[Congressional Record (Bound Edition), Volume 151 (2005), Part 5]
[House]
[Pages 6240-6247]
[From the U.S. Government Publishing Office, www.gpo.gov]




                        THE NEED FOR TAX REFORM

  The SPEAKER pro tempore (Mr. Gohmert). Under the Speaker's announced 
policy of January 4, 2005, the gentleman from Maryland (Mr. Hoyer) is 
recognized for 60 minutes as the designee of the minority leader.
  Mr. HOYER. Mr. Speaker, I rise to speak about tax reform and tax 
simplification, but one of our newest Members has had the opportunity 
to have the floor for the previous hour and talk about Social Security. 
I know that he is very worried about Social Security and, as a result, 
has been addressing that. But I am constrained to say that he talked 
about personal accounts with reference to Social Security. Of course, 
what he did not say is that Social Security has nothing to do with the 
solvency of Social Security. He talked about a moral responsibility. 
The President of the United States and his party indicated they were 
not going to spend any money of Social Security. In fact, in the last 4 
years, they have spent and continue to spend every nickel of Social 
Security. I am sure my young friend will acknowledge that point at some 
point in time, but that is not the subject tonight of our Special 
Order.
  Mr. Speaker, the one thing that millions of Americans will not be 
saying at the end of this week is, TGIF, thank goodness it is Friday. 
Friday is the day, of course, April 15, the annual deadline for filing 
Federal income tax returns, a duty of citizenship that provokes 
anxiety, confusion, and, yes, even anger in many taxpayers every year. 
Without question, the Internal Revenue Code has become a maze of 
complexity that confounds millions of Americans, including, I think, 
all of us who will speak. It treats many taxpayers unfairly; and it 
creates an opportunity, some would say an incentive, for those who 
would exploit its complexity to avoid compliance, thus placing an 
unfair share on others.
  As Nina Olson, Mr. Speaker, said, the National Taxpayer Advocate 
stated in December in her annual report to Congress: ``The most serious 
problem facing taxpayers and the IRS alike is the complexity of the 
Internal Revenue Code. The only meaningful way to reduce these 
compliance burdens is to simplify the Tax Code enormously.'' So said 
Nina Olson, the National Taxpayer Advocate.
  All of us, of course, bear some responsibility for the complexity of 
our Tax Code, Democrats and Republicans and every American who believes 
that

[[Page 6241]]

the tax preferences that he or she utilizes are worthwhile. Considered 
individually, the tax preferences that clutter the code certainly can 
be rationalized and explained. Collectively, however, they are a jumble 
of confusion that have a corrosive effect on our democracy.
  As Paul O'Neill, the former Secretary of the Treasury said, ``One of 
the unseen consequences of the Tax Code's complexity is the sense it 
leaves taxpayers that the system is unfair, and that others pay less 
tax because of special advantages.'' Almost every American, I think, 
feels that, including those who take special advantage.
  A few facts illustrate the scope of the problem, Mr. Speaker. In 
1913, the Tax Code was a mere 500 pages in length. 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. Think of that. They are relatively simple forms. When the IRS 
started tracking this information in 1988, the average paperwork burden 
was 17 hours and 7 minutes, about 11 hours less. Even the simplest form 
in the IRS inventory, a 1040 EZ, perhaps misnamed, now requires 3 hours 
and 43 minutes for the average taxpayer to prepare, up from 1 hour and 
31 minutes in 1988.
  Complexity costs more than $100 billion. That cost is in accounting 
fees and the value of taxpayers' time to complete their returns. This 
is roughly equivalent to what we spend to run the Department of 
Education, Homeland Security, and State. Think of it: the cost of 
complexity for our taxpayers, $100 billion more than we spend on the 
Department of Education, Homeland Security, and the Department of 
State. Not surprisingly, Mr. Speaker, more Americans than ever rely on 
tax professionals. I know I do. Nearly 60 percent rely on tax 
professionals today compared to 48 percent in 1990.
  If the administrative burden does not convince you that reform is 
crucial, the crisis in noncompliance should. The IRS has estimated 
there is a $311 billion annual tax gap due to underreporting, 
underpayment, and nonfiling. Think of that, $311 billion. The bad news 
is that the budget deficits we are running up under this administration 
and the Republican leadership this coming year will be over $400 
billion. So even if we collected every nickel of that that was due and 
owing, we still would not solve our budget deficit, but it would help.
  Now, leaders in the Republican Party have repeatedly proclaimed their 
commitment to tax reform and simplification. We have heard that. The 
