[Congressional Record (Bound Edition), Volume 150 (2004), Part 12]
[House]
[Pages 16926-16932]
[From the U.S. Government Publishing Office, www.gpo.gov]




                     THE COMPLEXITY OF OUR TAX CODE

  The SPEAKER pro tempore (Mr. Bishop of Utah). Under the Speaker's 
announced policy of January 7, 2003, the gentleman from Maryland (Mr. 
Hoyer) is recognized for 60 minutes as the designee of the minority 
leader.
  Mr. HOYER. Mr. Speaker, I want to say to the gentleman from Michigan 
that I was very interested in his remarks, and I agreed with a lot of 
his remarks. Where we would disagree is our responsibility is if we are 
going to buy things to pay for them. And I would say, with all due 
respect to my friend, for the last 40 months we have not been doing 
that.
  We continue to buy and we are not paying. And that is why that half-
a-trillion-dollar debt to which he referred has been accumulated, and 
this year it may be a little less or a little more, but I agree with 
his general proposition that we need to come together, and if we are 
going to buy, pay for it and not pass it along to future generations, 
because as the gentleman so correctly pointed out, if we incur debt 
today, it is inevitably taxes tomorrow.
  It is, I think, appropriate that we transit from a discussion about 
the deficit that confronts us, the obligations confront us, and talk 
about the way we pay for what government is asked to provide.
  Mr. Speaker, I am pleased to be leading this Democratic special order 
tonight on an issue that confronts millions of Americans every single 
year, the unbelievable complexity of our tax laws.
  All of us, of course, bear some responsibility for the complexity of 
our Tax Code. Democrats and Republicans and every American, every 
American who believes that the tax preferences that he or she utilizes 
are worthwhile. Considered individually, the tax preferences that are 
part of the code, of course, can be rationalized: the charitable 
deduction, a very worthwhile effort; the mortgage interest deduction, 
which has provided for America being now one of the largest home-owning 
countries in the world, a good provision.
  Collectively, however, they are a jumble of confusion that causes 
unfair results and has a corrosive effect on our democracy. As Paul 
O'Neill, the former Secretary of the Treasury, who is no longer with 
us, perhaps because of candor, said, ``One of the unseen consequences 
of our Tax Code's complexity is the sense it leaves with taxpayers that 
the system is unfair and that others pay less tax because of special 
advantages.''
  A few facts, Mr. Speaker, illustrate the scope of the problem. In 
1913, the Tax Code was a mere 500 pages. Today, the code and 
regulations total more than 60,000 pages. Four common forms: Form 1040 
and Schedules A, B, and D take an estimated 28 hours and 30 minutes to 
prepare.
  There is a lot of talk about simplification, but we have not moved 
towards simplification, and Americans are rightly frustrated. Americans 
are rightly angry about this annual challenge that they have to pay 
correctly the taxes toward supporting their government.
  When the IRS started tracking this information in 1988, that is how 
long it took to fill out forms, the average paperwork burden was 17 
hours, 7 minutes. Even the simplest form in the IRS inventory, the 
1040EZ, now requires 3 hours and 43 minutes to prepare, up from 1 hour 
and 34 minutes in 1988. It is called EZ. There are a whole lot of 
Americans who do not believe it is easy.
  Complexity costs more than $100 billion a year in accounting fees and 
the value of taxpayers' time to complete their returns. This is roughly 
equivalent, Mr. Speaker, to what we spend to run the Departments of 
Education, Homeland Security, and State. Think of that. The dollars 
that we spend to fill out our forms are equal to what it costs us to 
run the State Department, the Department of Homeland Security, and the 
Department of Education.
  Not surprisingly, more Americans than ever rely on tax professionals, 
56 percent, in fact, compared to 48 percent just 14 years ago, in 1990. 
But even tax professionals cannot guarantee accuracy. The General 
Accounting Office

[[Page 16927]]

recently found that 2 million taxpayers who used a preparer took the 
standard deduction when they would have been better off itemizing. That 
says something about our system and perhaps something about preparers.
  If the administrative burden does not convince people that the form 
is crucial, the crisis in noncompliance surely should. The IRS has 
estimated that there is a $311 billion annual tax gap due to 
underreporting, underpayment, and nonfiling, $311 billion owed but not 
collected. What does that mean? That means that somebody has to pick up 
that slack. Frankly, today nobody is picking it up because we have a 
deficit larger than that $311 billion, which means, as the gentleman 
from Michigan said earlier, that future generations are going to pick 
up that gap. They are going to pay that bill. And, in fact, all of us 
pay higher rates because too many pay not their fair share of that $311 
billion.

