[Congressional Record Volume 144, Number 55 (Wednesday, May 6, 1998)]
[Senate]
[Pages S4406-S4409]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
INTERNAL REVENUE SERVICE RESTRUCTURING AND REFORM ACT OF 1998
The Senate continued with the consideration of the bill.
Amendment No. 2347
(Purpose: To require 1 member of the Internal Revenue Service Oversight
Board to be a representative of small business)
Mr. GRAHAM. Mr. President, I rise for the purpose of offering an
amendment on behalf of myself and Senator Bond.
Yesterday, I spoke at some length about the issue of small business
and the Internal Revenue Service. In that statement I pointed out that
small business is a peculiarly affected part of the American economy as
it relates to the Internal Revenue Service.
Small business, as we know, is the fastest growing sector of our
economy. Typically, management has multiple responsibilities and does
not have the kind of access to a panoply of expertise in accounting and
law as a larger business would have. Oftentimes the small
businessperson and those associated with the small business are in
their own learning curve as to what requirements of compliance might
be.
Therefore, it is my feeling as we look at this reform of the IRS that
we should pay some special attention to how this will evolve in terms
of its application to small businesses. As we know, one of the
principal elements of this reform is the establishment of an IRS
Oversight Board. This oversight board has the responsibility of being
both the window of the Government onto the taxpayer, and the taxpayer
back to the Government. So it serves an especially important role of
understanding and communication.
The legislation is written so that three of the members of the nine-
member oversight board are ex officio--the Secretary of the Treasury,
the IRS Commissioner, and a representative of IRS employees. The other
six appointees are Presidential appointments, and according to the
current draft of the legislation these six appointees must possess
expertise in the following areas: management of large service
organizations, customer service, Federal tax laws, information
technology, organization development, and needs and concerns of
taxpayers.
The amendment that I am offering will add an additional category of
expertise to be represented among the six Presidential appointees and
that is the needs and concerns of small business. It is the expectation
that the President would appoint six individuals, and his
responsibility would be to assure that those six had a sufficient range
of backgrounds that they would be able to cover the six and, if this
amendment is added, the seventh requirement.
I think it is extremely important that among the six people who are
appointed as Presidential appointees to the oversight board for the
Internal Revenue Service there be represented in that six one or more
individuals who understand the needs and concerns of small businesses
of America and can assure that those concerns are effectively
communicated to the management and administration of the Internal
Revenue Service and, if necessary, the Congress, for appropriate
changes in law.
The distinguished chairman of the Small Business Committee, Senator
Bond, joins me in this effort. I want to commend him for his thorough
analysis of the IRS bill as it affects small business and for including
this provision in his legislation.
So, Mr. President, I send to the desk an amendment which would add to
the requirements for those persons who are serving on the IRS Oversight
Board that there be included expertise in the needs and concerns of
small business.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from Florida [Mr. Graham] proposes an amendment
numbered 2347:
On page 176, between lines 4 and 5, insert the following:
``(vii) The needs and concerns of small businesses.
Mr. GRAHAM. I thank the Chair.
I ask for immediate consideration of this amendment.
Mr. KERREY addressed the Chair.
The PRESIDING OFFICER. The distinguished Senator from Nebraska.
Mr. KERREY. Mr. President, we would be prepared on this side to
accept what I consider to be a very, very good amendment. The idea of
this board is to give the President authority to select from a wide
range of experiences that will assist the Commissioner of the Internal
Revenue Service in managing the agency, and the Commissioner has
already indicated--indeed, we are going to help him follow through--his
preference to manage the IRS much differently than it currently is.
The IRS is currently managed using a three-tiered system that we
adopted in 1952. There are regional and district offices, multiple
offices, and you have all different kinds of taxpayer needs taken care
of in each one of these district offices.
What the Commissioner has indicated he wants to do is reorganize
along functional lines. Function No. 1 is large business of which I
believe there are 7- or 800,000, individual taxpayers would be function
No. 2, small business No. 3, and nonprofits No. 4.
So what the Commissioner is already attempting to do, and this law
would direct him, is to entirely or completely eliminate the three
tiers in favor of this kind of functional organization. But what he is
already recognizing is that taxpayer needs vary not according to their
geography but according to the category of the taxpayer. One of the
largest and most important categories of radically different needs than
the other three is small business.