party that wants to bring down taxes wants to simplify the code. Both 
of us can share that objective. However, let us look at the facts.
  The gentleman from Texas (Mr. DeLay), the House majority leader, 
stated in April of 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, that they were making the Tax Code 
fairer, flatter, simpler, and less burdensome. But the facts, 
unfortunately, and no one should glory in these facts, but, 
unfortunately, the facts say otherwise. Republican tax bills during the 
last 4 years have added, added more than 10,000 pages to the code and 
regulations. In fact, during the 108th Congress, the Republicans 
orchestrated nearly 900 changes in the Tax Code.
  Now, those of us that have been here as long as the gentleman from 
Massachusetts (Mr. Neal) and I will remember passing a tax reform 
package which was designed to protect the taxpayer. And a report of our 
colleague, our Republican colleague, the gentleman from Ohio (Mr. 
Portman), who is now going to be our trade negotiator, that report said 
that one of the things that Congress had to stop doing if the IRS was 
going to be able to efficiently and effectively administer the Tax Code 
was to stop changing it every year. We have changed it every 4 years of 
this administration. And, of course, today on the floor of the House of 
Representatives, we changed it again. We made it more complex. In fact, 
many of us argued that what we did was really raise the taxes on really 
thousands of farmers and small business people as a result of the 
change we made.
  Just one bill, the Republicans' so-called American Jobs Creation Act, 
resulted in 561 changes to the Tax Code, requiring more than 250 pages 
of tax law changes. Is it any wonder why it takes Americans so long to 
fill out their forms? The Joint Economic Committee notes how this one 
new law will require more than 10 percent of all small businesses to 
keep additional records, result in more disputes with the IRS, increase 
tax preparation costs, and require additional complex calculations.
  Clearly, our tax system must be made simpler, fairer, and more 
efficient for the sake of every American, for every family.
  Now, there are some people, frankly, who are wealthy and can afford 
unlimited accounting services to make sure that they take every 
advantage of the Tax Code, but the overwhelming majority of Americans 
are not in that position. Because of that, it is incumbent upon the 
Congress of the United States and each one of us individually to ensure 
that the Tax Code is fairer, simpler, and more efficient and that 
Americans can understand it and take much less time to fulfill their 
obligations to their country.
  I think President Bush has taken an important first step in this 
effort by appointing the bipartisan Advisory Panel on Federal Tax 
Reform. I applaud him for doing that. It is chaired by former Senators 
Connie Mack, who served in this body as well; and John Breaux, who also 
served in the House of Representatives.
  The panel, in my opinion, must present options for reforming the 
Internal Revenue Code. The requirement to do so is prior to July 31. I 
am hopeful that Congress can act on this important issue during the 
109th Congress. I believe there is an increasing momentum, Mr. Speaker, 
among taxpayers for real reform; and Democrats intend to join and lead 
this fight. Democrats want to see reform to the Tax Code. Democrats are 
committed to a fairer, simpler, more efficient Tax Code.
  For example, we need to diffuse the middle-class time bomb, the 
alternative minimum tax. Now, the alternative minimum tax was adopted 
for people who were making hundreds of millions of dollars, 
corporations making hundreds of millions of dollars, maybe billions, 
but were paying no taxes at all. So what the Congress said some decade 
and a half ago, was that, look, everybody in our country needs to 
contribute to its defense and its support. Therefore, we will have an 
alternative minimum tax.
  That was never intended to adversely impact middle-income earners, 
not in the million dollar category, but far less than that. It was not 
intended for them. But Americans are now finding, two-earner families 
doing reasonably well, but just making their college tuition payments 
for their child, paying for their cars so that they can get to and from 
work, and paying for their mortgage payment because maybe they had to 
get a new house and housing prices have gone up; they are not having an 
easy time, and what they are finding now is they are getting caught in 
the web.
  We should have fixed this 4 years ago. We should have fixed it 3 
years ago. We should have fixed it 2 years ago. We should have fixed it 
last year. We should fix it this year. We are not going to. The 
President has not proposed fixing it, and the Republicans do not want 
to fix it either. Why? Because it is a secret stealth tax increase on 
middle-income and upper-middle income Americans.

