<DOC>
[106th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:58810.wais]
CLINTON-GORE V. THE AMERICAN TAXPAYER
=======================================================================
JOINT HEARING
before the
SUBCOMMITTEE ON NATIONAL ECONOMIC GROWTH,
NATURAL RESOURCES, AND REGULATORY AFFAIRS
and the
SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
INFORMATION, AND TECHNOLOGY
of the
COMMITTEE ON GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
__________
APRIL 15, 1999
__________
Serial No. 106-24
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.house.gov/reform
______
U.S. GOVERNMENT PRINTING OFFICE
58-810 CC WASHINGTON : 1999
COMMITTEE ON GOVERNMENT REFORM
DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut ROBERT E. WISE, Jr., West Virginia
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
STEPHEN HORN, California PAUL E. KANJORSKI, Pennsylvania
JOHN L. MICA, Florida PATSY T. MINK, Hawaii
THOMAS M. DAVIS, Virginia CAROLYN B. MALONEY, New York
DAVID M. McINTOSH, Indiana ELEANOR HOLMES NORTON, Washington,
MARK E. SOUDER, Indiana DC
JOE SCARBOROUGH, Florida CHAKA FATTAH, Pennsylvania
STEVEN C. LaTOURETTE, Ohio ELIJAH E. CUMMINGS, Maryland
MARSHALL ``MARK'' SANFORD, South DENNIS J. KUCINICH, Ohio
Carolina ROD R. BLAGOJEVICH, Illinois
BOB BARR, Georgia DANNY K. DAVIS, Illinois
DAN MILLER, Florida JOHN F. TIERNEY, Massachusetts
ASA HUTCHINSON, Arkansas JIM TURNER, Texas
LEE TERRY, Nebraska THOMAS H. ALLEN, Maine
JUDY BIGGERT, Illinois HAROLD E. FORD, Jr., Tennessee
GREG WALDEN, Oregon JANICE D. SCHAKOWSKY, Illinois
DOUG OSE, California ------
PAUL RYAN, Wisconsin BERNARD SANDERS, Vermont
JOHN T. DOOLITTLE, California (Independent)
HELEN CHENOWETH, Idaho
Kevin Binger, Staff Director
Daniel R. Moll, Deputy Staff Director
David A. Kass, Deputy Counsel and Parliamentarian
Carla J. Martin, Chief Clerk
Phil Schiliro, Minority Staff Director
Subcommittee on National Economic Growth, Natural Resources, and
Regulatory Affairs
DAVID M. McINTOSH, Indiana, Chairman
PAUL RYAN, Wisconsin DENNIS J. KUCINICH, Ohio
BOB BARR, Georgia TOM LANTOS, California
LEE TERRY, Nebraska PAUL E. KANJORSKI, Pennsylvania
GREG WALDEN, Oregon BERNARD SANDERS, Vermont
HELEN CHENOWETH, Idaho HAROLD E. FORD, Jr., Tennessee
JOHN T. DOOLITTLE, California
Ex Officio
DAN BURTON, Indiana HENRY A. WAXMAN, California
Marlo Lewis, Staff Director
Barbara Kahlow, Professional Staff Member
Andrew Wilder, Clerk
Elizabeth Mundinger, Minority Counsel
Subcommittee on Government Management, Information, and Technology
STEPHEN HORN, California, Chairman
JUDY BIGGERT, Illinois JIM TURNER, Texas
THOMAS M. DAVIS, Virginia PAUL E. KANJORSKI, Pennsylvania
GREG WALDEN, Oregon MAJOR R. OWENS, New York
DOUG OSE, California PATSY T. MINK, Hawaii
PAUL RYAN, Wisconsin CAROLYN B. MALONEY, New York
Ex Officio
DAN BURTON, Indiana HENRY A. WAXMAN, California
J. Russell George, Staff Director and Chief Counsel
Bonnie Heald, Professional Staff Member
Mason Alinger, Clerk
Faith Weiss, Minority Counsel
C O N T E N T S
----------
Page
Hearing held on April 15, 1999................................... 1
Statement of:
Hoff Hay, Sydney, Phoenix, AZ; Kaye Whitehead, farmer,
Muncie, IN; William N. Lindsay, president, Benefit
Management & Design, Inc., Denver, CO; John Nicholson,
owner, Company Flowers, Arlington, VA...................... 131
Reed, Anne F. Thomson, Chief Information Officer, Department
of Agriculture, accompanied by Keith Kelly, Administrator,
Farm Service Agency........................................ 165
Rossotti, Charles O., Commissioner, Internal Revenue Service. 12
Stevens, Nye, Director, Federal Management and Workforce
Issues, General Accounting Office; Deidre A. Lee, Acting
Deputy Director for Management, Office of Management and
Budget; and James R. White, Director, Tax Policy and
Administration Issues, General Accounting Office........... 67
Letters, statements, etc., submitted for the record by:
Hoff Hay, Sydney, Phoenix, AZ, prepared statement of......... 133
Horn, Hon. Stephen, a Representative in Congress from the
State of California, prepared statement of................. 4
Kelly, Keith, Administrator, Farm Service Agency, prepared
statement of............................................... 194
Kucinich, Hon. Dennis J., a Representative in Congress from
the State of Ohio, prepared statement of................... 52
Lee, Deidre A., Acting Deputy Director for Management, Office
of Management and Budget:
Information concerning increased staffing................ 125
Information concerning the IRS oversight board........... 130
Information concerning recommendations................... 129
Prepared statement of.................................... 97
Lindsay, William N., president, Benefit Management & Design,
Inc., Denver, CO, prepared statement of.................... 143
McIntosh, Hon. David M., a Representative in Congress from
the State of Indiana:
List of paperwork required for a new hire................ 163
Prepared statement of.................................... 8
Nicholson, John, owner, Company Flowers, Arlington, VA,
prepared statement of...................................... 152
Reed, Anne F. Thomson, Chief Information Officer, Department
of Agriculture:
Information concerning expiration of existing collections 174
Information concerning management plans.................. 206
Prepared statement of.................................... 167
Rossotti, Charles O., Commissioner, Internal Revenue Service:
Information concerning section 482....................... 55
Information concerning tax filing requirements........... 62
Prepared statement of.................................... 16
Stevens, Nye, Director, Federal Management and Workforce
Issues, General Accounting Office, prepared statement of... 70
Turner, Hon. Jim, a Representative in Congress from the State
of Texas, prepared statement of............................ 208
White, James R., Director, Tax Policy and Administration
Issues, General Accounting Office, prepared statement of... 109
Whitehead, Kaye, farmer, Muncie, IN, prepared statement of... 137
CLINTON-GORE V. THE AMERICAN TAXPAYER
----------
THURSDAY, APRIL 15, 1999
House of Representatives, Subcommittee on National
Economic Growth, Natural Resources, and
Regulatory Affairs, joint with the Subcommittee
on Government Management, Information, and
Technology, Committee on Government Reform,
Washington, DC.
