
of an IRS, which, frankly, is not known to be very user friendly. I 
hope that we will address the issue of tax compliance or tax 
simplification as we address the issue of reform of the agency, because 
while these two things are related they are not the same thing, and I 
think it would be a huge mistake to think that with the passage of this 
legislation we would have cured the underlying problem with the 
complexity and with the confusion that the Tax Code itself causes.

  Unfortunately, we frankly have been moving in the wrong direction in 
regard to tax simplification or getting rid of the complexities. For 
example, in last year's Balanced Budget Act, which was, of course, 
hailed as providing significant tax relief to the American people, the 
Balanced Budget Act added over 1 million new words and 315 new pages to 
the Internal Revenue Code. The capital gains computation form alone 
grew from 19 lines to 54 lines. So anybody who filled out their tax 
forms in April knows how much more difficult we have made the Code by 
trying to tinker and trying to give tax relief here and tax relief 
there.
  The result is tax complexity that is, frankly, overwhelming. The 
average taxpayer will spend some 9 hours and 54 minutes preparing just 
the 1040 form for the tax year 1997. The total burden on all taxpayers 
for maintaining records, preparing and filing their tax returns, is 
estimated to be in excess of 1.6 million hours this year. That is kind 
of a funny number and incomprehensible. But when you consider how

[[Page S4252]]

many people have to put in that kind of time, it really is a staggering 
use of energy and time by the American people that, frankly, could be 
put to better use if we had a more simple and fair Tax Code.
  I believe, frankly, the system we have now is outrageous. Having the 
additional headache of figuring out the complex forms dealing with rude 
and cranky workers at the IRS and possibly facing audit is really 
overwhelming. That is what has led to this day and brought us to the 
point of reforming and changing the system.
  Mr. President, I think we took the first step toward positive change 
last October when the President nominated and we confirmed Mr. Rossotti 
to oversee the IRS. Commissioner Rossotti has already begun the process 
towards changing the way business is done over there. During his short 
tenure he has already been quick to respond to problems that are 
identified. He has proved that he is not afraid to make the hard calls 
at the IRS. Since his appointment in late October, Commissioner 
Rossotti has made several major administrative changes that will help 
taxpayers break through some of the red tape at the IRS.
  In December, Commissioner Rossotti announced the establishment of 
interim procedures requiring higher level management approval of 
seizures of property for nonpayment of Federal taxes. The issue of 
seizures was really one of the high points of the abuses that we heard 
because they are so dramatic and so obvious. In January, Commissioner 
Rossotti announced broad-sweeping changes designed to modernize the 
Service. This ``modernization'' was tailored to emphasize customer 
service as well as production within the agency. Then, in February 
Commissioner Rossotti announced internal changes to address the 
innocent spouse problem, and just this past month he announced the 
appointment of William Webster to head the IRS' review of the Criminal 
Investigations Division. I think we should all applaud his willingness 
to implement some meaningful changes and his interest in moving forward 
quickly on an issue which, frankly, has been very long in the coming.
  The solution does not lie solely in mending the day-to-day 
administrative operations of the IRS, however. Indeed, this body shares 
a great responsibility in ensuring that we are responsive to the needs 
of taxpayers by passing laws that will put the ``service'' back in 
International Revenue Service. I believe that this bill is a major step 
in that direction.
  In addition to giving Commissioner Rossotti the additional statutory 
authority he needs to continue restructuring the management of the 
agency, this bill also contains several administrative changes. A new 
oversight board is established that will have the responsibility of 
reviewing and approving the operational functions of the IRS and 
reviewing the practices and procedures of the IRS. The IRS is given 
greater flexibility in hiring and firing IRS employees, and electronic 
filers are encouraged to continue filing electronically by removing 
barriers.
  This legislation, however, also provides taxpayers with a plethora of 
expanded rights and protections, including provisions that will allow 
taxpayers to enjoy expanded ability to sue the IRS when the IRS 
blatantly and intentionally disregards the law; a provision that will 
give the Secretary of the Treasury the authority to provide up to $3 
million annually in matching grants to low-income taxpayer clinics; and 
a provision that will eliminate the penalty for failure to pay taxes 
when a taxpayer is paying those taxes under an installment agreement. 
The rules for computation of interest have been simplifies. For those 
taxpayers who are audited, the bill will include procedures to insure 
that due process is afforded prior to the seizure of any property and 
it will require that the IRS set up a process so that any lien, levy, 
or seizure will have to be approved by a supervisor. Taxpayers would 
also be given greater access to installment payment agreements with the 
IRS, greater access to information about the appeals and collections 
process, and greater access to statements regarding the payments and 
balance owed in installment agreements.
  In addition, several of provisions that I helped craft, and that I 
believe will give taxpayers further protection, have also been included 
in this partisan legislation. For example, taxpayers who successfully 
defend themselves in disputes with the IRS will receive increased 
reimbursements for legal fees and other expenses incurred. In our 
hearings we heard from several attorneys who believes that the IRS 
should pay more reasonable damages when the IRS erroneously pursues an 
innocent taxpayer. I believe it is only fair that we not leave the 
taxpayer holding the bill when the IRS audits them unfairly.
  Finally, this legislation will also give greater protection to other 
individuals who are often overlooked by the tax law. For example, new 
protections for innocent spouses are included in the bill. The change 
would make couples who file joint returns liable only for taxes based 
on the income of the husband or wife instead of the total liability for 
all of the couple's taxes.
  There are several other provisions that I believe will also serve 
useful to many taxpayers. Among them is a so called technical 
correction that will ensure that more farmers are eligible for the 
inheritance tax relief that was approved last year by Congress and a 
provision that would protect computer software writers from having 
their ``source code'' information arbitrarily accessed by the IRS. I 
support the amendment, it is unfortunate that the unintended 
consequences of complexities we've recently added to the Tax Code come 
to be remedied by such technical corrections.
  All of these changes are needed to amend the current operation of the 
IRS, but there is still much more to do to address the desperate 
condition of our tax system as a whole. This bill presents a vital 
first step in that process.
  In closing, I would like to by commending Senators Roth and Moynihan 
on their leadership in the Senate Finance Committee on this bill. I 
would also like to the Kerry Commission for finally getting us to this 
point.
  I would have preferred to have completed fundamental reform of the 
IRS prior to the April 15th deadline that 140,000,000 taxpayers have to 
meet, but as the saying goes, ``better late than never.'' I remain 
encouraged that fundamental reform of our tax system as a whole is 
around the corner, and I look forward to completing action on this 
bill. I urge my colleagues to join me in supporting this legislation, 
and in doing so beginning the process of reforming our tax system in a 
manner that is fair and efficient for all Americans.
  I commend the commission, the Kerrey commission. Senator Kerrey is on 
the floor. I want to commend him for his work in this regard. He has 
done a great deal to bring us this far. I want to commend the chairman 
of the Finance Committee, Senator Roth, for his work in giving us a 
bipartisan bill. I want to register my strong support for this 
initiative. I think this bill shows Congress at its best, when we are 
functioning in the oversight capacity over these agencies that I think 
the Founding Fathers intended us to do. This oversight is so vitally 
important to restore confidence not just in the Internal Revenue 
Service but in our Government as a whole.
  I thank the Chair, and I yield the floor.

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