                              {time}  2000

  That is why we do not fix it, so that the majority party can posture 
that they are cutting taxes while at the same time raising taxes. The 
AMT, or the Alternative Minimum Tax, will hit an estimated 3 million 
taxpayers this year, requiring them to pay $6,000 or more on average 
than they would otherwise owe, and which, when this was adopted, was 
not intended to have any effect on them. And the number of taxpayers 
subject to this tax will explode.

[[Page 6242]]

  Listen to this, my friends. All of our constituents ought to know 
this. It will go from the 3 million who are adversely affected today to 
35 million taxpayers.
  Now let us say, just for the sake of argument, that there are only 15 
million families there. So 50 million families, in other words, 35 
million taxpayers who have a wife and children, so maybe as many as 50 
or 60 million people, 35 million taxpayers will be included in the 
provisions of the Alternate Minimum Tax by 2010.
  Furthermore, Mr. Speaker, because the AMT was not indexed for 
inflation, that is the way we could have protected the middle-income 
folks, we did not do it. We should be doing it now. We should have done 
it in 2001, we should have done it in 2002, we should have done it in 
2003, we should have done it in 2004, and we should have done it this 
year. We are not doing it. It ensnares more and more middle-income 
taxpayers because it was not indexed.
  We also, Mr. Speaker, need to take a hard look at moving toward a 
return-free income tax system, a system that would say to most 
taxpayers, you do not have to get involved in paperwork. Here is the 
deal. You can file very easily because the tax system will be much 
simpler and much fairer.
  Think how much better Americans would feel, not that they are going 
to feel great about paying their taxes. None of us feel great about 
paying our taxes. But all of us understand, as a democracy, that it is 
necessary if we are going to have a national defense and if we are 
going to have other services in this country.
  We need to simplify, Mr. Speaker, as well tax rules for small 
businesses. No reason small businesses ought to be under a mountain of 
rules and regulations and tax requirements. We ought to stop 
individuals and corporations, however, from gaming the system, which 
means that small businesses and individuals have to pay more than their 
fair share. We need to consider overhauling the corporate income tax 
and focus on eliminating tax breaks that actually encourage American 
companies to move jobs overseas.
  The gentleman from Massachusetts (Mr. Neal) has been very involved in 
this entire issue, and perhaps he will discuss it when I yield to him. 
Overseas, rather than giving tax incentives to corporations and 
businesses, to create and keep jobs here in America for Americans.
  The American people are acutely aware of the unnecessary complexity 
and dire need for real tax reform in America today. The Republican 
party has not led on this issue. And the President can call a 
commission together, but for 5 years they have taken no action. The 
American people need and deserve a tax system that is simpler, fairer 
and efficient.
  I would like to yield now to some of my colleagues who are here. The 
gentleman from Georgia (Mr. Scott) has been here for a long time 
waiting to speak, and I thank him for being here. I yield to the 
gentleman from Georgia.
  Mr. SCOTT of Georgia. Mr. Speaker, I want to just, first of all, 
thank our distinguished Minority Whip, the gentleman from Maryland (Mr. 
Hoyer) for the distinguished leadership that he has been providing on 
this issue.
  Mr. Speaker, I rise today to discuss what is one of the what I call 
tragic burdens, one of the greatest tragic burdens on the American 
family, and this is the costly, complex Tax Code. This Friday, April 
15, is tax day for millions of Americans who will spend countless hours 
this week trying to comply with our unbelievably complex tax laws.
  At the outset, I want to make something very clear, Mr. Speaker, to 
the American people tonight. Let me make it clear that it is Democrats 
who you will see tonight who are taking the leadership. It will be 
Democrats on this floor of the Congress tonight who are taking the 
leadership to make our tax system fairer, less complicated, and 
simpler.
  Now we all know that over the last 4 years this government has been 
getting bigger under the Republicans. The deficits have soared under 
the Republicans. Social Security is coming under direct attack and 
attempting to be dismantled and privatized by the Republicans. And our 
tax system has gotten more complicated, more unfair and complex under 
the Republicans.
  There has been a growing unfairness in the Tax Code and an 
astronomically exploding national debt, trillions upon trillions of 
dollars, and growing each year.
  But, Mr. Speaker, it is Democrats who are here tonight providing the 
leadership for tax fairness, for tax relief, for tax simplification 
and, most importantly, for reducing taxes on working American families.
  Americans are double-taxed by the time and expense that it takes to 
do their taxes. For example, individuals, businesses, tax-exempt public 
and private entities spend nearly 6 billion hours complying with the 
Tax Code.
  Nearly 60 percent of taxpayers currently use a tax professional to 
prepare their taxes, compared to only 40 percent in 1990. A typical 
taxpayer knows that a competent tax professional does not work for 
free, so it is costing taxpayers an estimated $100 billion each year in 
accounting fees and the value of their time to complete their tax 
returns.
  Now, Mr. Speaker, I am reading a very interesting book by Thomas 
Friedman, and it is called ``The World is Flat''. And in this book, he 
talks about a phenomenal situation that takes place largely because of 
the paperwork and the complexity of our tax returns and preparing them.
  He points out very clearly in a chapter called ``While I Was 
Sleeping'' that over in India a burgeoning industry is taking place, 
preparing Americans' taxes, outsourcing jobs. In 2001, it was 50,000; 
2002, it was 100,000; 2003, it was 400,000; and 2005 it is projected to 
be over 1 million. Not just jobs, but our precious preparation of our 
taxes being outsourced.
  I am here to tell you that our failure to simplify our Tax Code is 
causing a major transformation of our accounting profession. Taxpayers 
are losing money due to the complexities of the system.
  The Government Accountability Office estimates that Americans overpay 
their taxes by an estimated $1 billion a year because they fail to 
claim deductions. About a quarter of Americans who are eligible for the 
Earned Income Tax Credit fail to claim it due to complexities.
  Mr. Speaker, this is terrible. It is a tragedy, and we must make our 
Tax Code easier for the American people, make it easier for them to 
figure it out.
  As an entrepreneur who started a successful small business, I was not 
surprised to learn that the IRS estimates that the average self-
employed taxpayer has the greatest compliance burden of almost 60 hours 
to prepare his or her taxes. It is no wonder that small business owners 
overpaid their taxes by $18 billion in 2000 and 2001, according to the 
GAO.
  This is unacceptable, Mr. Speaker. We do not need to take this any 
further. Considering these statistics, is it any wonder why 70 percent 
of Americans recently polled believed their Federal taxes are too 
complicated?
  In that same Associated Press poll, about half of the respondents 
would prefer to visit the dentist than prepare their taxes.
  Another tax problem that Americans will discover is, as our 
distinguished leader, the gentleman from Maryland (Mr. Hoyer), pointed 
out, that the Alternative Minimum Tax which will have to be paid by 
nearly 3 million taxpayers this year, that number will explode to 30 
million by 2010 according to the Congressional Budget Office. By 2010, 
the AMT will ensnare one-third of all households and 97 percent of 
families with two children and incomes between 75,000 and 100,000, 
according to the Brookings Institute.
  Now, in January our distinguished President announced the 
establishment of a bipartisan panel to provide alternatives to simplify 
the Tax Code, which I certainly join with my leader in commending him. 
This advisory panel will submit to the Secretary of the Treasury a 
report of its recommendations by July 31, 2005; and I hope that the 
advisory panel will consider tax fairness as well as tax 
simplification. And let us all work together. The current Tax Code is 
riddled

[[Page 6243]]

