[Congressional Record Volume 145, Number 96 (Thursday, July 1, 1999)]
[Senate]
[Pages S8125-S8127]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERRY (for himself, Mr. Grassley, Mr. Baucus, Mr. Harkin, 
        Mr. Cleland and Mr. Burns):
  S. 1328. A bill to amend the Internal Revenue Code of 1986 to permit 
the disclosure of certain tax information by the Secretary of the 
Treasury to facilitate combined Federal and State employment tax 
reporting, and for other purposes; to the Committee on Finance.


                  Single Point Tax Filing Act of 1999

  Mr. KERRY. Mr. President, there is no shortage of ideological ferment 
over the issue of taxes--from IRS Reform to discussion after discussion 
of tax cuts, we have gone back and forth over these questions and we've 
worked, as much as possible, to find a bipartisan consensus. Today I am 
joined by my colleagues Senator Grassley and Senator Baucus to 
introduce legislation about which I would think every member of this 
body would be able to agree--legislation that makes tax filing simpler 
and easier for the small businesses that constitute 98 percent of all 
businesses in America, employ nearly 60 percent of the workforce, and 
which, having created close to two-thirds of America's net new jobs 
since the 1970s, continue to serve as the wellspring for our Nation's 
technological innovation and productivity growth.
  Mr. President, America's small businesses are today drowning in tax 
paperwork. The nation's 6.7 million employers are responsible for 
filing federal and state employment taxes and wage reports, as well as 
unemployment insurance reports. Under current law, employers file tax 
and unemployment insurance reports with federal and state agencies 
throughout the year, reports which obligate employers to understand and 
comply with diverse and often conflicting state and federal laws. Just 
to keep up with these requirements, employers must maintain separate 
wage records for federal income tax withholding, state income tax 
withholding, FICA, FUTA, and SUI. In many cases, employers must report 
this information to government agencies at different times and in 
different forms. The reporting burden is only compounded when employers 
do business in more than one state, many of which do not have the same 
legal or procedural requirements. Just consider the financial burden--
essentially a tax

[[Page S8126]]