The subcommittees met, pursuant to notice, at 2 p.m., in
room 2154, Rayburn House Office Building, Hon. David M.
McIntosh (chairman of the subcommittee on National Economic
Growth, Natural Resources, and Regulatory Affairs) and Hon.
Stephen Horn (chairman of the Subcommittee on Government
Management, Information, and Technology) presiding.
Present: Representatives McIntosh, Horn, Ryan, Terry, Ose,
and Kucinich.
Staff present: Marlo Lewis, staff director; Barbara Kahlow,
professional staff member; Jason Hopfer, chief counsel; Luke
Messer, counsel; Andrew Wilder, clerk; J. Russell George, staff
director and chief counsel; Bonnie Heald, director of
communications, professional staff member; Mason Alinger,
clerk; Elizabeth Mundinger and Faith Weiss, minority counsels;
and Earley Green, minority staff assistant.
Mr. Horn. The joint meeting of the hearing of the House
Subcommittee on Government Management, Information, and
Technology and the Subcommittee on National Economic Growth,
National Resources, and Regulatory Affairs will come to order.
April 15 is tax day for all Americans. It is the day the
Internal Revenue Service holds individuals accountable for the
accurate reporting of their tax liability.
It is fitting that today we hold the IRS accountable as
well. In the past years, the Subcommittee on Government
Management, Information, and Technology has held similar
hearings and heard reports of management problems at the
Internal Revenue Service.
Last year on this date, we heard from the newly appointed
Commissioner of the Internal Revenue Service, Mr. Charles
Rossotti. He outlined for us his priorities for restructuring
and refocusing the IRS. Commissioner Rossotti spoke as follows:
``Shifting entire focus of the agency from one which focuses
solely on conducting our own internal operations to one which
puts far more emphasis on trying to see things from the point
of view of the taxpayers and emphasizing service and fairness
to taxpayers.''
A few months after that testimony, on July 22, 1998, the
IRS Restructuring and Reform Act of 1998 was signed into law.
The underlying theme of the act is one of creating a cultural
change within the IRS. In the broadest terms, the act shifts
the emphasis on the IRS from its defined role of an enforcement
agency, to a role that resembles more closely a financial
service organization.
The initiatives presented by the Commissioner last April 15
and the broad array of provisions in the IRS Restructuring and
Reform Act seem to go hand and hand. One year has passed since
we heard from the Commissioner, and nearly 9 months has passed
since the enactment of the restructuring act.
Today we hope to learn of the first steps taken by the
Commissioner to restructure and refocus the Internal Revenue
Service. I think that's one of the most difficult jobs that has
been ever undertaken in government, and might well be one of
the most difficult ever taken in a human organization.
In addition, we need to have a candid discussion of the
challenges that lie ahead for the agency. Great things are
expected and the road will be difficult. The Commissioner knows
that, and most of us know that.
However, the effort is much needed, and we will all be
better off when it has been accomplished. The Government
Management, Information, and Technology Subcommittee will focus
on these and other management practice issues within the IRS. I
will then yield the chair to Mr. McIntosh whose subcommittee
will examine the agency's record in complying with the
Paperwork Reduction Act.
That law is intended to reduce the burden of paperwork the
Federal Government places on the American people. The National
Economic Growth, Natural Resources, and Regulatory Affairs
Subcommittee will focus specifically on the paperwork imposed
by the IRS and the Department of Agriculture.
Let us begin today by welcoming our witnesses. Mr. Charles
Rossotti, Commissioner of Internal Revenue Service, has a
distinguished career. He's the type of person that should have
long ago been made Commissioner, and we now have one that has
been a chief executive, knows what it is to be a chief
executive. And when you preside over a complicated
organization, such as the IRS, with 102,000 employees, the
challenges are obviously great.
He will be panel 1. And the Members on both sides will have
the opportunity to question the Commissioner after his
statement has been made, and we will alternate 5 minutes each,
varying between the majority and the minority.
On panel 2, we will hear from Mr. Nye Stevens, Director of
the Federal Management and Workforce Issues at the General
Accounting Office, which is the legislative arm of the
government, and does our program and fiscal accounting; Mrs.
Deidre Lee, Acting Deputy Director for Management at the Office
of Management and Budget; and Mr. James R. White, Director of
Tax Policy and Administrative Issues at the General Accounting
Office will finish out panel 2.
Panel 3 will consist of Ms. Sydney Hoff Hay, a taxpayer
activist from Phoenix, AZ; Ms. Kaye Whitehead, a pork farmer in
Muncie, IN; Mr. William N. Lindsay, president of Benefit
Management and Design Inc. in Denver, CO; and Mr. Jack
Nicholson, owner of Company Flowers in Arlington, VA.
On our fourth and final panel, we will hear testimony from
Anne Thompson Reed, Chief Information Officer of the Department
of Agriculture.
I now yield to Mr. McIntosh for his opening statement.
[The prepared statement of Hon. Stephen Horn follows:]
[GRAPHIC] [TIFF OMITTED] T8810.001
Mr. McIntosh. Thank you, Chairman Horn. I'm delighted to be
able to cochair this hearing with you and welcome Mr. Rossotti
today.
Last year, Congress passed the IRS Restructuring and Reform
Act, because of its concerns about IRS treatment of taxpayers.
The IRS accounts, in addition, for nearly 80 percent of the
governmentwide paperwork burden on Americans. This hearing will
examine the IRS's failure to initiate any specific actions to
reduce paperwork burdens during 1999 and 2000 for any of its
671 tax forms and recordkeeping requirements, which impose
approximately 5.8 billion hours of burden on the American
public.
This equates, by the way, to about $154 billion in costs
for paperwork compliance. I think of it, and it nearly equals
the total $182 billion of taxes imposed on businesses in this
country each year. I think of it as a hidden tax, an extra tax
that goes along with the tax that Americans are paying today on
April 15, because it's a cost that is borne by them in order to
comply with the laws as Congress has passed them and the
paperwork requirements the IRS uses to collect those revenues.
In addition, we understand from the IRS staff that IRS has
not analyzed all of the paperwork imposed on individuals to
spare them the burden of providing the same information on
multiple tax forms. Also, IRS has not analyzed all paperwork
imposed on small businesses to identify duplicative form
burdens on them. I find the agency's lack of effort to be
unacceptable and believe the American people will share my
assessment.
Today's hearing will also examine the Office of Management
and Budget's mismanagement of the paperwork burden imposed on
Americans. The OMB is supposed to be the Federal Government's
watchdog agency guarding the public against waste, fraud, and
abuse. Yet OMB has failed to push the IRS or, frankly, many
other Federal agencies to cut existing paperwork burden on
taxpayers. Worst, the GAO confirms today that the OMB has
mislead the American people, providing a falsely inflated
picture of the Clinton administration's paperwork reduction
accomplishments.