So what the Senator from Florida is doing is adding to the list of
requirements the President would have to consider when making a
selection, and that would be some small business experience which
reinforces very much
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the other section of this bill, which directs the Commissioner to
eliminate, as much as possible, the three-tier system in favor of this
functional system of organization.
So I think it is a very good amendment. It is one of these amendments
that just has a few words in it. There is a lot more to this amendment
than meets the eye. I think with the addition of a small business
experience, this board is much more likely to be able to carry out its
function, and that is to provide the kind of consistent oversight and
advice the Commissioner needs to manage this very important agency.
Mr. ROTH. Mr. President, I think we are all in agreement as to the
importance of small business. Certainly, the current success of our
economy has depended in large part on the contribution of small
business. For that reason, from this side I agree that we should accept
the amendment, and so do.
The PRESIDING OFFICER. If there be no further debate, the question is
on agreeing to the amendment.
The amendment (No. 2347) was agreed to.
Mr. GRAHAM. Mr. President, I move to reconsider the vote.
Mr. KERREY. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
The PRESIDING OFFICER (Mr. Sessions). The Senator from Montana.
Mr. BAUCUS. Mr. President, during the last couple of months, in every
household across the country, Americans went through an annual rite.
They sat down at the kitchen table, pulled all their financial records
together, and figured out what they owed the Government in taxes.
Nobody likes doing their taxes. And people dislike paying them even
more. Yet the vast majority of our citizens do pay their taxes. And
they pay them honestly.
In short, Americans expect their money to be used to pay for all of
the things that help make this nation great. In return, though, the
American people want their Government to do two things.
First, the American people want their Government to treat them with
respect and dignity as the revenue is being collected. They expect to
have their privacy respected, and to be treated fairly.
Second, Americans expect that everyone else who enjoys the benefits
taxes pay for will shoulder their share of the burden. That their
neighbor down the street isn't hiding part of his income, and thus
avoiding paying his fair share of the tax. That everyone is filing
returns, and that the amounts claimed on those returns are accurate and
true.
Mr. President, I truly believe the American people have the right to
have both of these expectations met. And I believe we here in the
Senate shoulder a great deal of the responsibility for making sure of
it.
Chief Justice John Marshall said: ``The power to tax involves the
power to destroy.'' It is our duty as Senators to make sure this
country does not use its power in that fashion.
Running the IRS is a study in careful balances. And I believe that
the IRS has somehow lost its ability to maintain one side of the
equation over the years.
Many tax collectors, in their zeal to catch those among us who don't
pay their taxes, seem to have lost sight of the most important truth
about our tax system--that citizens have rights that must be protected.
Anything less undermines our ability to make a system of voluntary
taxation work.
Here's a graphic example of how the system has gotten out of whack.
It's contained in a recent letter from one of my constituents. It's a
plea for help:
The problem with the IRS started in 1997. John [not his
real name] and I had just bought a house. I was a semester
away from graduating from college, and we thought the
[failed] business was behind us. The last week in July 1997,
I returned home after a day of working at my part-time job to
find a nasty note on my front door from [an IRS agent]
stating that he had `tracked' us down and expected a phone
call or action would be taken. I promptly called him to find
out the reasoning behind the note. He was very rude and
reluctant to give me any information, because I [was not my
husband]. I explained that I was his wife and he began
talking to me in a degrading manner. He said, ``Your husband
owes tax, and I expect to collect it in full.'' When I asked
him to explain, he very quickly said it was for [my husband's
failed business] and began treating me as a criminal who was
running from the IRS.
We feel we have not been treated fairly in this situation.
We have attempted to make good on all other situations
regarding this [failed] business and have not been hiding
from the IRS. [The IRS agent] has been extremely rude and
unsympathetic toward us. He has put a tax lien on everything
we own. He has also made comments to our accountant
indicating that he has been tracking our personal lives and
mentioning purchases and other personal matters. In [the IRS
agent's] eyes we are criminals cheating the government. In
our eyes the government is cheating us by never giving us a
fair chance to make good. This whole situation has cost us
over $700 in accounting fees and is still unresolved. We are
turning to you as a final attempt to resolve this problem. We
hope you can help us in making the government work for the
people not against them.
That letter sums up this issue in a nutshell: Make the Government
work for the people, not against them. Make Government responsive to
taxpayers' needs. Make service the priority of the Internal Revenue
Service. Make the IRS treat taxpayers fairly--and with respect. That's
what my constituent wants. And that's what I want.