with special advantages for various subgroups of business people.
  Mr. Speaker, I serve on the Financial Services Committee, and I am 
deeply worried about the finances of our country. A simplified Tax Code 
would reduce tax cheaters and cut down on compliance expenses for all 
taxpayers. I believe that it is time for Congress to clean up this Tax 
Code and provide some relief to families and small businesses.
  Yes, we Democrats are taking the leadership on this as you see 
tonight. But this is bipartisan. The American people are looking for 
Democrats and Republicans to join together and make our tax preparation 
simple, easy to understand. The American people deserve this, and the 
American people are going to get it with us working together to bring 
tax relief, to bring tax simplification of the Tax Code to the American 
people.
  Mr. HOYER. I thank the gentleman from Georgia for his remarks and for 
his restating the commitment the Democrats have to ensuring that 
Americans get a fairer, simpler and more efficient tax system that 
treats them fairly and treats everybody else fairly as well.
  Now it is my great pleasure, Mr. Speaker, to introduce or to yield to 
one of the senior members of the House of Representatives, the 
distinguished gentleman from Massachusetts, mayor of his town before he 
came here, and as a member of the Ways and Means Committee has been in 
the leadership of opposing complicating the Tax Code, opposing making 
it less fair and opposing tax legislation which sent jobs overseas. He 
has been a true giant in the leadership on this effort, and I am 
pleased to join with him in this effort that we join tonight. I yield 
to the gentleman from Massachusetts (Mr. Neal).
  Mr. NEAL of Massachusetts. Mr. Speaker, I want to congratulate the 
gentleman from Maryland (Mr. Hoyer) and thank the other members of the 
team that have assembled tonight for the purpose of discussing what we 
can do to simplify the Tax Code for the American people.
  Mr. Speaker, we argue frequently in this institution about tax cuts. 
In fact, this afternoon we came up with an estate tax cut that only 
further complicates the tax system. And indeed we ought to be called 
the House of Lords here for what we did today. We have created a system 
of peerage now. You can pass on money in this instance, vast sums, 
without any qualms. We can take care of Paris Hilton, we can take care 
of the idle rich, but we cannot address the issue in a forthright 
manner about Social Security or we cannot make sure that those Humvees 
arrive in time for our young men and women who serve us with great 
honor every day in Iraq and Afghanistan or to make sure that they have 
the necessary equipment. And as they return home we are asking now for 
a copay on veterans services at Veterans hospitals.
  But what is striking about this, in a town that often talks about tax 
cuts, we could quite easily, Republicans and Democrats working 
together, do something that everybody in America desires, and that is a 
simplification of our Tax Code.
  People really have to believe in their tax system. They have to 
believe that there is an equitable distribution of the burden, but 
there is also an important investment based upon the potential 
achievements that come from us paying our taxes.
  Now, I notice that the first two speakers were very bipartisan in 
their commentary about how we might get to the starting line. But let 
me be just a little bit more discerning, offer a little bit more 
scrutiny of what has happened here during the last 10 years.
  Now, if you recall, when the Republicans came to majority status 
here, they promised, and the former chairman of the Ways and Means 
Committee very clearly stated, and I quote, they were going to pull the 
Tax Code up by its roots.

                              {time}  2015

  They were going to rip the Tax Code up by its roots. We were all 
going to a long funeral for the Tax Code. And they were going to give 
us a flat tax. They were going to give us a consumption tax. We are no 
closer to a flat tax or a consumption tax than we were when they 
started. In fact, the reality is that they have not backed up their 
words with action.
  The Tax Code today is more complicated than ever, and the very people 
on the Republican side who denounce the Tax Code's complexity are the 
ones that put together what they now call a convoluted monstrosity. 
They put it into effect.
  The law that Republicans criticize today was part of their 2001 tax 
bill that a Republican-controlled White House sent to a Republican-
controlled House and then to a Republican-controlled Senate. So the 
Republicans controlled the conference committee. They negotiated the 
final version of the bill. They provided almost all of the votes for 
the plan, and now there is even a Republican administration that 
administers the Internal Revenue Service, and we are no closer to 
simplification.
  That is one of the reasons that we voted against the tax bill on our 
side, but let me tell you what the 2001 law did. It added 214 million 
hours to the paperwork burden for United States taxpayers in 2001 
alone. It led to an explosive growth of the Tax Code. The Tax Code has 
expanded from 500 pages in 1913 to 45,662 pages in 2001 to 60,044 pages 
today.
  Think of it: 60,000 pages and almost 15 percent, one quarter of those 
60,000 pages have come into effect during these last 4 years. Think 
about that: 15,000 new pages of tax laws from the same people who rail 
against tax complexity. It is breathtaking in its audacity.
  But do we have time in this institution to address the Bermuda tax 
issue? No, we do not. I remind the American people tonight that for the 
cost of $27,000 you can open a post office box on the island of 
Bermuda, declare that you are a corporate citizen of Bermuda while 
those 146,000 soldiers are in Iraq and say that your citizenship 
belongs to Bermuda, thereby escaping the responsibility and obligations 
that we have in America to those young men and women in uniform.
  Well, they have controlled this Congress for 10 years, 10 years; they 
said they were going to do something about the Tax Code.
  Well, let us talk about alternative minimum tax. They have done 
nothing about alternative minimum tax. It is creeping up across the 
board on the American people. I have asked for hearings time and again 
on alternative minimum tax.
  Let me announce this to the American people tonight one of the best 
things about this debate, as a Democrat from Massachusetts, I have 
proposed eliminating, getting rid of the alternative minimum tax. I 
want to congratulate the Republicans for one thing. Seldom have I ever 
been part of any legislation where I got more pats on the back on their 
side or words of encouragement and fewer votes. Fewer votes. They will 
encourage me, say keep up the battle. Stay with it. Stay after it. And 
then I will say, let us have an up-or-down vote on getting rid of AMT, 
alternative minimum tax.
  If you are watching tonight and you take advantage of the Hope tax 
credit or the child tax credit, you bump into a whole new category of 
taxation. When that individual finds out what is about to happen on 
Friday or if they picked up their taxes during the last few days or 
weeks, they are going to be pretty upset with the notion of alternative 
minimum tax.
  I filed a very good simplification bill here. It is almost revenue 
neutral, and it will achieve all the ends and strip pages from the Tax 
Code. But again, I want to hearken back to what I spoke of when I 
started.
  We should stop arguing about tax cuts in this town. After all, we 
have had five tax cuts while we are fighting two wars. But we could do 
something that all members of the American family are in favor of and 
that is simplifying the Tax Code, changing the Tax Code, getting rid of 
the complexity instead of what has happened during these 10 years from 
a party that promised to take the Tax Code and tear it