                              {time}  2245

  In March, Nancy Killefer, the chairwoman of the IRS Oversight Board, 
told the House Committee on Ways and Means, ``The IRS does not have the 
resources needed to accomplish its mission.''
  Let me repeat that. ``The IRS does not have the resources necessary 
to accomplish its mission.'' What is its mission? To collect the 
revenues from each of us to pay for the government that we ask for.
  John Kennedy said that taxes were the price of freedom. That is 
correct. We have established an agency to collect those revenues. Nancy 
Killefer says it does not have the resources to do so. She went on to 
say, ``It continues to be out gunned and outmanned.'' By whom? By those 
who want to avoid paying their fair share.
  That same month, Deputy Treasure Secretary Sam Bodman informed 
Congress that the IRS intended to walk away from more than 2 million 
delinquents tax accounts last year that total nearly $16.5 billion 
dollars.
  What message does noncompliance and lack of enforcement send? What 
does it result in? For too many the answer is clear, that it may pay to 
cheat. In fact, an IRS survey found last year that 17 percent of 
taxpayers, nearly one in five, believe it is acceptable to cheat, up 
from 11 percent just 4 years earlier.
  Now, just like the people who go into a store and they take something 
off the shelf, put it in their pocket and walk out and do not pay for 
it, guess who pays for that item? All of us who come behind and buy 
that product, because we build in the price of cheating.
  Well, there is no difference here. While more people believe that 
cheating is acceptable, fewer and fewer face audits. In 2003, 
individuals were audited at a rate of 6.5 per 1,000 returns, and 75 
percent of those were computer-generated, non-personal audits. Compare 
that to the audit rate of 12.8 percent in 1997, or even 9.9 percent in 
1998, the year Congress passed tax reform legislation. Audits for 
business also are down, from three per 1,000 returns to two in 1,000 in 
2003.
  Mr. Speaker, if they caught only two speeders out of every 1,000 
speeders, what kind of enforcement would that be? What kind of 
constraint would there be to stay within the law?
  Leaders in the Republican Party have repeatedly proclaimed their 
commitment to tax reform and simplification. For example, the gentleman 
from Texas (Mr. DeLay), the House majority leader, stated in April 
2001, ``We are pushing forward with our campaign to reform the Tax 
Code. We are making it fairer, flatter, simpler and less burdensome to 
the American people.'' That is what the gentleman from Texas (Mr. 
DeLay) said in 2001.
  But the facts, Mr. Speaker, clearly demonstrate otherwise. Since 
2001, Republicans have made 227 changes to the Tax Code and added more 
than 10,000 pages to the code in regulations.
  Mr. Speaker, I want the camera to go right to the end of my finger 
here. This is 10,000 pages. In 40 months, this is just \1/2\0th of 
those 10,000 pages, 500 pages. That is the number of pages the 
Republican Party has added to the Tax Code and regulations in just the 
last 40 months.
  Today on the floor, of course, we spent about an hour on tax 
simplification. Wonderful. By the way, in passing that tax 
simplification, we added more pages to its complexity.
  We need to do better. We Democrats believe that we can do better, and 
we intend to do better.
  Additionally, the Republicans propose another 109 provisions in the 
FSC ETI bill, the bill that tries to fix the problem found in unfair 
competition in the WTO, the trade scenario. So we passed a bill to 
solve a $4 billion problem that cost us $150 billion, which we did not 
pay $35 billion of. That is the party that wants to make our code more 
simple, less complex, fairer. It was a grab-bag of special interest 
provisions, just as most of these pages are as well.
  Just today, our Republican friends considered two bills as part of 
their tax reform and simplification week. But let us be honest. As I 
said, they spent 40 months complicating the code. They devoted 40 
minutes to making it simpler.
  Today, there is an increasing momentum among taxpayers for real 
reform. Mr. Speaker, Democrats will take the lead on this issue when we 
regain the House majority in November. We are going to make it simpler. 
We need to defuse the middle-class time bomb. We talk about it, but we 
have not acted on it, the Alternative Minimum Tax, which is no longer 
serving its purpose, at least not as intended. We need to take a hard 
look at looking toward a return-free income tax system, simplify tax 
rules for small businesses, stop individuals and corporations from 
gaming the system and reform international tax laws that encourage 
American companies to move jobs overseas.
  The American people, Mr. Speaker, are acutely aware of the 
unnecessary complexity and dire need for real tax reform in America 
today. We Democrats have been talking about that. When we are in 
charge, we are going to do it, not talk about it, as our friends in the 
Republican Party have done.
  The American people need, the American people deserve, a tax system 
that is simpler, fairer and more efficient.
  I want to look at some of these quotes.
  Newt Gingrich, 1997: ``So we want to move towards a simpler Tax Code 
that takes less time to fill out, that is easier for the American 
people.'' 10,000 pages since that time, and, indeed, more, added to the 
Tax Code.
  President Bush, March 17, 2001: ``Americans want our Tax Code to be 
reasonable and simple and fair. These are the goals that unite our 
country, and these are the goals that have shaped my plan.''
  My plan? My plan? What plan? There has been no plan submitted to the 
Congress of the United States. There is no plan in front of the 
Committee on Ways and Means to which the President referred. There has 
been no simplification. There has just been these 10,000 pages of 
additional special interest provisions added to the code. No plan, Mr. 
President. But, then again, you only said that 40 months ago.
  The gentleman from Texas (Mr. DeLay), a month after the President 
said his simplification plan was on its way: ``Because of the Tax 
Code's mind-numbing complexity, millions of hard-working men and women 
waste countless hours every April. We are pushing forward with our 
campaign to reform the Tax Code. We are making it fairer, flatter, 
simpler and less burdensome to the American people.''
  10,000 pages have been added to the Tax Code since the gentleman from 
Texas (Mr. DeLay) said he was bringing us a fairer, simpler Tax Code.
  John Snow, the Secretary of the Treasury, this year: ``The 
administration has made tax simplification a priority, and we look 
forward to working with Congress to achieve it. A simpler code is 
something we owe honest taxpayers, and the worst thing of all for the 
tax cheat.''
  Amen, Mr. Secretary. Where is the plan? Nobody here has seen it. Is 
it in the Treasury Department? Is it in the White House? Or perhaps it 
is on its way down Pennsylvania Avenue. Where is the plan?