First, I want to turn my attention to the IRS. A survey
conducted 2 years ago found that most respondents would rather
undergo root canal surgery than be audited by the IRS. A
magazine poll found that the scariest words Americans could
imagine hearing when they pick up the telephone are, ``This is
the IRS calling.''
Indeed, for many persons, today's hearing falls on the
worst day of the year, April 15, or tax day. Much of their
frustration and anger is directed at the government's tax
collector, an unenviable duty that has been assigned to the
IRS. Although I'm very disappointed with its effort, or lack of
effort, to reduce the paperwork burden, I do not intend at this
hearing to take cheap shots at what has been done by the
agency, either for sins of past Congresses or Presidents.
America should be mad at the unfair and oppressive tax
system. But, the source of most of the unfairness and
oppressiveness is the mind-numbingly complex, economically
irrational, special interest-dominated Tax Code, in other
words, 86 years of bad tax policy. The IRS can't be held
accountable for that. That's written here in Congress and
signed into law by the President.
But, what I would like to focus on today is how the IRS
takes that Tax Code and translates it into the paperwork that
is required by the American people to fill out that message.
And, I believe--right now the staff is putting here the
Internal Revenue Code which includes all of the regulations
implementing the code of law to indicate how that has grown in
terms of the complexity just in the sheer volume of the
paperwork that is required to produce that.
If it helps policymakers get the message that more and more
Americans are sending to Washington, it is time to scrap the
code and replace it with something that is economically fair
and decent, then I think the hearing will in itself be a
success.
Now, we all know the direct costs of the Tax Code is about
$1.7 trillion that Americans pay in taxes to the government.
But, there is this hidden cost which adds an extra 10 percent,
or about $154 billion, to that burden. Each American spends an
estimate of 5.8 hours in complying with the 671 different tax
forms. To me, this is unconscionable. And, what is even worse
is that the IRS projects this hidden tax burden will go up by
150 million hours in 1999 and 130 million hours in the year
2000.
IRS correctly observes that recent and anticipated
statutory changes in the Tax Code are the driving force behind
the growth in the paperwork. Please note that the huge stack of
the Internal Revenue Code represents not only the statute but
also the 12,000-some pages of tax regulations used to implement
that code.
Clearly, the code is too complicated. Nonetheless, that
does not excuse the IRS from failing to provide any significant
paperwork-reducing initiatives for existing forms. I understand
there are many that were created as a result of recent tax
bills, but there are also many, many that have been in
existence for some time that could easily be examined to
determine whether they're duplicates, whether they need to be
filled out in order for the IRS to do its job in enforcing the
Tax Code.
Now, let me turn to the entire government's paperwork,
which OMB has severely mismanaged. The 1999 Treasury and
General Government Appropriations Act required OMB to issue a
report by March 31 that identified specific paperwork reduction
accomplishments expected, constituting 5 percent reduction in
the paperwork expected for 1999 and fiscal year 2000.
The next day, I submitted comments that the draft report is
not responsive to the statutory requirements in several ways.
First of all, OMB estimates that 2.6 percent increase in
paperwork requirements for 1999 and 2.3 percent increase in
2000, instead of a 5 percent decrease in each of those years.
This expectation follows 3 successive years of increases in
paperwork, instead of decreases.
Second, the draft report only identified some specific
reductions. This aspect of the report is not acceptable to us
or responsive to the congressional requirement. In fact, IRS
and 5 of the 14 Cabinet Departments--Energy, Health and Human
Services, Housing and Urban Development, State, and Veterans
Affairs--were unable to identify any specific paperwork
reduction initiatives in 1 of 2 years.
Now, why didn't the administration say no to these proposed
budgets and ask OMB to send them back to the agencies? I
believe the administration's incredible disregard for the $7
billion of paperwork burden experienced by the American people
is insensitive and unacceptable.
This burden equates to $185 billion in costs each year, and
OMB's draft report includes 872 violations of law last year
alone, where the agency levied unauthorized paperwork burdens
on the American people, including over 100 each by the
Department of Agriculture, Health and Human Services, and
Veterans Affairs. In other words, there were at least 872 times
when the Clinton administration required paperwork without the
legal authority to do so.
The GAO says, as disconcerting as these violations are,
even more troubling is the fact that OMB reflects the hours
associated with unauthorized information collections ongoing at
the end of the fiscal year as burden reductions.
We believe that OMB has an obligation to Congress and the
American people to accurately report paperwork burdens imposed
on the public and that OMB must immediately take necessary
steps to stop the violations. I believe the public deserves
substantially more paperwork reduction initiatives by the
administration, especially the IRS, the largest component of
that hidden tax of paperwork, and an honest accounting to the
American people, which reflects only actual burden reduction
accomplishments and not the total burden.
It's only fitting that today on tax day we hold this
hearing, and I appreciate Mr. Horn in joining us in a joint
hearing on this to find out exactly how we can best reduce the
hidden tax of paperwork.
[The prepared statement of Hon. David M. McIntosh follows:]
[GRAPHIC] [TIFF OMITTED] T8810.002
[GRAPHIC] [TIFF OMITTED] T8810.003
[GRAPHIC] [TIFF OMITTED] T8810.004
[GRAPHIC] [TIFF OMITTED] T8810.005
Mr. Horn. I thank the gentleman. That's quite a list of
horrors. And I assume it will come out in the question period a
little more.
Commissioner, and all other witnesses on panels 2 and 3,
let me just say what our procedures are. This is an
investigating committee, as are most subcommittees of the
Committee on Government Reform. And, we swear all witnesses
prior to their testimony. When we call on the witness, their
statement is automatically part of the record, as well as
background information on them and so forth. So one doesn't
have to ask permission for that. It's in the written record.
So, Commissioner, if you would stand, we will administer
the oath. Why don't we get all panels standing. We can have a
mass baptism right now. It will save a lot of time.
[Witnesses sworn.]
Mr. Horn. The clerk will note that all the witnesses took
the oath.
We will then begin with panel 1. Commissioner Rossotti,
it's always a pleasure to have you here, and you must have been
the most popular guy in town today with probably the other
body, as it is known, also had you over today.
Mr. Rossotti. Actually, I was there yesterday.
Mr. Horn. I see.
STATEMENT OF CHARLES O. ROSSOTTI, COMMISSIONER, INTERNAL
REVENUE SERVICE
Mr. Rossotti. Thank you very much, Mr. Chairman, and
Chairman McIntosh as well. We have several subjects here. I
would first like to very briefly cover some topics on managing
year 2000 and filing season and then go on to a discussion
concerning paperwork and taxpayer burden.