[[Page 6244]]

out by its roots. We now have a Tax Code that has roughly 15,000 more 
pages. It is wild in its complexity with what has happened.
  I want to thank the gentleman from Maryland (Mr. Hoyer) and the 
gentleman from Georgia (Mr. Scott) and the others that will participate 
in this discussion. But hearken back to that notion I have raised, and 
that is let us simplify the Tax Code for the American people as 
Democrats have promised to do.
  Mr. HOYER. Mr. Speaker, I thank the gentleman from Massachusetts (Mr. 
Neal). That is our pledge. The Democrats are going to work. We are 
going to work hard, and we will work with the President if the 
President wants to work, and we will work with the other side of the 
aisle to make this a fair, simpler, more efficient tax system. We owe 
that to the American public. We want to be the party of reforming our 
tax system so that Americans will say, I understand it, nobody likes to 
pay taxes but I am paying a fair share.
  I thank the gentleman from Massachusetts (Mr. Neal). It is now my 
honor to yield to my good friend, the distinguished gentlewoman from 
Cleveland, Ohio (Mrs. Jones), who has done such an extraordinary job 
during her tenure here and is now a member of the Committee on Ways and 
Means.
  Mrs. JONES of Ohio. Mr. Speaker, I want to thank the gentleman from 
Maryland (Mr. Hoyer) for his support for the years I have here in 
Congress and his support for my appointment to the Committee on Ways 
and Means. I am happy to be on the committee that is going to have the 
opportunity to review the Tax Code, and I want to thank him for his 
leadership on this issue.
  Public distrust, that is the main reason why we urgently need 
fundamental tax reform. More and more Americans distrust the current 
tax system because they perceive it as unfair. Are they wrong? No.
  Lower- and middle-income Americans bear a disproportionate tax 
burden. Small businesses bear a great compliance burden. That is 
unfair.
  Does fairness in our tax system matter? Of course it does. It matters 
because tax collection depends on voluntary compliance. And in a 
democracy like ours, people contribute private resources to provide the 
public goods and services we deem appropriate as a community, including 
helping those not able to fend for themselves.
  In America, paying taxes embodies a civic relationship of mutual 
responsibility, and people's obligation to pay them is as legitimate as 
any other public duty. So I am glad that we are discussing 
comprehensive tax reform, an issue that will only become more important 
for us in this Congress.
  Let me offer five short points to consider as we discuss the 
important issue. First, fundamental tax reform is a necessity. The 
current system is complicated, inefficient, and unfair. Its 
unpopularity is warranted, and that is a problem because that breeds 
distrust.
  The Tax Code must be simplified in order to eliminate the 
disproportionate amount of time and money currently spent on 
compliance. For example, the average taxpayer with a self-employed 
status has the greatest compliance burden in terms of tax preparation, 
59 hours. In 2002 taxpayers spent more than $90 billion in compliance. 
I know somebody has already talked about that, so I will move on.
  Second, simplification can occur only with fundamental tax reform. 
This is clear after decades of incrementalism. We know that tax reform 
cannot be done in a piecemeal fashion. The current system is flawed at 
its roots. Hard-working, middle-income, and lower-income people bear 
the largest burden in our current tax system.
  Third, fundamental tax reform must focus on the tax base. Our tax 
base is derived from total income. However, this is complicated by the 
bewildering array of adjustments, deductions, credits, omissions, and 
mismeasurements. This undermines the fairness of our tax system. 
Therefore, fundamental tax reform must focus on the issue of tax base 
in order to achieve equity, efficiency, simplicity, and accountability.
  Fourth, the Tax Code must encourage entrepreneurship. Small 
businesses provide our economy's foundation. They need a tax system 
that frees resources for investment and ensures affordable capital. We 
must support small business and American entrepreneurship which make up 
the backbone of our economy.
  Fifth, fundamental tax reform is possible. Tax reform is not an easy 
task. However, the American public demands it. They see our tax system 
is unfair, and they are right. As it was in the mid-eighties, the time 
is right to begin taking serious steps towards achieving fundamental 
tax reform. We must listen to our constituents and be up to the task of 
implementing a fair tax system.
  I want to close with this: this is a letter from one of my 
constituents. And I will not read it all, but I will read a portion of 
it.
  It is dated March 22, 2005. It is from Stratford Road, Cleveland 
Heights, Ohio, 44118, to Congresswoman Tubbs Jones:
  ``Dear Stephanie, When we worked in the Cuyahoga County Prosecutor's 
Office, we prosecuted matters deemed criminal by statute. For how it 
will potentially decimate our district and others, the alternative 
minimum tax ought to be considered criminal.
  ``The AMT increased my Federal tax liability by over $13,000. This 
increase did not result so much from my income level but rather was 
directly related to the fact that Cleveland Heights has among the 
highest property tax rates in the State and the State of Ohio is among 
the States with the highest income tax rates.
  ``The AMT was enacted in response to individuals earning over 
$200,000 a year who reduced or eliminated tax liabilities through 
various tax shelters. Because the AMT has not been adjusted for 
inflation and tax cuts, households with children earning over $50,000 
will be subject to the AMT. Those residing in high-tax districts like 
Cleveland Heights will also be hit the hardest.
  ``I have no fancy tax shelters. Ninety percent of those subject to 
AMT, including me, face this tax solely on account of paying high 
income property taxes and having children. Without immediate changes to 
the AMT and our outrageous high property taxes, people will continue to 
move out of Cleveland Heights with consequential loss of an income tax 
base, decline in property values, and a loss of diversity.
  ``In my neighborhood alone there are over 20 homes for sale, the 
majority leaving on account of the taxes. The AMT exacerbates the 
problem as a significant proportion of these high taxes can no longer 
be deducted to reduce taxable income. This double whammy will affect 
Cleveland Heights residents as well as those in other inner ring 
suburbs proportionally more so than others.''
  He suggests two changes. AMT should not consider any income earned or 
taxed in one city or State of residence or any real estate tax on one's 
principal residence in order to increase taxable income.
  Secondly, he suggested that school funding cannot rely so heavily on 
real estate taxes.
  It is signed by Tony Mastroianni. He is a young doctor and young 
lawyer. And I just wanted to submit it for the Record so he knew I 
presented this information for my colleagues for review with regard to 
AMT.
  I thank the gentleman for the opportunity to speak.