[[Page 16928]]

  Lastly, Scott McClellan, the President's Press Secretary: ``The 
President is committed to making the Tax Code more simple and fair.'' 
February 2004.
  No plan, no fairness, no simple plan. 10,000 additional pages.
  I now would like to yield to some of my colleagues to speak on 
particular aspects of how we can make this fairer, simpler and a better 
code.
  I yield to my friend the gentleman from Georgia (Mr. Scott), a new 
Member of Congress, but a veteran of 20 years in the Georgia Senate and 
one of our most able legislators.
  Mr. SCOTT of Georgia. Mr. Speaker, I rise today to discuss what in my 
opinion is the absolute heaviest burden on the American people and the 
American family today, and that is this costly, confusing, complex and 
complicated Tax Code.
  I want to start my comments by commending our distinguished House 
Democratic Whip, the gentleman from Maryland (Mr. Hoyer), for his 
steadfast leadership on this issue of the need for tax reform. I thank 
the gentleman for leading on this issue. He has not just started 
leading on this issue. He has been leading on this issue for a number 
of years.
  Mr. Speaker, I believe that Americans are double-taxed, and that the 
time and expense that it takes to file their taxes creates an 
additional cost to our taxpayers.
  The current Tax Code is riddled with confusion, complexities, 
ambiguities and unfairness of staggering magnitude. We need to make 
drastic changes now. Our current Tax Code is beyond reason and basic 
common sense.
  For instance, the Federal income tax code has grown from 45,662 pages 
in 2001 to 60,044 pages today. Mr. Speaker, at that rate, at that 
number of pages, it would take over a year just to read the current Tax 
Code, and that is only if you were reading an average of 1,215 pages 
every week and doing it at least 8 hours every day. That is absolutely 
incredible.
  Our four common tax forms, 1040 and Schedules A, B and D, take an 
estimated 28 hours and 30 minutes to prepare. As our distinguished 
leader pointed out, in 1988, when the IRS began tracking this 
information, the average paperwork burden was 17 hours and 17 minutes. 
That is an increase of over 10 hours in just 6 years. Unbelievable.
  Mr. Speaker, Alexander Hamilton, one of our great founders of this 
country, perhaps the primary architect of our taxing system and our 
first Secretary of the Treasury, said, ``In order for our Nation to 
succeed, our taxing system must be simple, literate and fair, and I 
tremble for the future of my country if we fail in this endeavor.'' And 
I tremble indeed for the future of our country also, as Mr. Hamilton 
did 200 years ago, if we fail to reform our Tax Code.
  Indeed, I predict a serious taxpayers' revolt in the very near future 
because of complexity, because of expense, because of unfairness, if we 
do not move with haste now to reform the Tax Code.
  It now costs taxpayers $100 billion each year just in fees for our 
taxpayers just to complete their tax returns. Individuals, businesses, 
tax exempt, public-private entities, spend 6 billion hours each year 
just complying with the Tax Code. It is a loss to our economy and it is 
a loss to our productivity, and it is staggering.
  Mr. Speaker, as you know, as an entrepreneur that has started a 
successful business, as I have, as a small business owner, I believe 
that tax reform proposals that simplify the Tax Code merit serious 
consideration, and to that end I am a cosponsor of H.R. 1783, the 
Freedom Flat Tax Act.
  Let me just tell you for a minute what this flat tax will do. It will 
take the complexity out of our Tax Code. It will ensure fairness by 
closing creative loopholes that allow some unscrupulous persons to 
avoid paying their fair share of taxes.