And, Chairman Horn, I know that your subcommittee is
concerned with management, information, and technology. So I
think it's actually fitting that you hold a hearing on the IRS
at this time, because as you noted in your opening remarks, the
IRS is, in fact, faced with a massive program of change in all
of these dimensions. And I've got a few of the initiatives
listed over here in bullet-point form.
As you noted, last year the Congress passed nearly
unanimously the Restructuring Reform Act. And this act has many
specific provisions that are all very important. As important
as they are, I think collectively the bill said something even
more important than any provision, which is that the IRS must
fundamentally change our direction. I think what we were told
is that we must not only collect taxes, which we must do, but
we must think about our job as serving the people who are
paying the tax, namely, the American taxpayers.
I believe that we can succeed in this mandate, and as a
matter of fact, I think we now know more clearly than we did
before what we need to do to succeed. But we also know that
this involves a lot of changes, and some very fundamental
changes, covering almost all significant aspects of the agency.
Some of these changes are intangible, such as how we
communicate and define our mission and our goals and our
guiding principles, but many of the changes are very tangible,
such as how we measure our performance, train people, organize
ourselves, as well as many very detailed procedures and
especially our technology programs. Collectively, this all
affects the skills attitude tools that constitute the way we
serve taxpayers.
In addition, as you have noted, Mr. Chairman, a number of
times the information technology on which the IRS critically
depends, is fragile and inefficient and I believe cannot be
fixed short of nearly a total replacement. In addition to
technology, there are other major areas of change needed to
achieve our strategic goals, including reengineering our basic
business processes. This includes many of the aspects that pose
burdens on taxpayers such as our forms and filing procedures,
as well as our internal organization, management and
performance measures.
And I recently sent, I believe, to you both--to you
gentlemen a copy of a document that we recently wrote called
``Modernizing America's Tax Agency,'' which lays out in some
detail, which we don't have time for today, this overall
program. I do want to note that this is a massive amount of
change; and it has to, of course, be coupled with continuing
ongoing operations. And this all means that there is a
significant risk in what we're doing, that we may have
unanticipated problems, and that we may have operational errors
as we go along.
In other words, in the current situation the IRS is in, I
don't believe there is any risk-free plan. But, although we
know that there are inherent risks, knowing that they exist,
means that we can try to manage them so that no setback is
fatal and we can be reasonably confident of ultimate success.
And in this regard, I would like to mention two important
aspects of our management process: one is the need to
rigorously set priorities in light of the fact that we have
limited organizational capacity. The other, of course, is to
establish effective management over each of our major change
processes.
Like any organization, we have limited capacity to manage
change. And even before the Congress passed the Restructuring
Reform Act and we began our modernization program, the IRS
organizational capacity was, in fact, stressed to the maximum
in an attempt to respond to actually thousands of individual
recommendations that were coming from many studies and
proposals, as well as legislative mandates and tax law changes.
And the process of reacting to this many inputs was
actually using up all of the available capacity without,
actually, in my view at least, addressing many of the
underlying problems. So what we have done now is to establish a
set of programs to try to manage these activities and
priorities in an orderly way, in an orderly sequence so that we
attempt to get the most benefit out of the organizational
capacity we have, though also building increased capacity to
make the improvements come even faster into the future.
Now, Chairman McIntosh, I would like to report just a bit
on the one part of our program that is attempting to deal with,
specifically, the paperwork burden aspect of our mission. And I
would just like to note that the situation, the reality that we
face, is that the growth of the economy--the growth in the
complexity of the economy and the growth of the Tax Code, all
combined to not only impose the paperwork burden that you noted
in your opening statement but also to inherently increase it
each year.
In the filing season that ends today, for example, we
expect to receive about 3 percent more total returns. That's
because of the growth of the economy. In addition, because of
the two recent tax bills that were passed, we're actually
revising 153 forms to reflect Tax Code changes and
unfortunately adding two more forms. And it's estimated that
under current estimating methodology that those changes alone
would add 92 million hours of burden.
So when you combine all of those economic growth changes
and tax law changes, we actually increase just by that alone,
4\1/2\ percent to the burden of 5.8 billion hours that was
already estimated by OMB. So that's just handling the reality
of economic growth and Tax Code changes.
My view of what our mission is, and what my mission is in
the agency, is to deal with that reality; we have to note that
it's there. But our goal is to try to make it as easy as
possible for the taxpayers to comply with those obligations and
to essentially rethink our way of doing business, as much as is
in our control in order to make it as easy as possible for
taxpayers to file and pay.
Now, as I noted, we do have limited organizational
capacity. So we have to set priorities. In order to reconcile
these various demands, we've tried to give priority to making
those changes that we think will benefit taxpayers as quickly
as possible. And, of course, we are also making those changes
that are mandated by law, while also working on some longer-
term changes that we think will really improve service and
reduce burden even more in the future.
For the near term, we have basically three strategies that
we're pursuing, all in the near term, to deal with this issue.
The first is to increase the ability of taxpayers to both file
and pay electronically, which we think eliminates errors in
paperwork. And this filing season we were successful in
increasing electronic filing by about 17 percent of the
taxpayers, getting close to 30 million. This includes the 5
million telefile returns which the taxpayer just handles the
transactions by dialing the phone. They don't have to file a
return at all with telefile.
For small businesses, we also have a similar system for
quarterly employment tax returns where they can file by
telephone without having to actually file a form at all.
And we are taking a number of steps to try to increase this
method of filing. So electronic tax administration is one
strategy. A second one is to eliminate the need for some
taxpayers to file at all, where we can. For example, over the
last year we raised the threshold for small businesses that are
required to make monthly tax deposits; and by doing this we've
eliminated 500,000 small businesses from having to make these
monthly deposits at all, which eliminates 6 million pieces of
paper.
We also have noted that there are some taxpayers who file
who don't need to, and we've sent letters to 2 million
individual taxpayers simply informing them that based on the
data that we have they didn't need to file returns, we
encourage them not to file. So I mean that's the ultimate
paperwork reduction--just get people not to file at all.
A third thing we're doing is that we are working with
private contractors to help us redesign certain of the forms
and instructions that go with them to make them easier to file
and less error prone. We know that there are some good ideas
and expertise out there in the private sector. And I can give
you some examples that I have with me of working on this.
We're going to continue to aggressively pursue all three of
these strategies over the next year, within the limits of our
capacity.
Another major step that we are taking is to redesign the
way we measure burden. Frankly, the measurements that we have
today that address the question of burden are based on a 15-
year-old methodology that is very seriously flawed. I came into
office--I looked at this, and I said, ``this really does not
help us very much to determine what we should be doing.''
It doesn't take into account, for example, anything about
the currently very extensive and growing use of tax preparation
software. I think we've learned from our private contractors
that this methodology actually sometimes points us in the wrong
direction by telling us that a certain way of designing a form
makes it more burdensome when, in reality, it makes it less
burdensome. And finally, it doesn't take into account what is
some of the, I think, most important kinds of transactions that
the taxpayers have--which is what happens if there's an error
in a form. Then it requires interaction with the IRS after the
form is filed, referred to as postfiling.
