[Congressional Record Volume 159, Number 50 (Monday, April 15, 2013)]
[Senate]
[Pages S2631-S2633]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                               TAX REFORM

  Mr. WYDEN. Mr. President, in Shakespeare's ``Julius Caesar,'' a 
soothsayer warned Caesar to ``beware the Ides of March.'' For most 
Americans, however, the Ides of March passes without incident. It is 
the Ides of April--April 15, tax day--that so many Americans dread. The 
last few days must have been a big bonanza for the headache medicine 
industry. Taxes are due tonight at midnight.
  Millions of Americans spent their weekend struggling to use tax 
software that crashed, flailing about to locate receipts, and wading 
through hundreds of pages of tax instructions. Instead of enjoying the 
outdoors or spending time with family and friends, too many Americans 
spent this past weekend hunched over their kitchen tables or in front 
of their computers surrounded by a maze of receipts, canceled checks, 
forms, and other paperwork as they undertook the annual water torture 
ritual of preparing tax returns.
  This is the tax instruction booklet for our personal taxes, our 1040 
form. It goes on and on, well over 200 pages. The first 104 pages of 
instructions are the basic form 1040. The further 110 pages of 
instructions are for the most common schedules to the 1040. There has 
got to be a better way.
  Some day I hope Democrats and Republicans can come to the floor of 
this body, ask unanimous consent that this goes into the trash, and 
instead we substitute a much simpler way for our people to do their 
taxes. The reality is the Tax Code is too complex, too costly, and 
simply takes too much time to comply with. It is a code that is 
hopelessly out of date, mind-numbingly complex, increasingly unfair, 
and extraordinarily inefficient.
  As a result, one of our most consequential economic policies, our tax 
law, does far more to stifle economic growth than to encourage it. Our 
country needs a comprehensive overhaul of our system of raising revenue 
and a modern Tax Code that is simpler, fairer, and simply more 
efficient. In sum, what is needed is a progrowth economic tax policy. 
If history is any guide, particularly when former President Reagan and 
a big group of Democrats got together, it can bolster American families 
and increase revenue without raising rates.
  I have been something of a broken record on this issue for some time. 
But on a day such as this, particularly given what our people went 
through over the past weekend, I think it is time we spend a few 
minutes to talk

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about how important it is to bring some common sense to American tax 
law. What is particularly striking is that I think the Congress 
understands what needs to be done. This is a question of political will 
now. There have been all kinds of blue-ribbon reports from the Bush 
administration, the Obama administration. I think what needs to be done 
is widely understood.
  The pipes in the Tax Code are clogged with provisions that encourage 
rent-seeking behavior, lead to the misallocation of capital, and warp 
the American economy. What needs to be done is go in there and drain 
the swamp and clean out the Tax Code. It contains almost 4 million 
words. In the last decade alone, more than 130 laws have been enacted 
that yielded almost 4,500 changes to the Tax Code. That amounts to more 
than one change to the Tax Code each and every day, year in and year 
out.
  It has become so complicated that almost 90 percent of taxpayers 
either hire a tax preparer or use tax preparation software to complete 
returns. The IRS reports that the average estimated time burden for all 
taxpayers filing a Form 1040, a 1040A, a 1040EZ, is 13 hours, with an 
average cost of $210. With respect to these forms, nonbusiness 
taxpayers face an average burden of about 8 hours, a full day's work, 
while business taxpayers face an average burden of about 23 hours, 
nearly 3 days of work.
  In 2011, the Small Business Administration found that among 
businesses with 20 or fewer employees, tax compliance cost $1,584 per 
employee. In addition to the escalating cost of compliance with this 
code, cost, both time and money, the complexity of the code, in my 
view, has obscured the typical person's ability to understand it and 
has undercut voluntary compliance, which is, of course, the bedrock 
principle of our tax law.
  With the ongoing debate about how to reduce the budget deficit, the 
Tax Code's complexity serves also to perpetuate what is known as the 
tax gap; that is, the difference between what taxpayers pay and what is 
owed under the law. The most recent Internal Revenue Service estimate 
for the tax gap is $385 billion. Based on statistical trends, the 
likely gap for this year is going to exceed $420 billion. This is an 
underpayment of approximately 14 percent.
  My gut tells me--I serve on both the Finance Committee and the Joint 
Committee on Taxation--that some of this gap certainly is due to 
conscious tax evasion, but I also believe a significant portion of it 
is attributable to inadvertent mistakes in filing, many of which stem 
from the complexity of the code. Well-coordinated, thoughtful, 
comprehensive reform is going to reduce the need for many complex 
provisions that limit the ability of taxpayers to benefit from certain 
deductions, credits, exemptions, and exclusions. Comprehensive tax 
reform must eliminate the multiple provisions that require taxpayers to 
calculate their liability multiple times, such as the alternative 
minimum tax. Talk about bureaucratic water torture. All this weekend 
across the country we had middle-class folks essentially doing their 
taxes twice as a result of the minimum tax. The personal exemption 
phaseout, PEP, and the phaseout of itemized deductions, Pease, isn't 
much easier.