                              {time}  2300

  This measure would phase in a flat tax over a 3-year period with a 19 
percent rate for the first 2 years and a 17 percent rate in subsequent 
years, and it will allow for no deduction loopholes, but will allow for 
personal exemptions, including a $5,300 exemption for each dependent.
  I do not believe that the flat tax is perfect, but at least it is a 
starting point to do 2 essential things: give our taxpayers back their 
time and give them back some of their money. That is what the American 
citizens are asking for.
  This current Tax Code is mesmerizing in its confusion and unfairness. 
For example, there are 5 different tax breaks for families with 
children: dependency exemption, head of household filing status, the 
child tax credit, the child independent care tax credit, the EITC, and 
all 5 of these define a qualifying child differently. How confusing.
  Taxpayers overpay their taxes by an estimated $1 billion a year 
because they fail to claim itemized deductions, opting for the standard 
deduction instead, according to the General Accounting Office, because 
they say the Tax Code is too hard to understand.
  About one-quarter of taxpayers who are eligible for the earned income 
tax credit, which is designed to help the working poor, fail to claim 
it because they say it is too complicated. Our Tax Code is terrible.
  Mr. Speaker, we cannot wait any longer. The time for tax reform is 
right now. We must not tinker around the edges of the Tax Code, but go 
right to the heart of the problem. The American people are depending 
upon us, and we Democrats must provide the way and the leadership on 
this critical issue of tax reform. The American people need and deserve 
a tax system that is simpler, fairer, and more efficient, just as the 
gentleman from Maryland (Mr. Hoyer) stated, and we must give it to them 
now.
  Mr. HOYER. Mr. Speaker, I thank the gentleman for his comments and 
for the passion that he brings to the effort to make this a simpler, 
fairer Tax Code for the welfare of our people, for small business, and 
all of those who must comply with a system that has become 
extraordinarily complicated.
  Mr. Speaker, I yield to the gentleman from Washington (Mr. 
McDermott), a senior member of the Committee on Ways and Means.
  Mr. McDERMOTT. Mr. Speaker, I thank the gentleman from Maryland. This 
is an auspicious night tonight. The President had a dinner downtown and 
raised $25 million from some of his closest friends. In the recent 
motion picture, in talking to them, he said, some people say you are 
the elite, but I say you are my base.
  Well, we ought to talk about this man's base.
  Mr. HOYER. Mr. Speaker, if the gentleman will yield, is that the 
movie in which the gentleman from Washington (Mr. McDermott) starred?
  Mr. McDERMOTT. Mr. Speaker, since 1994, when the Republicans created 
a Contract With America and said that they would pull the Tax Code up 
by the roots and simplify it, this Tom DeLay Congress and its tax-
writing committee have added another 10,000 pages, which the minority 
whip has already pointed out, and lowered taxes on the most affluent 
among us. Over the past 3 years, the Congress has watched 1 million 
jobs disappear, and what has it done? Well, first the Congress passed 
out lavish tax breaks to the millionaires so that they could send more 
money to Wall Street. Second, the House of Representatives sent the 
chairman of the Committee on Ways and Means to Europe. While he was 
there, the Europeans said, because of the WTO's ruling, you Americans 
need to change your tax structure to make it easier for European 
products to compete with American ones. How did the chairman of the 
Committee on Ways and Means respond? He told the Europeans he would 
like to help them out, but that they should impose tariffs on the 
American products first to get our attention. He thought that if they 
hit us, he could get something through the House.
  Today, Mr. Speaker, the Europeans are imposing a 9 percent tariff on 
American products exported to Europe, our largest trading partner. 
These tariffs apply to some of our most sensitive products like 
agricultural goods that come from all across America, from Florida and 
from the Midwest. The Europeans are imposing tariffs on paper

[[Page 16929]]

and wood products that come from the Pacific Northwest and from the 
American south. Just last month, to appease the Europeans, the House 
and Senate passed a bill to hike up taxes on U.S. companies who export 
American-made products to foreign markets. At the same time the House 
and Senate lowered taxes for U.S. companies that operate offshore.
  And what do other Republican leaders have to say about this? Well, 
the chairman of the Committee on Rules came out here a few weeks ago 
and said he was happy that European tariffs were imposed, he was happy 
that this Congress was raising taxes on U.S. firms that operate in 
America, and he was happy that we were lowering taxes for U.S. firms 
that operate offshore. Check the Congressional Record, Mr. Speaker. My 
colleagues will find I am right. This is not hyperbole. I am not making 
this up. This man stood right over there and said it. This is the 
official Record as recorded by the House Clerk.
  Mr. Speaker, our tax structure is one of the most competitive in the 
developed world. Our effective corporate tax rate is among the lowest 
in the developed world. Let me say that again. Our effective corporate 
tax rate is among the lowest in the developed world. Only 2 nations 
have lower effective tax rates than ours.
  Furthermore, Mr. Speaker, despite the fact that we currently tax U.S. 
firms who operate overseas at a lower tax rate than those who operate 
on our own shore, the Republican Party has pushed through legislation 
in the House and Senate to again lower the tax rate that U.S. firms 
operating offshore will pay.
  This country has lost 1 million jobs, and many of those were lost 
because they simply moved offshore. It is cheaper to operate over 
there. That is why they went, and the tax structure is set up so that 
it is cheaper for companies to move offshore and leave the American 
worker behind without a job.
  The Republican Party's response to an increasingly connected global 
economy has been to make our Tax Code more complex and to lower taxes 
for U.S. companies that decide to move their operations offshore.
  When is the Republican Congress going to do something right and 
something fair for the American people, Mr. Speaker? When is the 
Congress going to reform the Tax Code so U.S.-based firms are not put 
at a competitive disadvantage, compared to U.S. firms that move 
overseas?
  Since the Republicans took control of the congressional tax-writing 
committee on which I sit, U.S. firms have moved overseas, Americans 
have lost their jobs, and we spend more time than ever trying to figure 
out our taxes, because of the 10,000 pages they have added.
  Since the Republicans took control over the Department of the 
Treasury, the Federal Government finds itself in annual an $500 billion 
deficit. Now, that is real fiscal responsibility. We borrow nearly $500 
billion every year from foreigners, from the Chinese, from the Saudis, 
from the Swiss. We are in hock to half the world.
  Does the Republican Party expect to control the Congress based on 
this record over the last decade, Mr. Speaker? If they do not make some 
changes pretty quick, and those 2 silly bills they brought out here 
today did absolutely nothing to simplify; all they were was a piece of 
paper that said ``tax simplification'' across the top and the body of 
the text did nothing, nothing. There is not a single person in this 
country that will have an easier time on the 15th of next time because 
of the silly bills they passed out of here today.
  Luckily, we only have 105 more days to suffer under these people. We 
are going to have a change when the Democrats take over this place.
  Mr. Speaker, I commend the gentleman from Maryland for bringing this 
issue up and bringing it out here. It is late at night, but it is an 
issue that affects every single American, and the American people ought 
to know that we are thinking about it and want to change it.
  Mr. HOYER. Mr. Speaker, I thank the gentleman from Washington State, 
a member of the Committee on Ways and Means, for his remarks. And then 
that, of course, as the gentleman points out, is the purpose. The tax 
simplification purpose of ours is not going to be just tonight, it was 
not just 3 days ago when I gave a statement to the press and to others; 
it is a commitment that we have for all Americans to make this a 
fairer, simpler system for them and their families, and for every small 
businessperson in America so that they can feel that we are not placing 
an extraordinary burden on them.
  Paying is burden enough. Complicating the system and causing them 
hours and hours and costs to comply is too much for them to expect, and 
we need to change it, and we Democrats are going to change it. I thank 
the gentleman from Washington for his remarks.
  I now am pleased to yield to the gentleman from Illinois (Mr. 
Emanual), who has been very involved in our efforts to focus on tax 
simplification and who is a leader in this effort.