So we're working with another private contractor to
redesign this whole method of measuring burden. We hope this
will give us better tools enabling us to improve in the future.
And, finally, what I think is really the most important step
dealing with increasing our long-term capacity to improve, is
our plan to redesign our whole organization structure. That
will have a number of objectives, but one of the most important
objectives is that it will enable us to put in place a set of
management teams that will each have the responsibility for
dealing with a particular group of taxpayers.
For example, you mentioned small business taxpayers, which
is a sector with which I have some familiarity. We know there
are some of the greatest burdens in this sector. Small business
needs are very, very different when compared to a typical wage
earner who simply files a return once a year and gets a refund
in most cases.
In keeping with the Restructuring Reform Act, we're putting
in place a whole new structure. Part of this is that we will
have a team--this will take a few years--of people whose job it
will be to understand very clearly the needs, for example, of a
small business taxpayer, as differentiated from a wage earner.
The team will have the responsibility for figuring out what we
can do to improve the way we provide service to those taxpayers
and reduce, not only their paperwork burden, but other burdens
in dealing with us.
So those are some of the approaches that we're attempting
to take. Recognizing we have many demands on us, we're trying
to balance our priorities and address what we think will do the
most good the quickest.
Let me stop there. Both Chairman Horn and Chairman
McIntosh, I would be happy to take your questions.
[The prepared statement of Mr. Rossotti follows:]
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Mr. Horn. Well, thank you very much, Commissioner. We have
been joined by Mr. Terry, the gentleman from Nebraska; and we
have been joined briefly by Mr. Ose, the gentleman from
California, and we now have the ranking Democrat on the
National Economic Growth, Natural Resources, and Regulatory
Affairs Subcommittee, Mr. Kucinich of Ohio.
And I'm going to begin with some questioning, then I will
yield to the cochairman here, Mr. McIntosh. Then we will yield
to the ranking Democrat. Each of us is going to take 5 minutes,
so staff will please monitor the time so we can get through a
lot of questioning.
I'm curious, since you spoke of significant risk associated
with the efforts being entertained by--the efforts--you also
stated that there is no low-risk plan. What specific risk-
management strategies are you deploying?
Mr. Rossotti. Well, we have defined a number of major
change areas. For example, the organizational change is one
major change area; the replacement of our basic technology
systems is another major change area; year 2000 is another
area. There are about five of them. And in each one of these,
we have a whole management process. At the top is an executive
steering group of which in most cases I'm a member, and the key
executives who are involved in managing these programs are all
part of this process. Then we have a program management office
whose staff has the responsibility for day-to-day management
and oversight of all the activities that are involved in making
these changes.
For example, the first one that we established and the
example that is the one that has the most media impact is Y2K.
As soon as I got in office I knew that this was clearly a huge
change area, over $1 billion affected everything, and we put
this process in place. Of course, it's not over until it's
over.
But one of the most important milestones in this Y2K issue
was the filing season that just ended, because we have almost
all of our mission-critical application software systems
renovated, made compliant and put back in. We knew that with
that much change there could be a lot of risks during the
filing season.
So one of the risks would have been major failures during
the filing season, incorrect notices, delayed refunds, that
sort of thing. Having gotten through that, many of those things
didn't happen.
Mr. Horn. If I might, let's take many of those examples
because I'm sure there are many other things you want to do
also. But one of the things that's long concerned me is what
happens to the checks that relate to Social Security and
Medicare. An employer sends them in, the employee has a
deduction from income. And my understanding is it simply goes
in the Treasury bank account at the end of the day and that
there's no separate bank account for what is a trust fund.
Now, you have about 14 major trust funds, your money from
employers, employees, all depending on what the law is. The
people that drive up to the gasoline pump, they've got a tax
they pay to the Federal Government to maintain interstate
highways and on and on down the line.
How does that system work, and can you really tell as
Commissioner how much money came in that day for the Social
Security trust fund, for the Medicare trust fund, for the
interstate highway trust fund, the aviation improvement fund
that we pay excise taxes every time we buy a ticket, and that's
to complete, extend, renovate runways around the country?
Mr. Rossotti. Well, I think your first point is, does the
money come in and go into different bank accounts. Clearly
that's not the case. I mean, we receive money from, for
example, an employer that comes in to us; and we process that,
get the cash to the Treasury. Most of it comes in
electronically--now actually, almost all of it--and then we get
the forms that go with it. And in most cases those forms
designate what the purpose of the money is.
But as you noted and, as GAO has noted, in some cases, the
initial transaction that is initiated by the taxpayer does not
fully designate exactly which trust fund it is for. So it has
to be an estimating process after the fact.
This gets fairly technical, but the net of it is that,
although we think that these estimating processes are
reasonably reliable, they are not; and some improvements noted
by GAO have been made. They are not 100 percent reliable.
That's for two reasons: One is that some of our systems, our
old systems, are not as good as they need to be in order to do
the most accurate accounting.
And in a few cases we don't actually have the source data
from the taxpayer to be precise about which amount that has
been deposited is for a particular trust fund.
Mr. Horn. Isn't the fact the following--that we really
can't account for the dollars that go ultimately to Social
Security. We--and I don't understand why not. It seems to me it
is very simple. The employer sends his or her half, the
employee's half is also sent by the employer, and it clearly is
marked or should be, Social Security, Medicare trust fund. It
just seems to be when your office and processing centers around
the country get those checks they ought to be able to identify
it, put it into a special account in the Treasury.
And we don't have that; we have an estimate. Does anybody
know if we're off $1 million, $1 billion? Here we are trying to
use the surplus to give more integrity to the Social Security
fund than it has had. And what's your feeling on this? Can't we
solve a simple problem like that? A business would.
Mr. Rossotti. Well, I think it could be solved. I'll say
there are very few things I found at the IRS that turn out to
be actually simple--but that doesn't mean they can't be solved.
I think the source of the issue is the fact that there's a
great deal of cash that comes in through the deposits which, in
order to make it simple for taxpayers, are simply designated as
cash come in; and then when the forms, the actual tax returns,
are filed, there's a need for a reconciliation process; and
that's what creates the complexity and the need for making
estimates. So I guess I will just stop there.
Mr. Horn. Well, do you have any concerns that this is
misestimated and who does the estimation work?
Mr. Rossotti. Well, anytime there's an estimate, of course,
there could be errors in estimating. But some of it is done by
the Office of Tax Analysis and Treasury, and some of it is done
by IRS.
Mr. Horn. And what do they do, compare notes and say, well,
shall we split the difference or what?