                                           Cleveland Hts., OH,

                                                   March 22, 2005.
     Hon. Stephanie Tubbs Jones,
     Longworth House Office Building,
     Washington, DC.
       Dear Stephanie: When we worked in the Cuyahoga County 
     Prosecutor's Office we prosecuted matters deemed criminal by 
     statute. For how it will potentially decimate our district 
     and others, the alternative minimum tax (AMT) ought to be 
     considered criminal.
       The AMT increased my federal tax liability by over $13,000. 
     This increase did not result so much from any income level 
     but rather was directly related to the fact that Cleveland 
     Heights has among the highest property tax rates in the state 
     and the state of Ohio is among the states with the highest 
     income tax rates.
       The AMT was enacted in response to individuals earning over 
     $200,000/yr who reduced/eliminated tax liability through 
     various tax

[[Page 6245]]

     shelters. Because the AMT has not been adjusted for inflation 
     and tax cuts, households with children earning over $50,000 
     will be subject to the AMT. Those residing in high tax 
     districts like Cleveland Heights will be hit the hardest.
       I have no fancy tax shelters, 90% of those subject to AMT, 
     including me, face this tax solely on account of paying high 
     income/property taxes and having children.
       Without immediate changes to the AMT (and outrageously high 
     property taxes), people will continue to move out of 
     Cleveland Heights with consequential loss of an income tax 
     base, decline in property values and loss of diversity. In my 
     neighborhood alone, there are over 20 homes for sale; the 
     majority leaving on account of the taxes. The AMT exacerbates 
     the problem as a significant proportion of these high taxes 
     can no longer be deducted to reduce taxable income. This 
     `double whammy' will affect Cleveland Heights residents as 
     well as those in other inner ring suburbs proportionately 
     more so than others.
       Allow me to propose two suggestions: AMT should not 
     consider any income earned/taxed in one's city/state of 
     residence or any real estate tax on one's principal residence 
     in order to increase taxable income. Itemized deductions are 
     already limited based on income level; there is no need to 
     further penalize individuals for buying a single residence 
     and having children: we need kids (and to feed them) to grow 
     up and pay into social security! Go after real tax shelters; 
     School funding cannot rely so heavily on real estate taxes. 
     Real estate taxes in Cleveland Heights are among the highest 
     in the state and Cleveland Heights is fourth in spending per 
     pupil in Cuyahoga County. Ed Kelley and other inner ring 
     suburb mayors have been meeting to determine ways of 
     equitable school funding so that people do not flee Cleveland 
     Heights on account of obscene property taxes. As mentioned 
     above, not being able to deduct such taxes is adding insult 
     to injury.
       The AMT is a national problem that clearly exacerbates an 
     ongoing problem in Cleveland Heights. I hope that you and 
     your colleagues can remedy this soon. If you need additional 
     information or would just like to listen to me complain, I 
     may be reached at work or at home.
       Thank you.
           Sincerely,
                                                 Tony Mastroianni.

  Mr. HOYER. Mr. Speaker, I thank the gentlewoman for her comments. I 
think her reading of the letter is an example of all that we are 
hearing from Americans: Congressman, this Tax Code I cannot understand. 
Congressman, this Tax Code costs me a lot of money and a lot of time to 
comply. And I want to comply and I want to be honest and help my 
country but, golly day, I am having trouble figuring it out. Will you 
please make it fair? Will you please make it simpler and just make it 
work better for me, for my family, and for the country.
  Mr. Speaker, I yield to someone who is working very hard to do just 
that for his constituents and all Americans, the newest member of the 
Committee on Ways and Means, the gentleman from Illinois (Mr. Emanuel), 
who does an extraordinary job.
  Mr. EMANUEL. Mr. Speaker, I would like to pick up on a point the 
gentleman made of what we hear from our constituents. That is this 
notion that people are just trying to be honest and just trying to do 
something that is honest.
  The fact is we all know the sense of frustration that we are hearing 
from our constituents is that the Tax Code has created a culture that 
has rewarded cheating and penalizes those who play by the rules.