                              {time}  2310

  Mr. EMANUEL. Mr. Speaker, I would like to thank the leader for doing 
this, although again it is late at night; but many times when families 
have to fill out the 1040, these are the hours they are working at 
their kitchen table trying to figure out what those stacks of paper 
mean, and so it behooves all of us to be here at this hour because it 
is very similar to what middle-class families across America have to do 
when it comes to the Tax Code, and it requires countless hours; and I 
think if I am not mistaken in the last 10 years we have added about 
7\1/2\ hours to the average family's hours that they are dedicating 
just to filling out the tax forms around April 15.
  Now, I have put together a proposal that would affect about 60 
percent of the tax filers and get the form down to 12 simple questions 
and eliminate 200 pages of the code, about 2,000 addendum pages, and it 
is called the simplified family credit. It takes the earned income tax 
credit, which is for working people making the moderate income level, 
the per child tax credit, the dependent care and collapses them into a 
single family credit, eliminates 200 some-odd pages of code, 12 
questions. Also wacks the marriage penalty and deals with the AMT, 
which is a regressive tax for families.
  And in my sense, that puts not the onus so much but the benefits of 
the Tax Code behind families at work who are trying to do right for 
their children, and it would simplify the code but also reward those 
families who choose work over dependency.
  You make $50,000. You have two children, this would be an additional 
$1,500 cut to that family versus what President Bush has put in place, 
and it would do it by eliminating well over 200 pages of the code.
  This code has become so complicated, the complexity has led to 
tremendous inequity in the code.
  Today we have about $311 billion, this is the lowest according to the 
IRS, of underreported or nonreported income, mainly by the extremely 
well-off corporations and individuals, who through lawyers and 
accountants do not report income, and they use the code to disguise 
income.
  Well, nobody should pay more than they are supposed to pay, but the 
code is written now for those who can afford lawyers and accountants to 
shelter and hide and disguise income. When the burdens of the rest of 
the funding of the government services, the burdens of paying their 
fair share are shifted more and more upon those who work for a living. 
$311 billion goes underreported or not reported or collected.
  That would wipe away well over half the deficit this year. We are 
going to have $450 billion. $311 billion would wipe it away. You could 
fund close to half the Americans who are seeking college assistance, 
aid for middle-class families to pay for college can still pay about 
$100 billion or $200 billion of the deficit. What simplifying the code 
would do is ensure that when you paid your taxes, you knew that people 
down the street, you knew that people on the other side of the tracks 
were paying their fair share, because today nobody

[[Page 16930]]