on taxes--associated with employer tax, wage, and unemployment 
insurance reporting is estimated at $16.2 billion for Fiscal Year 1999. 
The federal portion of this employer burden is $9.8 billion, the state 
portion relatively little less at $6.4 billion.
  Given what we know about the role small businesses play as the engine 
of our economy, and given all the expectations we share in terms of the 
potential for these businesses to push the boundaries of economic 
growth out even further in the new economy, I think we would all agree 
that we ought to do something to relieve some of the tax filing burdens 
on these employers, to give them more time and, I think it follows, 
more capital to focus on job creation in our workforce, not, 
respectfully, job creation over at the IRS and in the accounting 
industry.
  Let me just read to you what David A. Lifson, speaking on behalf of 
the American Institute of Certified Public Accountants, said in his 
testimony before the Ways and Means Committee, Oversight Subcommittee 
on ``The Impact of Complexity of the Tax Code on Individual Taxpayers 
and Small Businesses'' May 25, 1999:
  ``Significant problems arise from the increasing complexity of the 
tax law. For example: a growing number of taxpayers perceive the tax 
law to be unfair; it becomes increasingly more difficult for the 
Internal Revenue Service to administer the tax law; the cost of 
compliance for all taxpayers is increasing (of particular concern are 
the many taxpayers with unsophisticated financial affairs who are 
forced to seek professional tax return preparation assistance); and, 
complexity interferes with economic decision making. The end result is 
erosion of voluntary compliance. By and large, our citizens obey the 
law, but it is only human to disobey a law if you do not or can not 
understand the rules. In a recent Associated Press (AP) poll, 66 
percent of the respondents said that the federal tax system is too 
complicated. Three years ago, just under one-half of respondents in a 
similar AP poll said that the tax system was too complicated. The poll 
also showed that more than half of those surveyed, 56 percent, now pay 
someone else to prepare their tax returns. This is a serious indictment 
of our tax system. When over half our individual taxpayers have so 
little comprehension of (or faith in) their tax system that they have 
to hire another party to prepare their returns, something is not 
right.''
  Now, Mr. President, I applaud David Lifson's candor in speaking out 
for tax simplification. The truth is, when the one industry--
accounting--which depends financially on the very complexity and 
unwieldiness of our tax filing process and the tax code itself, is 
saying--honestly--that the system is too complex, we know--
unequivocally--that we need to do something to make the tax filing 
process work for taxpayers. The burden of tax code complexity is taking 
a heavy toll. At an April hearing before the Senate Small Business 
Committee, the General Accounting Office identified more than 200 
different federal tax code requirements that potentially apply to small 
businesses. Today, when a business hires an employee, the business 
becomes responsible for collecting and paying three federal taxes 
(income tax withholding, FICA, and FUTA). It also becomes liable for 
state and local employment taxes: in most states, these include a state 
income tax and a state unemployment tax. For businesses, each tax 
presents its own set of rules and regulations. For the small business 
owner just starting up, these employment tax rules make compliance 
difficult and confusing--and in too many instances the cumbersome 
nature of the tax filing process is a disincentive in itself for small 
businesses to grow.
  We need to reverse that course, and, Mr. President, we can do just 
that today--we can simplify the tax filing process for employers by 
allowing the Internal Revenue Service (IRS) and State agencies to 
combine, on one form, both State and Federal employment tax returns.
  As we all know, traditionally, federal tax forms are filed with the 
federal government and state tax forms are filed with individual 
states. This necessitates duplication of items common to both returns. 
Several States have been working creatively with the IRS to implement 
combined State and Federal reporting of employment taxes, on one form, 
as a way of reducing the administrative burden on taxpayers. The 
Taxpayer Relief Act of 1997 authorized a demonstration project to 
assess the feasibility and desirability of expanding combined 
reporting. The pilot project was: (1) limited to the State of Montana, 
(2) limited to employment tax reporting, (3) limited to disclosure of 
the name, address, taxpayer identification number, and signature of the 
taxpayer, and (4) limited to a period of five years. On March 29, 1999, 
the IRS announced the successful testing of the Single-Point Filing 
Initiative. Several States are currently considering agreements with 
the IRS to initiate joint-filing of employment taxes. Those States 
include Maine, Oklahoma, Iowa, South Carolina, Ohio, and Massachusetts. 
My colleague Senator Baucus knows just how popular this experiment has 
been in Montana. He'll tell you that by permitting the IRS to share a 
limited amount of basic taxpayer identity information--information 
which States already collect separately at an added expense to 
themselves and the taxpayer, the Single-Point Tax Filing Act we are 
introducing today will allow the IRS to expand joint-filing beyond its 
current pilot project.
  Implementation of combined State-Federal employment tax reporting--a 
good idea, a common-sense idea long in the making--has been hindered 
because the tax code applies restrictions on disclosure of information 
common to both the State and Federal portions of the combined form. Our 
bill will waive those restrictions, and allow us to take a common-sense 
step forward for small businesses in the United States, a step forward 
for single-point tax filing.
  Mr. President, this is one of the obligations the American people--
regardless of party or politics, expect us to take seriously--to 
protect them as taxpayers. And I believe that this is one tax 
provision, one measure of simplification, on which we can all agree--
and we can make it law at no additional cost to taxpayers. I am pleased 
to introduce the Single Point Tax Filing legislation today, I thank the 
distinguished members of the Finance Committee Charles Grassley and Max 
Baucus who join me today in offering this legislation, and I ask for 
your support of this important measure.
  Mr. President, I ask unanimous consent that a summary of the bill be 
printed in the Record.
  There being no objection, the summary was ordered to be printed in 
the Record, as follows:

                  Single-Point Tax Filing Act of 1999


                                Purpose

       To simplify the tax filing process for employers by 
     allowing the Internal Revenue Service (IRS) and State 
     agencies to combine, on one form, both State and Federal 
     employment tax returns.


                                Summary

       Traditionally, Federal tax forms are filed with the Federal 
     government and State tax forms are filed with individual 
     States. This necessitates duplication of items common to both 
     returns. Several States have been working with the IRS to 
     implement combined State and Federal reporting of employment 
     taxes, on one form, as a way of reducing the administrative 
     burden on taxpayers. By permitting the IRS to share a limited 
     amount of basic taxpayer identity information--information 
     which States already collect separately at an added expense 
     to themselves and the taxpayer, the Single-Point Tax Filing 
     Act will allow the IRS to expand joint-filing beyond its 
     current pilot project.