We certainly don't want to tie IRS's hands so much that tax cheats
are encouraged. The rest of us end up picking up the tab when someone
cheats. At the same time, we also can't have IRS harassing innocent
citizens, assuming everyone is guilty the minute they walk in the door.
I believe this legislation will help IRS find its way back to the
reasonable balance that our tax system requires.
The IRS has suffered from years of neglect and lack of focus. The
spotlight that has been turned on the Service, by the IRS Restructuring
Commission and by the series of hearings we have held in the Senate
Finance Committee, has already had a positive effect on the IRS.
The Service is expanding hours and people for its telephone answering
service. Taxpayers got 13 million fewer busy signals this year when
they called IRS to ask questions about their taxes. Toll-free calls are
being answered 91% of the time--a huge improvement. Last year callers
only got through 66% of the time, and only 39% of the time the year
before. This year, phone lines are being answered 18 hours a day. And
for the first time, the IRS is open on Saturdays.
People answering the phones are also getting better. One group of
Baltimore IRS workers gave correct advice to 100% of recent random test
calls. Nationally, accuracy scores are up to 93% this year, from only
63% as recently as 1989.
So more taxpayers are able to get through to the IRS when they have a
question, and more of the answers they will get will be the right ones.
IRS has a webpage where taxpayers can download documents and forms.
Now taxpayers don't have to run all over town just to find the right
paperwork.
And the Service has had a series of ``Problemsolving Days'' around
the country, where taxpayers can come in and get their problems taken
care of. The last ``Problemsolving Day'' in my home state of Montana
was in Billings in January. More than half of all the taxpayers who
participated walked out with their problems taken care of on the spot.
Many of the rest have been resolved in the succeeding weeks.
But there are still problems at the IRS, as our hearings--and my
constituent's letter and plea for help--have clearly identified. And
many of the improvements planned by our new IRS Commissioner, Charles
Rossotti, require legislative action in order to go forward.
The bill before us is a very good beginning. It addresses the first
expectation the American people share--making sure the Government
treats them with respect and dignity as the revenue is being collected.
It does this through a series of provisions.
First, the bill creates a board, made up chiefly of private citizens,
to oversee the direction the IRS is going. The Board will keep an eye
on the Service's budget, to make sure enough resources are being
dedicated to customer service. It will help define long-term goals, and
make sure the Service stays on track to meet those goals. The Board
will ferret out problems at the IRS, and help craft solutions to those
problems.
The bill creates significant new personnel flexibilities to make it
easier for Commissioner Rossotti to get his
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own team on board and reward employees who are doing well. It requires
the IRS to submit an employee training plan to Congress, to help
employees improve the quality of their work. The bill requires IRS to
tell Congress about taxpayer complaints of misconduct by employees, and
to take disciplinary action against ``bad apples''. The bill also makes
it easier for IRS employees to provide confidential information to the
Finance and Ways and Means Committees to report allegations of employee
misconduct or taxpayer abuse.
The bill will reorganize the IRS, much as IBM was reorganized when
they realized they couldn't compete against newcomers like Microsoft.
Right now, IRS is organized horizontally, by function. This means every
time a taxpayer has a question or a problem that crosses the Services'
functional lines, they are handed off to a different person in an
entirely different department. No one has final responsibility to
getting the taxpayer's problem solved.
There is no accountability.
This bill reorganizes the agency by type of taxpayer. There will be a
separate division for individuals, one for small businesses, one for
large corporations, and one for tax exempt organizations. Employees
within these divisions will be responsible for just about every type of
problem their assigned group of taxpayers could have. They will stick
with the taxpayer until his problem is solved.
No more passing the buck.
The bill also adds important new taxpayer protections to the law, to
help protect citizens against arbitrary actions of IRS agents.
The bill will allow taxpayers to sue for negligent actions by IRS
agents. Today they must meet a very high treshold by proving any abuse
was intentional.
The bill expands the offers-in-compromise program. It makes it harder
for IRS to turn down legitimate offers. The bill also requires IRS to
leave taxpayers with more money to live on when they enter into
repayment agreements.
In our hearings, taxpayers complained about the difficulty of using
innocent spouse protections. The House and Senate bills take different
approaches to solving this problem. Both make it easier for truly
innocent spouses to be protected from the tax debts their guilty
spouses have accumulated.
These are only a few examples of the taxpayer protections built into
the legislation.