believes that the others are paying their fair share, and we have a 
system that is corrosive. It is stacking the deck against ordinary 
American taxpayers, and while the special interests win shelters and 
loopholes, middle-class families who play by the rules are now carrying 
the burden for those who do not report and do not pay their fair share.
  Others have mentioned this, but I do think it is worth noting, in the 
last 3\1/2\ years, this administration has had three tax cuts, and in 
that time they have added 10,000 pages to the code--326 separate 
changes. They have added phase-ins and phase-outs and other gimmicks, 
sunsets to the code. All the while they have increased the burden of 
the Tax Code on those who work for a living and shifted the burden of 
those who earn money from capital investment, while if you work for a 
living, you are now paying more and getting less from this Tax Code. 
And it is high time we put the Tax Code not on the backs of the middle-
class family but fighting for middle-class families, understands the 
obligations they have of meeting the needs of their children, and I 
think that the Bush Tax Code is a treasure chest full of loopholes and 
tax shelters for the special interests, and it has become a nightmare 
for middle-class families.
  As I mentioned earlier, 7\1/2\ hours of additional time to fill out 
the tax returns. The child tax credit now has five separate breaks. I 
think the last time, when you compare the earned income tax credit per 
child and the dependent care, it is close to 10 separate definitions of 
children. Well, I have got three. They are all the same definition. 
They are sniveling and they bother you all the time. You do not need 12 
definitions of what a child is. You know what it is, and the code does 
not understand it; and it is clearly making it more complicated.
  Again, it has increased costs for filling out the form. We can do 
this. There is no reason for the Tax Code to be this way, but it was 
designed this way. That is the point that people need to understand. 
The code as it exists today was designed for the special interests, was 
designed for those who can hire lawyers and accountants to figure their 
way out of paying income, hiding income, sheltering income, moving jobs 
overseas, moving corporations overseas, holding capital in a separate 
subsidiary overseas.
  Do you know a family in America that has set up a subsidiary of their 
family in Bermuda to not pay taxes? If a family could figure out how to 
do that, they would figure out how to pay for college. They are 
struggling how to pay for college, yet corporations are setting up 
subsidiaries in Bermuda not to pay their fair share of tax and the 
burden shifts on the middle-class families.
  We need to take this Tax Code and ensure that the middle-class 
families, that it is fair to them, it is simple, you do not have to 
have a family dispute to fill out the tax form, and deal with that that 
is on that table. It is not fair. It is not right. We can do better. 
And so I applaud the efforts today, as Democrats put together the ideas 
of simplifying the code and making sure it reflects the values and the 
interests of our middle class.
  I offer my idea of a simplified family credit that would affect 60 
percent of the taxpayers and reduce the tax form down to 12 easy 
questions, and it would be right for them. It would be right for their 
children. And, again, it would ensure the most important thing, that 
everybody have a sense that everybody is paying their fair share. And 
today we do not have that sense, and we end up with $311 billion of 
people who are cheating the system and cheating the country of their 
obligation, and therefore shifting the burden to the rest of us who pay 
our fair share. That is wrong, and we can do better.
  And, again, I applaud you for holding this and again reminding people 
that Democrats have an idea of massive tax reform, a big idea that 
would change the way we do things and it would be good for the economy, 
not only be fair to middle-class families. It would lead to a more 
productive economy, and it would make sure also the entrepreneurs and 
small businesses were treated correctly in our code.
  Mr. HOYER. Reclaiming my time, I want to thank the gentleman from 
Illinois (Mr. Emanuel) for his contribution tonight, but more 
importantly, for his contribution to spurring the effort of tax 
simplification and tax fairness for middle-class Americans, but I would 
suggest to him that those families, of course, cannot site an offshore 
post office box and therefore avoid taxes. But to some degree, we 
ourselves have created 10,000 pages in which Americans normally look to 
how do I reduce my obligation in taxes. That is a normal thing for 
people to do, and the fact that we have made it so complicated allows 
some people to take advantage of loopholes that perhaps were not 
contemplated but exist; and the unfairness then is not only to our 
working-class, middle-class families but also to those competitors of 
theirs who do not take advantage of those loopholes, who keep jobs in 
America, who are paying their fair share of taxes here in America.
  So tax fairness is not only tax fairness in terms of middle-class 
taxpayers but, frankly, all taxpayers so they can have the confidence 
that their liability based upon the income that they make will be 
proportionately the same as their competitor, as their fellow citizen.
  Mr. Speaker, I now yield to another member of the Committee on Ways 
and Means, extraordinarily able member of our caucus, who does an 
extraordinary job in focusing on fairness to working families, the 
gentleman from Texas (Mr. Sandlin).
  Mr. SANDLIN. Mr. Speaker, I first off want to thank the distinguished 
minority whip for his leadership of the entire United States Congress 
on the issue of tax simplification and fairness, an issue that affects 
every working family in America.

                              {time}  2320

  Just last week our whip said, ``Taken individually, of course, nearly 
all of the tax preferences that clutter the code can be rationalized. 
Collectively, however, they are a jumble of confusion that leads to 
unfairness.''
  That is certainly being kind. So we appreciate all that the whip is 
doing to lead not just our caucus but the entire Congress in this issue 
that affects us all.
  For more than 10 years, my friends on the other side of the aisle 
have made tax reform and simplification a cornerstone of the economic 
program. However, for all of their expertise, or maybe all of their 
obsession, they seem to have fallen far short.
  In Texas we would say that the record strongly suggests that on tax 
issues the Republican majority is ``all hat and no cattle.'' The 
Republican majority talks a lot about giving the American people their 
money back. We all agree on that. We all agree that the American people 
are better stewards of their own money than is the government. However, 
the Republican tax themes and schemes have the perverse effect of 
taking from Peter to pay Paul, and in virtually every instance, the 
middle-class Peter is paying the millionaire Paul.
  Middle-class families are feeling a serious pinch from the economy. 
Ten years ago they had no problem making their house and car payments, 
putting food on the table or sending their kids to college. Ten years 
ago, more likely than not, they had a stable and secure job in America, 
not China, not India, and they had benefits like health insurance and a 
pension that they took for granted. Faded memories, how they linger.
  Ten years later and 10 years into the Republican contract on America, 
those same families are getting the squeeze. Foreclosures and personal 
bankruptcy are at record levels in this country. Consumer debt has a 
stranglehold on the average American family. Tuition is skyrocketing 
while student aid is being cut year in and year out. Secure employment 
with health insurance and a pension has been replaced with reduced pay 
and no benefits.
  Just ask yourselves, are things getting better or worse? Do you have 
more money for your family or do you have less? The middle class is 
hurting, but where is Congress?