                              {time}  2030

  That is what we have today, and that is a problem, that is a 
frustration that we hear from people.
  When we were on Easter recess, there was a report by the IRS showing 
that there goes about $350 billion of unreported income, which would 
wipe the deficit off by three-quarters of this country. People who are 
hiding income, playing games, not reporting it, forcing the middle 
class to pay an ever-increasing amount of money, they are basically 
cheating. We know it is going on. They think the $350 billion is a low 
number.
  It is getting worse as the tax code has gotten worse, and yet we are 
putting middle class families further behind on health care bills, 
college costs, trying to figure out how to save for their retirement 
and a tax burden and a tax code that does not do justice to what they 
are trying to do as parents and as a family.
  So we have a code that rewards cheating. It promotes a culture of 
cheating and a code that on the other end is the middle class family. 
It penalizes those who play by the rules and try to do the right thing 
by their family.
  Everybody has got something that they have proposed so I do not want 
to be outdone. I have also done something to that effect, but I not 
only have done it by legislation, I do it in my office.
  One little story. I run a tax assistance program clinic in my 
congressional office every Saturday. We have the big four accounting 
firms, the accountants from the banks. It is called a tax assistance 
program. It is run as an entity. We house it in my congressional 
office. We advertise about it.
  Every Saturday from 8:30 to 11:30, we actually help people fill out 
their taxes. We do it for two-and-a-half to three months a year. This 
last year we did about 1,132 taxes for individuals with families, 
returning on average $1,900 in earned income tax credit deductions, tax 
deductions they would not have gotten because nobody else would have 
filled it out. I say, if you can fill out the EITC tax code, you can go 
to graduate school. You do not need to do it. It is the most 
complicated form. By comparison, I want you to know, if you are a 
corporation and try to get the export-import loan agreement, it is 12 
questions, but for the earned income tax credit, it is over 200 
questions. We fill it out.
  We also do college assistance, and we have back in my district about 
$10 million in different deductions and credits that exist in the code 
they would not have gotten, and after three months in a row every 
Saturday 45 different families show up. We turn on average away 15 
families because we cannot help do them, and we make them first in line 
the next Saturday. But we do that every Saturday for three months. We 
did our last one last Saturday. We run these clinics so we know 
firsthand how these go besides the one I do for myself.
  Second, I have introduced legislation called the simplified family 
credit. It takes the earned income tax credit, the per child deduction 
and the dependent care and takes 200 pages of the code and 2,000 
additional pages down to 12 questions. It collapses all of those 
deductions that exist for families earning somewhere between $15,000 to 
$50,000 down to 12 questions. It would save a huge amount of money that 
ends up because of waste and abuse in the code because it is too 
complicated.
  There are estimates of about $6 billion dollars, and if you 
simplified it, not only would you save money, but for people who have 
chosen to work and do right by their children, you have a tax code that 
was on their side, not on the side of folks who are trying to get 
lawyers and accountants to try to figure out how to basically game the 
system.
  Any reform should understand that people are in the moderate income, 
$50,000 and less, should have a code that is simple for them to use.
  So I have introduced what I call the simplified family credit that 
takes those three credits, the earned income tax credit, the per child 
and the dependent care and puts it down to 12 questions.
  We run the clinic in my office to help families fill out their taxes 
and the tax forms, the 1040, and get them the type of deductions that 
we are talking about.
  I want to stress, every one of us, we have people hit by the AMT. 
People come around and it is going to be Friday, they are going to be 
all in downtown Chicago and the neighborhoods and around the State and 
around the country. Their heads will be shaking because they know this 
code was not designed with them or their families in mind. It was 
designed for those who can afford lawyers, accountants and lobbyists. 
Those are the people that are benefiting by this code, and this code 
does injustice to people who are trying to do right by their families.
  We need a code that not only understands the trials and the 
challenges of the middle class family but finally reflects what they 
are trying to do for their kids rather than what the lobbyists are 
trying to do for their interests. That is what we have to do when we 
reform this code is put it back on the

[[Page 6246]]