                               Background

       The tax code prohibits disclosure of tax returns and return 
     information, except to the extent specifically authorized by 
     law. Unauthorized disclosure is a felony punishable by a fine 
     not exceeding $5,000 or imprisonment of not more than five 
     years, or both. An action for civil damages also may be 
     brought for unauthorized disclosure. No tax information may 
     be furnished by the IRS to another agency unless the other 
     agency establishes procedures satisfactory to the IRS for 
     safeguarding the tax information it receives.
       Implementation of combined State-Federal employment tax 
     reporting has been hindered because the tax code applies 
     restrictions on disclosure of information common to both the 
     State and Federal portions of the combined form.
       The Taxpayer Relief Act of 1997 authorized a demonstration 
     project to assess the feasibility and desirability of 
     expanding combined reporting. The pilot project was: (1) 
     limited to the State of Montana, (2) limited to employment 
     tax reporting, (3) limited to disclosure of the name, 
     address, taxpayer identification number, and signature of the 
     taxpayer, and (4) limited to a period of five

[[Page S8127]]

     years. On March 29, 1999, the IRS announced the successful 
     testing of the Single-Point Filing Initiative.
       Several States are currently considering agreements with 
     the IRS to initiate joint-filing of employment taxes. Those 
     States include Maine, Oklahoma, Iowa, South Carolina, Ohio, 
     and Massachusetts.


                              Legislation

       Before additional joint-filing projects may move forward, 
     the IRS must receive legislative authority to share basic 
     information with State agencies. By providing the necessary 
     statutory waiver, the Single-Point Tax Filing Act will permit 
     the IRS to extend joint-filing beyond its current pilot 
     project. The waiver would only pertain to employment tax 
     reporting and would only permit the disclosure of the 
     taxpayer's name, mailing address, taxpayer identification 
     number, and signature (i.e., taxpayer identity information).
  Mr. BAUCUS. Mr. President, I want to add my strong support to the 
Single-Point Tax Filing Act of 1999 introduced by my colleagues 
Senators Kerry and Grassley. As a result of language I had included in 
the 1997 Taxpayer Relief Act, Montana is the only state in the nation 
currently testing a Single-Point Tax Filing system, also known as the 
Simplified Tax and Wage Reporting System, or STAWRS.
  The STAWRS pilot project in Montana has been a tremendous success. 
Earlier this year, the State of Montana and its Department of Revenue 
received a Regulatory Innovation Award from the Small Business 
Administration, the Commissioner's Award from the Internal Revenue 
Service, and the ``Hammer'' Award by the National Performance Review. 
These awards were all given in recognition of the pilot project's 
achievement in dramatically reducing paperwork and cutting red tape for 
small businesses. I was also honored to receive SBA's Special Advocacy 
Award for my efforts to have legislation enacted that allowed the pilot 
project to go forward.
  The STAWRS program is designed to help businesses file their 
paperwork with one office, instead of wading through a blizzard of 
paper. It's one-stop shopping and will go a long way toward 
streamlining payroll information, making filing faster and easier. 
Right now, businesses find themselves reporting the same exact 
information, on wide variety of forms, to a range of state and federal 
agencies. This takes time and effort, both of which small business 
owners could put to much better use running their businesses. The 
STAWRS project is intended to eventually make it possible for employers 
to file a single, one-page report that is then shared by the 
appropriate revenue agencies. The governments will do the work and 
extract the information they need rather than the employer.
  Small businesses are the engine for economic growth in this country. 
They have created close to two-thirds of America's net new jobs since 
the 1970's, helping drive our unprecedented economic growth and 
prosperity. All of this growth has been achieved despite the crushing 
paperwork requirements that small business owners face. The Single-
Point Tax Filing Act gives us an opportunity to reduce this paperwork 
burden at no cost to the government. I am proud that Montana has taken 
the lead in reducing paperwork for small business, and strongly believe 
it should be made available to small businesses in every state, and on 
a permanent basis.
  I urge my colleagues to support the bill.
                                 ______