[[Page 16931]]

  While the Republican majority is cutting student aid while talking 
about the importance of education in the 21st century marketplace, the 
middle class is getting squeezed out. The Republican majority refuses 
to fully fund the centerpiece of President Bush's education policy, No 
Child Left Behind, while handing out annual $100,000 tax cuts to 
individuals making $1 million or more per year in income.
  We have passed permanent extensions of the child tax credits and 
marriage penalty relief, but to no avail. And why is that? What the 
Republican majority knows, but apparently does not want to talk about, 
is how its failure to enact meaningful reform of the alternative 
minimum tax has the perverse effect of eliminating, that is eliminating 
any benefit middle-class families would realize from the enhanced child 
tax credit and marriage penalty relief.
  My friend and colleague, the gentleman from Massachusetts (Mr. Neal) 
has devoted untold hours to devising a reasonable solution to the AMT 
problem, but the Republican majority absolutely refuses to fix this 
serious and enormous problem which Nina Olson, the IRS' National 
Taxpayer Advocate, labeled the most serious problem faced by American 
taxpayers.
  The alternative minimum tax was enacted in the late 1960s and was 
designed to affect only the wealthiest Americans as it was explained 
earlier tonight by the minority whip, and in the interest of time, I am 
not going into that. However, the reality is far from that ideal.
  For most of its existence, the AMT has affected few taxpayers, less 
than 1 percent in any year before 2000, but its impact is expected to 
grow rapidly in the next few years and affect more than 20 percent of 
the taxpayers by the year 2010, many of them middle-class taxpayers. 
Call it what you will. It is a Republican tax increase, that is what it 
is.
  So I ask you, where is the solution? The gentleman from Massachusetts 
(Mr. Neal) offered one, maybe there are others, but the Republican 
majority prefers the status quo just as it is today.
  What does the status quo foretell for America? Twenty percent of all 
taxpayers and 40 percent of married couples will owe AMT in 2010. This 
again is a Republican income tax increase on the American public. And 
where is the fairness? While only about 30 percent of taxpayers with an 
adjusted gross income over $500,000 will pay the AMT in 2010, in 
comparison, two-thirds of American taxpayers with an adjusted gross 
income between $50,000 and $100,000 will have AMT liability in 2010, 
two-thirds, again, a Republican tax increase on the middle class.
  Taxpayers with an AGI between $100,000 and $250,000 will be hit the 
hardest by the AMT. In 2010, over 90 percent of those individuals will 
have AMT liability. So despite the symbolism of passing marriage 
penalty relief and other relief, the Republican majority's refusal to 
meaningfully reform the AMT eliminates most of the benefits for middle-
class families, totally eliminating them. And not only does it 
eliminate the benefits, it passes on increased tax liabilities to 
American working families.
  You can call it Ray or you can call it Jay, but whatever you call it, 
it is a Republican income tax increase on the working class in America.
  I thank the whip again for his fine work on this issue, and we 
appreciate his leadership.
  Mr. HOYER. I thank the gentleman from Texas (Mr. Sandlin) for his 
comments and very important observations.
  Clearly he is correct. We need to not talk about simplification; we 
need to do simplification. We need to do fairness so that the American 
public is better served by their system and better able to support 
themselves and their families.
  Mr. Speaker, I yield to the gentleman from Texas (Mr. Gonzalez), a 
member of the very important Committee on Energy and Commerce.
  Mr. GONZALEZ. Mr. Speaker, I thank the gentleman. It is a pleasure 
joining the gentleman on such an important topic. It may be late at 
night, as someone observed, but I think most American families, they 
are used to staying up late right before April 15. And as a matter of 
fact, people get extensions, so I think there will be other late nights 
because no one is going to go through 10,000 pages looking for the 
answer unless they have a lawyer or an accountant.
  The Democrats do not have a monopoly on this particular issue. What I 
do believe we have is a sincere interest in doing something about it. A 
very distinguished colleague of ours who happens to have a seat on the 
other side of the aisle recently stated, ``We have been here long 
enough. We had better deliver a simplified Tax Code. I think this 
should be a centerpiece of reform for congressional Republican 
candidates. Instead of tax cuts, we should be talking tax 
simplification.''
  Now, those are words. They were in the majority. They could make it 
happen. But it is not happening. So wherein lies the problem? It is all 
talk.
  Let me read something to you which I have always found interesting. I 
cut this article out 2 years ago because I thought it was so incredibly 
demonstrative of plain words lacking real intention and action. We were 
looking at that time, or the administration was looking for a 
commissioner to head the Internal Revenue Service. They hired a firm, a 
head-hunting firm to proceed with the search. This was the ad.
  ``Our firm has been awarded the assignment by the Department of 
Treasury through Secretary O'Neill and a Presidential oversight board 
to identify possible candidates to become the Commissioner of Internal 
Revenue Service. From this list the Secretary will recommend to the 
President individuals for his nomination to the United States Senate 
for confirmation.''
  This is the part that I enjoy. ``The individual does not need to have 
any in-depth exposure to the tax system or code.'' They need not 
understand the problem. They need not understand the code. But what was 
the most important thing the administration was looking for? Here it 
is. ``As an appointee of the President, he or she is expected to fully 
support the President's position and his administration's position.''
  You are going to get your marching orders from the administration, 
which means you are not going to simplify anything. I think someone 
said earlier tonight that the President may be viewing as his base 
those individuals that find aid and comfort in 10,000 pages of complex 
legislation, that does not inure to the benefit of the average 
American.