Finally, the bill before us today takes a first step toward
addressing what may be the biggest contributor to taxpayer problems
with our Tax Code--Congress itself. Witness after witness at our
hearings complained about the complexity of the Code. Witness after
witness complained about how hard it is to keep up with frequent
changes we make in the law. And they are right.
This bill requires that every tax bill in the future be accompanied
by an analysis of whether it will further complicate the Code. How hard
it will be for taxpayers to comply with the new law. As we strive to
achieve fairness in our Tax Code, we sacrifice simplicity. With this
bill, we will be able to clearly understand the extent of that
sacrifice.
I believe that one of the hardest things to do when restructuring any
agency, and particularly one as sensitive as this one, is to find that
delicate balance between giving the Government too much power and
giving it too little.
Give it too much power, and innocent citizens will be abused. This
is, obviously, unacceptable in a civilized society. Even one single
instance of taxpayer abuse is one too many.
Law abiding taxpayers should not fear the taxman.
But clipping the Government's wings too closely presents its own
dangers. Americans expect us to make sure everyone is sharing the
burden of paying for the services our Government provides. And it is
clear some of us are not. IRS estimates the ``tax gap'', which is the
measure of tax avoidance, now is almost $200 billion a year. This
amounts to more than $1,600 per year for every tax return filed by the
rest of us.
This, too, must stop. Our entire system of collecting revenue would
unravel if taxpayers stop paying their fair share because they believe
everyone else is cheating.
The bill before us today is not perfect.
It does not address the problem of tax non-compliance. We have left
that challenge for another day.
There are provisions in it that may seem good at first blush, but may
cause more harm than good. We should try to fix these as the bill goes
through the legislative process.
But I firmly believe we must not let the perfect be the enemy of the
good. We must not let yet another tax season go by without the taxpayer
protections this bill provides.
Passing a solid restructuring bill will do more to get the IRS on
track than a hundred hearings where we sit, posture, pontificate and
play politics.
It is our responsibility to the American people to get this job done
quickly, and to get it done right. I want to be able to go back to the
constituent who wrote me that letter and say, Yes, we fixed your
problem. And, Yes, the Government works for you, not against you.
Thank you, Mr. President.
Mr. GRAMS addressed the Chair.
The PRESIDING OFFICER. The Senator from Minnesota.
Mr. GRAMS. Mr. President, I rise today to speak briefly about IRS
reform and overall reform of the tax system.
Paramilitary-style raids, attempted frame-ups, retaliation against
whistle blowers, harassment of innocent individuals, all carried out by
a Government agency oftentimes operating outside the bounds of the law
and with seemingly limitless authority. A premise played out within the
pages of the latest popular novel? Not exactly. These examples,
unearthed during recent hearings here in the Senate, are taken directly
from the playbook of the Internal Revenue Service.
The hearings, and the abuses they highlighted, have focused the
nation's attention on the ``IRS Restructuring and Reform Act'' that is
now before the Senate. Included within the legislation are many good
provisions that would protect taxpayer rights and restrict the power of
the agency. Key provisions would limit interest and penalties on
delinquent taxes and shift the burden of proof from the taxpayer to the
IRS in tax disputes.
Before I continue, Mr. President, I would like to take this
opportunity to commend Senator Roth, the Chairman of the Finance
Committee, for his tremendous efforts to reform the IRS and his
leadership on tax relief.
I also commend the Chairman for holding the series of oversight
hearings that exposed the abuses upon taxpayers carried out by the IRS.
All of us are greatly indebted to Senator Roth for that. He has done an
outstanding job to formulate a sound and responsible IRS restructuring
plan.
If enacted, these reform provisions before us today would improve IRS
service, make the agency more accountable, and provide better
protections for the taxpayers. I fully agree with Senator Roth that the
goal of IRS reform should be to make the IRS ``a service-oriented
agency instead of a law-enforcement agency.''
Still, Mr. President, a fundamental question remains: can the IRS
really be fixed by reform without scrapping the Tax Code? To answer
this, we need to take a closer look into the problems with the IRS.
The passage in 1913 of the 16th amendment to the Constitution granted
Congress the power to impose an income tax. A tiny division of the
Bureau of Internal Revenue Service was created to collect the taxes.
Eighty-five years later, this division, now known as the IRS, has grown
to become the most powerful agency in the entire Federal Government.