Mr. Rossotti. Well, that gets into--I think that there's
different parts of the estimate that are the responsibility of
different people. They each have a methodology which has been
reviewed which is being reviewed constantly by GAO. Clearly,
there's room for improvement in those methodologies.
But I think if you want to identify the solution to this
problem, some of the solution has to do with the computer
systems. Even in a business, you have some estimates when you
put your financial statements together, and they're not always
perfect. Some of it gets to a basic issue of do we want to add
more burden for taxpayers to provide more precision when they
make deposits; to identify what it's for, which would then give
us perfectly accurate data as to not require estimates.
I think we've been a little reluctant to do that because of
the very points that Mr. McIntosh raised. We don't want to put
more burden on the taxpayers. So the rest of the limitations
are based on what kind of burdens we put on the taxpayers.
Mr. Horn. Well, in the age of computers, I think we would
all agree the one thing that a computer does is do things that
you and I could do, but it does it very fast. And it can handle
millions of things when we might still be trying to figure out
what our tax form is all about. And it just seems to me that it
is a crazy system when some of the many billion dollars,
trillions, indeed, down the line, in these trust funds, that we
ought to have a very strict policy of putting the money where
it belongs at the beginning.
Now, I'm going to yield to Mr. McIntosh, and maybe we will
carry on this dialog afterwards. The gentleman from Indiana, 5
minutes.
Mr. McIntosh. Thank you, Mr. Chairman. And, Mr. Rossotti,
let me tell you I appreciate hearing those three different
areas in which you are working and reducing the burden.
My first question is essentially why aren't those reflected
in the OMB report for 1999 or 2000? 2000 is pretty devastating
through the agency where they say you don't have any plans,
specific plans to reduce the paperwork burden. If in fact,
you're doing those three, what happened between the agency
plans and the report?
Mr. Rossotti. I think, unfortunately, one of the things
that is true is that while we are pursuing those things, they
tend--in terms of the way that OMB measures burden, the numbers
tend to be overwhelmed by the other numbers that represent
growth in the size of the number of forms filed, and also the
number of forms that we have to change, and add elements to,
because of the tax law.
So I don't want to overstate my case. We have these kinds
of strategies. We are doing them. But they are relatively
limited in their impact as compared with the overwhelming
volume of change that we get as a result of tax law and volume
increases. I think that probably is the honest answer to your
statement.
Mr. McIntosh. Then I guess my further question would be,
and I had the staff--asked them to print out all the forms.
They told me it would take 6 hours, so they printed out a list,
30-some pages of all the different forms. Not all of those are
changing because of the economy or are new because of changes
in the Tax Code.
Why doesn't the agency take a further step and adopt a
strategy to figure out how we could reduce either the number of
the forms or the complicated nature of the forms?
Mr. Rossotti. Part of our strategy is to do that. Here's an
example of one we're working on. We're working with a private
contractor that we think is one of the best in the country to
work on--and you can see this. This is one example. This is the
child credit worksheet. And here's what it was before, and
here's what it is now. And, you know, clearly by any reasonable
estimate, when we get this done, this is going to be a better
form.
On the other hand, here's another one that they did, which
has to do with form 8812. After all of the analysis that
they've done, it looks better, but it still has the same number
of lines on it. So it doesn't always follow that you can, even
under the best review, make things better.
I think we are going to systematically work on this
problem, but I also want to be honest and raise another aspect
of this. If you look on this chart over here it says ``Process
Flow to Change a Form.'' That's the process that is required
because of regulation and other constraints to change even one
line on one form.
And I think you can see--right now we're in the process
this year of having to put 153 forms through that process
required by law. That tends to use up a lot of time in an
organizational capacity, and this is not something that we can
just disband or eliminate based on anything that we do in the
IRS. This requires a review by OMB. There's legal reviews to
ensure that forms conform to the law. There are also issues
related to pure processing considerations. We have to get our
information systems, which have major problems, to be able to
process these forms.
So these things are all needed in order to just make sure
that we're complying with the law and that we can actually
mechanically process these forms. This is what I mean by the
issue of organizational capacity. There is no possibility that
we could take all of the forms on your list in 1 year or 2
years and even go through the process we've done here, and
that's not to say something we can promise to do.
Mr. McIntosh. You were able to report 130 million increased
hours in 2000 as projected out. And are you telling me
essentially you want to put as your agency priority only having
your manpower work on ways of increasing the burden and don't
want to put anybody to studying and using that process to
decrease it?
Mr. Rossotti. No, I'm actually----
Mr. McIntosh. I find that somewhat unconscionable.
Mr. Rossotti. That would be unconscionable. But I don't
think that's what I'm intending to say. I'm saying that the
first thing we have to do is we have to comply with the law.
That uses up a tremendous amount of capacity when you have the
tax law change. I mean there's just no alternative to that.
What we're attempting to do is, within the available
capacity that we have, we're attempting to do projects like
that, as many as we can, to improve and simplify forms that are
on the books. The other thing we're attempting to do, as I
mentioned in my testimony, the other strategy is to eliminate
the forms, which is actually better than redesigning them,
because if you can eliminate the need to file, of course,
that's 100 percent reduction.
I just want to be honest and say that with the volume of
data that we have, the volume of changes and the capacity that
we have, I would not want to commit that we could review every
form on the books over the next year or 2 years, over the next
several years. As we make the other changes that we're
proposing, I think that we can make a dent at least in this.
And we're certainly going to try.
Mr. McIntosh. OK. Well, my recommendation, and I want to
see if you think it's reasonable, is to go back and review the
submission under the OMB project for reduction and say we can
do better than zero, because you've laid out that you have some
plans to do some.
Mr. Rossotti. OK, we will take note of that.
Mr. McIntosh. And come up with a timetable.
Mr. Rossotti. That's a fair request. We will take a look at
that and see if there's some things that are not reflected in
there that we can do, because we definitely have this as part
of our strategy; and we will attempt to see if we can do better
than what's in there. I will take that under advisement.
Mr. McIntosh. If we have extra time, I would also like to
talk with you on the methodology, because I think that's a good
project, too, on making sure you measure it accurately.
Mr. Rossotti. Sure. Certainly. Incidentally, we would be
happy to come in and talk with you about that methodology,
because I think that might be something of interest to you.
Mr. McIntosh. Exactly.
Mr. Rossotti. Without that, frankly, we're shooting in the
dark. We don't know where we're going.
Mr. Horn. The gentleman from Ohio, the ranking member, Mr.
Kucinich.
Mr. Kucinich. Thank you very much, Mr. Horn, Mr. McIntosh,
members of the committee. Being tax day, I think it's also an
appropriate day to thank the people of the United States for
their support of this government and the many important
functions which this government has on their behalf, our Social
Security programs, our health, our education, all the many
functions of government are funded by the taxpayers of this
country.
And while we're scrutinizing the collection system and
talking about what we can do to make it work better, we
certainly on this day owe the thanks of this government to the
American people for their support.
