I am writing to submit my views on the Commissionís Report, as approved on June 5, 1997, and request that this letter be included in the published version of the Report.
First, I want to take this opportunity to state that The National Commission on Restructuring the Internal Revenue Service has provided taxpayers with a great public service. The Commission thoroughly and systematically reviewed critical aspects of how the IRS is managed and operated. Most importantly, rather than just identifying problem areas, the Commission undertook the much harder task of developing and laying out possible solutions.
Also, I want to thank each of the Commission Members for providing me with their valuable insight into how the IRS might be improved. Particularly, I want personally to thank the Co-Chairs of the Commission for their excellent leadership. The Co-Chairs went to great lengths to accommodate Membersí differing views and concerns, including mine, with the goal of developing a consensus package of IRS reforms. I commend the Commission for a job well done.
While we did not speak with one voice on all aspects of the Commissionís Report and recommendations, the fact remains that we did agree that: the IRS needs to improve its customer service, training of employees, and development and application of technology; oversight of the IRS needs to be enhanced and institutionalized, with significant input from the private sector; the IRS Commissioner needs to have flexibility in hiring a top-notch team, and remain as head of the IRS for 5 years; and, the Congress should better coordinate and focus its oversight and funding responsibilities with regard to the IRS.
There are the numerous excellent recommendations and analyses in the Commissionís Report which I support. Among them are the Commissionís recommendations on the need: to increase employee training, education, salaries and work incentives; to improve cooperation among IRS functions; to improve customer service through IRS telephone assistance, clearer notices, quality reviews, taxpayer surveys, and increased access to the Taxpayer Advocate offices; to integrate technology with strategic objectives, develop intellectual capital, and focus on the Century date change; to encourage tax return filing electronically; and, to resolve financial reporting problems.
However, there are several recommendations and analyses in the Commissionís Report from which I dissent.
Executive Branch Governance: I agree with the Commissionís view on the importance of establishing mechanisms for providing direction of long-term strategy at the IRS, and holding IRS management accountable for its decisions and operations. The Commission established the need for more oversight and accountability at the IRS. Everyone agrees with the importance of having systematic input from the private sector on all aspects of IRS management, and the value of having an IRS Commissioner for a fixed term.
I have reservations about the Commissionís recommendation to allow individual taxpayers from the private sector to have final decision-making authority over the IRS administration of the tax laws, including the appointment of the IRS Commissioner. I think that this raises questions of accountability. Further, while the Commissionís Report indicates that its proposed independent Board would not have authority over tax policy, tax enforcement, procurement, or other sensitive areas, it is not clear to me that these issues can be adequately separated.
As an alternative, the Administration has proposed to enhance the Department of the Treasuryís oversight of major strategic, personnel, and procurement decisions of the IRS with an Executive Order creating an IRS Management Board (consisting of Treasury and other Federal officials). Also, the Administration has proposed an IRS Advisory Board (consisting of private-sector experts) to enhance oversight of the IRS. The Administration is in the process of implementing this oversight management plan for the IRS. The Administration has recognized that there is a problem, and is moving to address the problem with aggressive oversight. Because of this, I believe that adoption of the Commissionís governance recommendation is premature at this time.
To further strengthen this oversight initiative, I would propose that the Congress enact, by statute, the Administrationís "Plan for IRS Governance." I think this would serve to institutionalize the management responsibilities of the Administrationís Oversight Management Board, and the role and functions to be performed by the private-sector Advisory Board. Also, I would suggest that the Department of the Treasury be allowed to hire needed private-sector experts, on a full-time basis, with a five-year employment contract, paid at competitive pay levels, to ensure stable and effective oversight of the IRS.
Congressional Oversight: I agree with the Commissionís view that Congressional oversight of the IRS should be coordinated to ensure that Members and staff discuss strategic issues in a comprehensive manner, and that they have sufficient information to make informed decisions regarding tax legislation and tax administration.
I am concerned, however, with the Commissionís recommendation to create a new entity, such as a "joint committee on IRS administration." I do not believe that better coordination of Congressional oversight of the IRS will result from creation of a seventh legislative body, another Committee, another Chairmanship, or another Committee Membership structure. Also, I do not believe that creation of another Congressional entity will reach the Commissionís objective of consolidating Congressional oversight, providing clear and consistent Congressional direction, or generating substantial cost savings. The Commissionís recommendation, in my opinion, would have an opposite effect.
Rather, I would suggest better use of our current Joint Committee on Taxation and more coordination by the congressional committees of jurisdiction. As the Commissionís Report notes, the Joint Committee on Taxation currently has statutory authority and responsibility to review all aspects of IRS operations. The JCT has the statutory duty to "investigate the operation and effects of the Federal system of internal revenue laws," "investigate the administration of such taxes by the IRS or any executive department, establishment or agency charged with their administration," and "to make such other investigations in respect of such system of taxes as deemed necessary." Further, the JCT is charged with "investigation of measures and methods for the simplification of such taxes, particularly the income tax," and "publication, from time to time, for public examination and analysis, proposed measure and methods for the simplification of such taxes." The JCT has the power to hold hearings and take testimony, require the attendance of witness and documents by subpoena, administer oaths, and obtain all necessary information from the IRS, including protected taxpayer information. Congressional focus and coordination with our current resources is the answer, not creation of new entity.
Taxpayer Rights: I agree with the Commissionís view that taxpayers should be treated fairly and impartially by the IRS. The quality of the IRSís taxpayer service activities also is very important. The Ways and Means Oversight Subcommittee is currently considering various taxpayer rights proposals, in follow-up to the Taxpayer Advocateís 1997 report to the Subcommittee.
I am concerned, however, with the tone, analysis, and content of the Commissionís Report sections on "taxpayersí redress" and "other taxpayersí rights proposals." The Commissionís recommendations in these areas do not address the Commissionís goal of developing proposals to "prevent problems for taxpayers before they occur."
I believe that enactment of many of the legislative proposals approved by the Commission would have a serious negative impact on the publicís dealings with the IRS, and would have an adverse effect on voluntary compliance and the IRSís administration of the tax laws. While the legislative list was developed by the Commissionís task force on taxpayer rights, the various proposals were not analyzed or discussed by the full Commission, in any meaningful fashion, from a tax-policy and administrative standpoint.
Simplification: I agree with the Commissionís view that the Congress should systematically simplify the tax laws, consider the administrability of proposed tax legislation, and better involve the IRS in the drafting process.
However, I do not agree with the Reportís analysis and discussion of IRS "non-core functions." I do not consider the IRSís child support tax refund offset program, nor the implied references to the earned income tax credit and low-income housing tax credit, to be a "diversion of IRS resources" or creating a "risk of undermining the IRSís core capabilities." Further, I think that the Congress has accurate information about administering these programs through the tax system, and has found them to be quite efficient and effective.
Also, more generally, I do not think that the Report should have included an appendix of simplification proposals, even though the Commission attempts to disclaim support for, or analysis of, the proposals. Among my concerns is that many of the proposals: are not simplification; have long, controversial histories with clear winners and losers; have significant tax policy implications; have large revenue effects; and, would not meet the Commissionís own "tax complexity analysis" criteria.
In conclusion, I want to state that I look forward to continuing to work toward making the IRS the first-class Federal agency the public expects it to be.