working class and middle class families who are trying to do right for 
their families.
  I want to thank the gentleman for this time and organizing this, 
especially as Friday looms in people's eyes and they have to face 
literally around the kitchen table all those bills. It is not meant for 
9 hours of unpleasant time trying to fill that out. We can do better.
  Mr. HOYER. Mr. Speaker, I thank the gentleman for his comments, and I 
congratulate him for those clinics. I think that is a wonderful idea. I 
think very frankly we ought to have similar clinics and cooperate with 
a number of the people in our communities who could help people, 
particularly the EITC is difficult to understand for Members, much less 
those who it is designed for, to make sure people at the very poor end 
of the income scale have enough resources to support their kids. That 
is what it is all about, and this is what we think ought to be done.
  So I thank the gentleman. I also want to thank him for the 
simplification of all the child tax credits that are now available 
because if we can get that just one item, as you pointed out, down from 
those 200-plus questions down to 10 or 12 questions, we are going to 
save a lot of money, a lot of time and a lot of mistakes, a lot of 
mistakes. The EITC is complicated, but there are a lot of mistakes 
made, not by people who want to commit fraud but who simply make 
mistakes.
  I am glad that we are joined now by, in my view, one of the real 
stars of the new class in the Congress. She has been sent to us from 
south Florida, an area where I used to live, and she is doing an 
extraordinary job. I yield to the gentlewoman from Florida (Ms. 
Wasserman Schultz).
  Ms. WASSERMAN SCHULTZ. Mr. Speaker, I thank the gentleman from 
Maryland (Mr. Hoyer) very much for yielding and thank him so much for 
giving us this opportunity to talk to the American people about what is 
essentially a startling contrast between our vision and our view on 
what tax reform should entail and what the majority's vision is.
  I think that is really what we should ask people to take a look at, 
because the perception that is out there in America is not what it 
should be, and really what I would like to spend some time talking 
about is how the majority talks about making taxes simpler. As we can 
see, they have plenty of rhetoric that they have thrown around over the 
years as far back as 1997 and even for the years before that. Yet their 
actions do not match the rhetoric.
  That is really what it boils down to, and I am a person that is all 
about action. That is what our caucus is about, and I think you have to 
walk the walk when you talk the talk, and that is not happening with 
this administration. It is not happening with the leadership of this 
body.
  It is critical that the American people understand the consequences 
of the years, and I know that they do. Every working family sitting 
around their kitchen table understands the consequence of the 
complexities and the carving up of the Tax Code by the Republican 
majority here. I mean, that is what they have continued to do, in spite 
of the fact that they go out in America and talk about how complex it 
is. Well, it is time that something gets done about it. The time for 
talking needs to stop.
  Their tax policies clearly favor some citizens over others. They pick 
and choose. They pick winners and loser among businesses and 
industries, and they do it all under the guise and cloak of tax reform.
  One of the most important consequences is that the Federal Government 
and State and local governments, they do not have adequate resources to 
pay for the day-to-day services that our constituents need. That is a 
direct consequence of not having tax reform. There are real needs that 
are not being addressed because our local governments cannot provide 
the services because of the tax system as it is currently constructed. 
That squeeze is being felt all across this country, and particularly in 
the towns and cities in my district and in the districts of many of our 
colleagues.
  That is because the debt burden faced by the Federal Government is 
going to dramatically worsen in the future if the administration's tax 
cuts are made permanent. If the Bush tax cuts are made permanent, this 
problem is only going to get worse.
  The Government Accountability Office projects that interest on the 
national debt would nearly equal all of the Federal taxes, including 
income and payroll taxes that we generate in 2040, not now but the 
taxes that we generate in 2040, if the recent tax cuts are made 
permanent.
  Current and proposed debt and the rising level of interest that we 
pay on that debt, which is soon to average about $300 billion a year, 
which is more than we spend on Medicaid to help make people understand 
what that means, we weaken Social Security and threaten benefits for 
today's seniors, for disabled workers and their survivors, much of 
which affects women disproportionately which I want to address in a 
moment.
  The amount merely required to pay interest on the national debt 
ultimately will be almost twice the amount that is paid out to all 
Americans in Social Security benefits. That is unbelievable. The 
interest on the national debt will be more than twice what we pay out 
in Social Security benefits.
  Unlike interest on the national debt, Social Security has its own 
dedicated taxes, and the President fails to acknowledge that these 
costs crowd out resources for other priorities that affect people of 
all ages, people over 55 and younger people as well, in health care, in 
education and in homeland security. I want to take a minute and just 
talk about the impact on women of the Bush administration's policy 
decisions as it relates to tax cuts and the lack of tax reform.
  There are programs serving women and families that are really bearing 
the burden of deficit reduction. The President's budget now in front of 
us slashes funding for countless domestic programs.
  The administration itself in child care calculates 300,000 additional 
children could lose assistance by 2009 from the continued freeze in 
funding. Between 2003 and 2004, 200,000 children have lost child care 
help.
  In Medicaid, the administration would cut $7.6 billion over 5 years, 
and the House even more.
  Education and training: Investment in high school vocational 
education programs that can help train women and girls for higher 
paying, nontraditional jobs is totally eliminated.
  Supplemental nutrition for women, infants and children: The cut of 
$658 million could mean 660,000 fewer pregnant women, infants and 
children receiving WIC assistance in 2010.
  I want to boil this down for another few seconds. Millionaires' 
average tax cut in 2004 was $123,592, which is more than five times the 
annual income of a typical single mother with children, whose median 
income is $22,637. That is what their policy translates into for 
regular, everyday people.
  More than one-quarter of single-parent families, who are 
overwhelmingly headed by women, get nothing from the 2001 and 2003 tax 
cuts.
  These tax cuts, the bottom line, and the budget simply makes the 
wrong choices for women, for their families and for all Americans.
  Mr. Speaker, I want to again thank the gentleman from Maryland (Mr. 
Hoyer) so much for this opportunity for us to help the American people 
understand that it is Democrats that are committed both in action, deed 
and rhetoric, and our actions will match our words when it comes to tax 
reform.
  Mr. HOYER. Mr. Speaker, I thank the gentlewoman and she left me a 
beautiful segue into the closing of our action matching our words. That 
is what ought to happen, and when that does not happen, people get 
pretty cynical. Let me refer to some words.
  In 1996, Newt Gingrich was the Speaker of this House and he said, 
``The current system is indefensible,'' referring to the Tax Code. He 
was right. ``It is riddled with special interest tax breaks. Today's 
Tax Code is so complex that many Americans despair that only someone 
with an advanced

[[Page 6247]]

degree in rocket science could figure it out. They are wrong. Even a 
certified genius such as Albert Einstein needed help in figuring out 
this Form 1040.'' In 1996, 8 years ago, the Republicans were in charge 
of this House, and Mr. Gingrich was our Speaker.
  A year later, Mr. Gingrich said this as the Speaker of the House, 
``So we want to move towards a simpler tax code that takes less time to 
fill out, that is easier for the American people,'' 1997.
  In the last 7 years, the Speaker's party, the Republican Party, has 
made the Tax Code 25 percent more complicated than it was in 1997, 
moving in exactly the opposite direction.
  In 2001, 4 years later, 2001, President Bush said, Americans want our 
Tax Code to be reasonable and simple and fair. He was absolutely right. 
That is what I want. That is what every American wants. These are goals 
that have shaped my plan. What plan? No plan, no plan here, no plan in 
the Committee on Ways and Means, no plan from the White House.

                              {time}  2045

  And then in 2004, fast forward 3 years, just last 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.''
  Mr. Speaker, we agree with the President, but what did we do today? 
This very day, we made the Tax Code more complicated, not to mention 
costing many small farmers and small businessmen more money than they 
otherwise would have paid with existing policy.
  Mr. Speaker, my Republican friends, my Democratic friends, on behalf 
of the Democratic Party, I pledge that we are going to fight to reform 
a system that is complicated, that is unfair, and that is inefficient 
so that Americans will say, as painful as April 15 may be, at least it 
was easier to fill out, at least I think it was fair, and at least I 
think it will be handled in an efficient way.
  Democrats are committed to reforming this Tax Code so it will be 
simpler, fairer, and more efficient.

                          ____________________