                              {time}  2330

  Speakers before me pointed out I think a real basic tenet in our 
democracy. Everybody will do their own fair share, including the 
payment of taxes.
  According to the Treasury Department, actual corporate income tax 
revenues fell 36 percent from fiscal year 2000 to 2003, 3 years, 36 
percent drop.
  From 1996 to 2000, 95 percent of corporations paid than less 5 
percent of their income in taxes. From 1996 to 2000, 60 percent of 
U.S.-based corporations paid no corporate tax at all. Among large 
corporations, those with sales of more than $50 million or assets of at 
least $250 million, 33 to 45 percent paid no taxes. Do you know why? 
Therein, somewhere in those 10,000 pages, we allowed this to exist 
today.
  Warren Buffet declared, ``If class warfare is being waged in America, 
my class is clearly winning.''
  This is not an anti-business message. The Democratic Party and the 
policies and agenda and philosophy is pro-business. All we can ask is 
that everyone carry an equal burden and make their equal contribution. 
That is not so unfair. That is as American as anything that exists in 
any political philosophy.
  The leader touched on what is happening within the IRS and how his 
hands are tied because of obviously fiscal constraints and policy. The 
IRS says that its number of corporate audits has declined because of 
the explosive growth in tax shelters which allow companies to take 
advantage of complex tax code provisions. In other words, the 
increasingly complex tax code has made it more difficult for the

[[Page 16932]]

IRS to go after corporate tax evaders. In the meantime, middle class 
families remain open and increasing targets for the audits.
  To quote David Keating, of the conservative National Taxpayers Union, 
``If we had simpler tax laws, it would be simpler for taxpayers to 
follow and simpler for the IRS to enforce and administer.''
  I recognize we are running out of time, but to give my colleague a 
clear example of what we have contained in those 10,000 pages, unknown 
to most of the average taxpayers is section 179. What is section 179? I 
am going to read you from an article that appeared in the Washington 
Post on September 26, 2003.
  This is a sales representative for Hummer of Alaska. You know what 
Hummer is, the huge car. Allow me to introduce you to a fabulous 
opportunity, he writes in a prominent letter, a tax loophole so big you 
can drive a Hummer H2 through it. Imagine being able to purchase the 
number one large, luxury SUV in America today and receive a deduction 
for the entire purchase amount from your taxes this year. How is this 
possible, the salesman asks? Thanks to the Bush administration's recent 
economic stimulus package, small businesses and the self-employed are 
eligible to deduct the entire purchase cost of new equipment up to 
$100,000 the year of the purchase.
  Now, we need to remind our colleagues, these provisions are supposed 
to help farmers and small business owners buy equipment to transport 
merchandise and haul equipment. No matter.
  The letter continues: The Hummer H2 qualifies for this IRS section 
179 deduction by its gross vehicle weight of over 6,000 pounds. Cars 
and medium-sized SUVs do not qualify for this deduction. If you are 
seriously considering acquisition of a new vehicle, step up to the 
vehicle that can take you where you want to be, financially and 
otherwise.
  It does not stop there, because I will tell my colleague, you can go 
out and buy a Porsche SUV for about $90,000, and it will qualify for 
section 179 in those 10,000 pages that some taxpayer gets to write off 
in that 1 year to drive that luxury vehicle.
  I do want to remind my colleagues that someone on the Democratic side 
has introduced legislation to correct that. It will never see the light 
of day because we are not in the majority. That is what we are talking 
about. We have already talked about the different tax breaks for 
families that they could figure out.
  Taxpayers overpay their taxes by an estimated $1 billion a year 
because they fail to claim itemized deductions. How many taxpayers 
actually go through the trouble of figuring the code out so they can 
itemize? About one-third of taxpayers who are eligible for the earned 
income tax credit which is designed to help the working poor fail to 
claim it because it is too complicated. It is so complicated that tax 
preparers are responsible for nearly 70 percent of the errors and 
overclaims on returns. The people that are supposed to know the 
business cannot figure it out.
  I will leave you with one thought. Time is money. Simplification does 
translate into savings and responsibility and sharing the tax burden 
equally. Time is money, and I say this to the American taxpayer. It is 
your time and it is your money, and you deserve a heck of a lot better 
treatment.
  Mr. HOYER. Mr. Speaker, I thank the gentleman for his comments and 
his very important contribution to this discussion.
  In closing, let me say that we are committed to working, not only on 
our side of the aisle but working with our Republican colleagues as 
well, towards simplifying this code, making it fairer, reducing these 
10,000 pages so that the anomalies of which the gentleman from Texas 
just spoke in terms of the deduction for the Hummer and for the Porsche 
will not make our tax code unfair so that the average working American 
who goes to work every day, and as Bill Clinton said, plays by the 
rules, will not have an undue tax burden placed upon them because so 
many others take advantage of one of the loopholes included in these 
10,000 pages and do not pay their fair share.
  That is not fair. That is not good tax policy. That is not good for 
America. So we are pledged as Democrats, as Americans, as Members of 
this House sent up by our neighbors here to represent them, to work 
unceasingly and tirelessly on making this code simpler, making it 
fairer, making it more efficient, making for a better code, a better 
America.

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