Before I get started with my question, Mr. Chairman, I
would like to express concern about the unfortunate partisan
title of these proceedings--and I'm going to quote--``Clinton-
Gore versus the American taxpayer.''
Now, the subject of this hearing is very important. People
want to know what we're doing with their tax dollars and what
can be done to make the system better. But I don't believe that
it adds dignity to these proceedings to cast them in the light
of some partisan conflict when the fact is that we work long
and hard on many of these issues together to try to find a way
to make this system work a little bit better.
And in that line, I would like to say that there is strong
evidence that the taxpayer has significantly benefited under
Clinton and Gore, President Clinton and Vice President Gore,
the following ways: the Federal budget has gone from a record
deficit of $290 billion in 1992 to an expected surplus of $79
billion in fiscal year 1999, which is the largest budget
surplus in history; 18 million new jobs have been created and
real wages have risen 6.1 percent after declining 4.3 percent
during the previous two administrations, and the unemployment
rate has dropped from 7.5 percent in 1992 to 4.2 percent.
[The prepared statement of Hon. Dennis J. Kucinich
follows:]
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Mr. Kucinich. Now, I've got a long list of the benefits
that have accrued to the American taxpayers that I would submit
for the record. I will ask Mr. Rossotti--welcome, Commissioner.
The American taxpayers paperwork burden is nearly 80 percent of
the total paperwork burden imposed by the Federal Government.
Unfortunately, over the last 3 years, the IRS paperwork burden
has increased by about 6.9 percent.
I'm wondering, did legislation pass in 1997 that cut the
capital gains, the estate and gift taxes increase the paperwork
burden placed on the American taxpayers, or did it decrease the
paperwork burden?
Mr. Rossotti. Well, I know that I have the data here on
each one of those changes, and I would have to look up
precisely. I do believe--I'm not sure about the estate and gift
tax--I believe that the schedule D changes which are the ones
that dealt with capital gains did have the effect of increasing
the complexity--and while I don't have the precise data, I
believe that they did. I can get that for you, but I believe--
--
Mr. Kucinich. It's possible that there might be some
changes which the taxpayers find to be beneficial for them
which simultaneously may increase the paperwork burden. Is that
possible?
Mr. Rossotti. Well, I believe that Congress passes certain
provisions which are designed in some cases to provide benefits
to the taxpayers; but in order to administer them, it does
require some additional forms, that's true.
Mr. Kucinich. Thank you, Commissioner. Now, I read a GAO
report that was released yesterday showing that large foreign-
controlled corporations which are doing business in the United
States pay considerable less in U.S. corporate taxes than
similarly sized American companies.
For example, I think it was Robert McIntyre, who is the
director of the citizens for tax justice, I think he said that
paying too much or charging too little on paper transactions
with their foreign affiliates is a typical way that
multinational companies shift income out of the United States
for tax purposes.
My question, Commissioner, is the IRS committing adequate
resources to ensure that multinational companies are not
inappropriately avoiding paying their fair share of the taxes
to this country?
Mr. Rossotti. Well, what you're addressing there is the
issue of transfer pricing which is one of the complex areas of
the Tax Code. It actually applies to both domestically
controlled and foreign-controlled corporations, and we do
have--there have been actually some additional regulations
issued on that subject by the Treasury Department within the
last, I think, it was 2 years, that are specifically aimed at
addressing that issue.
So it is an important area on which to focus. By the way,
in our new organizational structure, we will have a special
group that will be focusing on those kinds of things.
Mr. Kucinich. Commissioner, I'm glad you're acknowledging
it is important. My question is, do we have corporations in
this country who are basically shifting income out of the
United States for tax purposes?
Mr. Rossotti. Well, if they are, it would only be because
we haven't been able to find out about it, because that is
something that our audit program is designed to detect. And if
we do find out about it, they would certainly be given
additional assessments to reflect what the tax should have
been. The program is not perfect, but it is designed to address
that kind of an issue.
Mr. Kucinich. So can you report to this committee as to the
prevalence of that?
Mr. Rossotti. We will report back what data we have. I'm
not sure that we have an exact report on that particular
subject. But we will be glad to get back to you and report what
information we have.
[The information referred to follows:]
In response to a similar Congressional directive contained
in our FY 1999 appropriation legislation, we recently completed
a through study of the application and administration of
Section 482 - transfer pricing. The resulting report contains
estimates on the gross income tax gap related to transfer
pricing, and describes some legal and administrative
developments undertaken by the Service to promote compliance
with section 482. Attached is a copy of the report which
answers several questions related to transfer pricing that are
ongoing concers of the Committee.
Mr. Kucinich. Thank you very much, Commissioner.
Mr. Horn. I thank the gentleman and now yield 5 minutes to
the gentleman from Nebraska, Mr. Terry.
Mr. Terry. Thank you. I appreciate that. If reducing taxes
creates such a paperwork burden, perhaps we should just
eliminate them. Mr. Kucinich, I'm glad you're going in the
right direction with us. I appreciate that, Dennis.
Today, some of my good friends back in Nebraska are filing
their taxes with the help of tax preparers, and they fall into
the classic group that you wouldn't think would use a tax
preparer. And I keep hearing the argument and tax application
that so few actually itemize and need it; but yet, at least in
our local paper, in the last week showed that almost 60 percent
now are using tax preparers.
First of all, my background is small business; and there's
no way I can run a small business without having both a
bookkeeper and a CPA to keep track of all what I need to do to
prepare for our taxes.
But I'm focusing my questions on the individuals, the hard-
working people that shouldn't have to hire H&R Block; and if
you've seen some of the commercials from some of the tax
preparer companies, they feed off of this now, the complication
in the forms and the paperwork and put the fear into the
average citizen that the code--and I think that fear is real--
is just too complex.
So first of all; what paperwork reductions and
simplification is the IRS pursuing for fiscal year 1999, 2000
that will benefit specifically the individuals and the
individual preparers?
Mr. Rossotti. The individual taxpayer. One of the areas
that has the characteristic of being designed to be a benefit
for individuals are things like, the child-care credit and the
earned-income tax credit. They are precisely the kind of thing
that affects many individuals; but they also have the
characteristic that they require sometimes an additional form
to fill out, or in some cases, a complicated definition of a
complicated form.
So one of the areas that we have, as I mentioned in my
remarks to Mr. McIntosh, as part of our strategy, is to try to
make some selected forms and some selected areas that affect a
large number of people. And with the aid of some outside
contractors, to redesign these to make them easier for people
to fill out. And this is actually an example of two that we're
working on exactly in that area. One is the child credit, which
is the $500 per-child child credit, which is very important--
and it's one of the reasons refunds are up 15 percent this
year. In our earlier version it had, you know, this particular
form, which admittedly is not a real user-friendly kind of a
form. But it has the information on it that you needed.