The IRS today employs more investigative agents than the FBI and the
CIA combined, and boasts a total workforce of more than 100,000. It is
hard to believe, but more employees work at the IRS than in all but the
36 largest corporations in this country. The decisions its bureaucrats
make daily affect every American who takes home a paycheck.
The agency's job is to administer and enforce the Nation's tax laws
and collect tax revenue for the Government. To ensure that all
Americans pay their taxes, Congress has given the agency almost
unlimited power--power that
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goes beyond the authority granted to any other agency in the Federal
Government.
By law, the IRS can audit individuals or businesses. It can impose
penalties and impose a lien on a taxpayer's property or bank accounts,
or seize them altogether. Average taxpayers and small business owners
have few little administrative or legal remedies against such a
powerful agency.
Its unlimited power has made the IRS a wasteful, arrogant,
incompetent, intrusive, and abusive agency. The IRS is driven by
illegal quotas and collection goals. It has targeted the
underprivileged for audits. It has mistreated hundreds of thousands of
innocent taxpayers. Clearly, this is an agency out of control, an
agency in need of a complete overhaul.
But let us not forget how the IRS reached this troubled point.
Congress deserves much of the blame for the present state of our
hostile tax system, for it is Congress that created the IRS in the
first place.
Congress grants the IRS its unlimited power. Congress writes the
complicated Tax Code that taxes Americans' income over and over and
provides loopholes to thousands of special groups, making the Tax Code
too complicated for even most attorneys and tax accountants to fully
understand. Congress requires the IRS to squeeze more tax money out of
the taxpayers so that Congress has more to spend. On top of that,
Congress does not have time to fully exercise its IRS oversight
responsibilities. Even while it talks reform, Congress is making the
Tax Code ever more burdensome--since last year, Congress has added 185
new sections and 824 changes to the Tax Code.
Most IRS employees are decent, hardworking people who face an
impossible task: interpreting and applying the hundreds of thousands of
pages of the Tax Code and its related regulations. A recent study shows
that more than 8 million Americans each year receive incorrect bills or
refunds due to IRS errors. Each year, Money magazine hires 50
professional tax preparers to calculate a return for a sample family.
No two preparers have ever had the same result; answers can vary by
thousands of dollars. It just shows that the Tax Code is confusing and
arbitrary, and this in turn encourages waste, harassment, corruption
and abuse.
Tinkering with the system by merely restructuring the IRS will not
solve its fundamental flaws. It is clear that the real problem with the
IRS is not management, or administration, but the Tax Code on which all
IRS decisions are based. This is such an ugly agency it is hard to make
it pretty by reforms.
We can replace the IRS management, we can improve its service, crack
down on abuses, increase its efficiency, and reduce its waste, but the
fundamental problems will not go away. Reorganizing the IRS without
real reform of the Tax Code will send a false signal to the American
people that once we restructure the IRS, all its problem will be solved
and there will be no need to reform our tax system. Unfortunately, as
the history books reveal, it is not that easy.
We have tried to overhaul the IRS in the past, and somehow the agency
always comes back more powerful and more abusive than ever before. At
least two versions of a ``taxpayer bill of rights'' previously enacted
into law have had little effect in taming the IRS. Even after last
year's IRS abuse hearings, which resulted in promised reforms, the
abuses continue.
Mr. President, let me make this clear: it is vitally important that
we continue our efforts to reform the IRS, and I strongly support
Chairman Roth's work and his legislation. My point is that we should
not let this debate delay or derail real tax reform--to delay us from
carrying out the demands of the taxpayers to scrap the Tax Code and
replace it with one that is simpler, flatter, fairer, and friendlier.
This Chamber already passed a resolution to sunset the Tax Code. Now
we should set a date to establish a new tax system. Once we have
eliminated the Tax Code, there will be little, if any, need for the IRS
and its playbook or its abuses.
Thank you very much, Mr. President. I yield the floor.
Mr. CONRAD addressed the Chair.
The PRESIDING OFFICER. The Senator from North Dakota.
Mr. CONRAD. I ask unanimous consent to be able to speak as in morning
business for 12 minutes.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. DORGAN. Mr. President, I certainly would not object, but I ask
the chairman if I might be able to speak for 8 minutes by unanimous
consent following Senator Conrad.
Mr. ROTH. A total of 20 minutes then. The manager has no objection.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. CONRAD. I thank the Chair.
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