  I would show this poster which demonstrates 11 tax forms. These are 
forms, colleagues, the typical filer must fill out every year or, if 
they can afford it, pay someone to fill them out. Is it really 
necessary to run this full-time, hand-cramping program for our citizens 
to have to wade through all of this?
  We also have another alternative, a one-page 1040 form which I have 
worked on with colleagues for years. It is only about 29 lines long. 
Some industrious reporters took this particular tax form and found a 
typical citizen--this was worked on by Democrats and Republicans--may 
fill out their taxes with this form in under an hour.
  To illustrate how complicated the code has become, let me refer 
briefly to capital gains. The income tax currently imposes at least 
nine different effective tax rates on capital gains, depending on the 
taxpayer's regular rate, how long an asset was owned, the type of 
asset, and whether the taxpayer owes the alternative minimum tax. For 
this the IRS provides three different worksheets, one with 37 lines, to 
help taxpayers calculate their tax on capital gains.
  Comprehensive reform should make things easier for taxpayers by 
allowing a percentage exclusion for long-term gains and reapplying 
regular tax rates to the rest. This simple change, to have an exclusion 
for a measure of capital gains which have been earned and then a 
progressive rate structure from this point on, would sharply reduce the 
complexity of returns while maintaining fairness and opportunities for 
all our people to invest.
  Further complicating matters, a number of commonly used terms in the 
Tax Code: qualifying child, modified adjusted gross income, and more, 
have multiple definitions depending on the provision. Certainly, 
Democrats and Republicans should agree uniform definitions for the most 
commonly used terms are something which shouldn't be a bipartisan 
issue. More than 40 definitions of small business exist in the Tax Code 
alone.
  There are certainly policy reasons to provide tax benefits to 
families with children. The definition of a child differs widely across 
the Tax Code.
  Children under 19 count in defining the earned-income tax credit 
benefits. Those under 17 qualify for the child credit, and only those 
under 13 are eligible for the child and dependent care credit. Maybe 
these differences result from deliberate congressional actions about 
who ought to receive tax benefits, but I think they needlessly 
complicate tax filing and certainly lead to inadvertent errors which 
the Internal Revenue Service then attempts to figure out how to 
correct.
  Other factors used to define qualifying children further complicate 
the situation, including the child's physical residence, custody 
arrangements, and who pays the child's living expenses. Establishing a 
single definition to determine whether taxpayers may claim tax benefits 
for children would simplify both tax filing and IRS processing of 
returns.
  The list only goes on and on, such as the earned-income tax credit, 
something vital to low-income families, and a whole host of different 
workshops. The educational credits are, again, another example where 
families with students in college qualifying for multiple tax benefits 
to defray educational expenses often may claim only one of them. For 
example, a family may be able to claim either the Hope credit or the 
Lifetime Learning Credit, but not both for the same student.
  If the family has more than one student it may claim one credit for 
one student and the other for a second student. Determining which 
alternative is best requires multiple calculations and may conflict 
with the use of other tax benefits for education such as Coverdale 
savings accounts and 529 savings plans. Comprehensive tax reform would, 
at the very minimum, coordinate these educational benefits to make it 
easier for families to determine eligibility.
  How complicated have things become? A few years ago Treasury's 
Inspector General for Tax Administration sent staff to pose as 
taxpayers at 12 commercial preparer chains and 16 small independent 
preparers. Of the 28 tax returns the professionals prepared, 17 had 
mistakes. All of the business returns were wrong. Let me repeat that. 
All of the business returns were wrong when professionals had prepared 
them.
  In 2006 the same sort of drill was undertaken. Again, the Government 
Accountability Office found professional preparers made mistakes. They 
mishandled those bread-and-butter kinds of issues, such as the earned-
income tax credit and the childcare credit. They even got it wrong 
whether the taxpayer should even itemize his or her deductions.
  The question is, If the pros can't figure out how to file taxes, 
isn't it clear, isn't it obvious to all of us the Tax Code needs to be 
purged and the special interest breaks cleaned out so rates can be held 
down for all? And we can agree on a simple tax philosophy. I can sum up 
mine in a sentence.
  I believe we need a tax system which gives everybody in America the 
opportunity to get ahead. If you are successful, we want you to be 
successful. You will pay your fair share, but nothing in the Tax Code 
will make it impossible for you to be successful in the days

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ahead. If you don't have much, we will have a Tax Code which is simple 
and understandable. When you work hard and play by the rules, you will 
have an opportunity to get ahead as well.
  Comprehensive tax reform will make it easier to file. It is going to 
lay out an opportunity for the Senate Democrats, Republicans, and 
Independents to come together.
  I close simply by saying once again, we saw in the past few days how 
broken and dysfunctional our tax system in America has become. Can you 
imagine what people thought when their software was crashing in the 
last couple of days? They are trying to find their receipts, flailing 
through filing cabinets trying to find those documents which attest to 
their taxable events for the past year. They can't know with certainty, 
based upon some of those analyses by the Government Accountability 
Office, whether they have done it right or even professionals have done 
it correctly.
  Until this Senate comes together on a bipartisan basis to work for a 
simpler, more coherent tax system--one which promotes growth and eases 
the burden on American families and American businesses--there will be 
no relief from the Ides of April. This, in my view, is a tragedy worthy 
of Shakespeare.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Nebraska.
  Mrs. FISCHER. Mr. President, I ask for such time as I may consume.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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