What we've done, with the aid of our contractor--and we
haven't gotten this out yet; I'm giving you a little bit of
information--we got this form--and I know you can't see it, but
it's got the information you need. It's a lot simpler and it
reduces the number of lines. Now there's another form that some
people need which is called the additional child tax credit.
And, you know, this is even a more complicated one.
Unfortunately, they're not as successful as in eliminating
that, because it still--it is a little bit easier but it still
has nine lines on it. That's because with all the research that
has been done, the lowest that you can get down do.
Nevertheless by doing this kind of a process, we can really
affect a significant number of people who want to take the
child credit but who have to fill out this form to get through
it.
Another area that's basically the same kind of a process is
the earned-income tax credit which similarly affects, by
definition, lower income people. It also has significant
complexities. So those are some of the steps that we're taking
in order to deal with this issue.
Another relavant area is our phone service. When people do
fill out tax forms themselves, they sometimes need to ask
questions. It's not the form itself. We tried to improve our
phone service, and we have improved it. We added 24-hour-a-day,
7-day-a-week phone service. I personally sat in over this
filing season in a number of different locations and listened
to these calls.
And, of course, a significant number of them do come in,
precisely from the kind of taxpayer that you're referring to, a
person that might be low to middle income. They might be trying
to get one of these credits. They know that there is such a
thing, but they're not quite sure how to do it. And so in
addition to simplifying the forms, we try to provide phone
service as well, and Internet service, by the way, to help
those kind of taxpayers. So that's the kind of strategy that
we're attempting to pursue to deal with the kind of situation
you're talking about.
Mr. Terry. I appreciate that.
Mr. Horn. Is the gentleman yielding back his time?
Mr. Terry. I will yield back my time.
Mr. Horn. I will take 6 minutes then if he's yielding back
1 minute, just to round this out as far as the management side
is concerned. At our March 1, 1999, hearing the General
Accounting Office discussed the weaknesses in computer security
at the Internal Revenue Service. Both internal and external
weaknesses were listed.
I wonder to what degree you've had an opportunity as
Commissioner to review that matter, and what is happening to
assure the security privacy laws, all the rest.
Mr. Rossotti. I'm going to ask Mr. Cosgrave to join me up
here. He's been already sworn in, so we don't have to ask him
to do it again.
Mr. Horn. It isn't Charlie McCarthy and Edgar Bergen?
Mr. Rossotti. As I think you know, you met him. He came in
also from the outside to help me with this. And I think that
before either of us got there, I do want to say this was a
matter that was very seriously--you know, it was acknowledged
there were serious problems, physical security and computer
security. And there was an important step taken to set up a
high-level security office that reports to the Chief
Information Officer. We have two senior individuals that
actually happen to come both from GAO, and we think, are world
class in the security area. They have put together a multiyear
plan. This is not a 1-year plan. I think--it's I forget how
many specific line items that deal with both, with all
dimensions of security.
I think we've got about three-fourths of those implemented.
Now, I would like to ask Paul to elaborate just a minute.
Mr. Horn. Try to do it in a minute, because I've got a lot
of questions.
Mr. Cosgrave. Very quickly, this program identifies risks
from the most serious and works down. So we start where we have
the most potential with our main computer sites, then we go to
our service center computer sites, then our district field
offices, and then our, what we call POD locations throughout
the country. There's some almost 800 locations, so it's quite
an extensive number of facilities that we have to track
security on.
The program that is run by Mr. Baptiste, who is actually
here at the end, is a very extensive program. It's over 60
people in his employ overseeing that program, and we've been
working down the risks. We've, in the computer area, already
corrected over 80 percent of the risks that were identified in
that GAO report over 2 years ago. And we're continually
managing the risk.
Mr. Horn. You have equipment to trace who is interfering,
or do you not in terms of high school students, and saying,
gee, let's see what's in the IRS files today?
Mr. Cosgrave. Yes, we have most of the standard technology
in place. In fact, we work with NAS and other folks in terms of
making sure we're up to date on all of that.
We employ firewalls and things of that sort, which
essentially keep the parts of the IRS such as the Web site--
whose use has increased about 153 percent this year, over 600
million hits this year in people accessing it for legitimate
purposes--isolated through firewalls so that they can't get
into any of the taxpayers'----
Mr. Horn. How many accessed that were not legitimate
taxpayer purposes? Do we know that?
Mr. Cosgrave. I don't have specific data for you on that.
Mr. Horn. The answer is no.
Commissioner, are you optimistic that that can get under
control, at least in the next 6 months?
Mr. Rossotti. Excuse me?
Mr. Horn. Are you optimistic that you will have the
security situation solved in the next 6 months, as GAO, General
Accounting Office, noted?
Mr. Rossotti. I do not believe that we will have everything
solved in the next 6 months, no. I think we have already
addressed the top two levels.
Mr. Horn. This is a high priority?
Mr. Cosgrave. Chairman Horn, as I indicated, over 80
percent of the GAO problems have been identified. It is very
difficult for us in open session here to give you any specifics
just because of the nature of the topic. So in closed session
we would be glad to give you a lot more detail.
Mr. Rossotti. But in answer to your question, it is
absolutely a priority, and I think we have already addressed
the more high risk issues, frankly.
Mr. Horn. Let me ask briefly, this is before your time,
Commissioner, but the IRS blew $4 billion on a computer system
that didn't work. Isn't there a chance that some major
businesses, maybe mail order businesses or something, have
computers that you can get them off the shelf that would solve
some of your problems? You are an expert in this area. How do
you feel about that?
Mr. Rossotti. Actually, the two of us both came from the
same kind of background. We were competitors with each other,
but we are on the same team now. We both went through 25 years
in the business of doing those same kinds of systems; and I
think here, because we are determined to not let that kind of
problem happen again, I think on the specific issue of using
off-the-shelf software, our strategy is to use outside
expertise. That is why we have Computer Sciences Corp. to help
us do this and to use off-the-shelf products as much as we can.
Now, we can use a lot of off-the-shelf products. Certainly
all of the basic technology can be off the shelf, all of the
operating systems, the hardware and telecommunications and
those things; and in some cases there is application software
that we can use. It does have to be integrated because we are
in a tax processing environment, so it isn't like we can take
the whole thing off the shelf.
Mr. Horn. My penultimate question here is how much has IRS
written off that they cannot collect? When I got my debt
collection bill with Mrs. Maloney on the books in 1996, that
situation was at about $110 billion, and she had--the then
commissioner had another pool of $60 billion and thought she
could collect more out of that, but there was no organization.
So what is happening on that front?
Mr. Rossotti. Well, this is a topic of longer discussion,
but I think that--you know, the IRS, the way it is done now in
terms of tracking accounts receivable, is very confusing,
frankly, very confusing and not a very management-oriented
approach. But part of it is because of the losses. We have to
keep everything that is on it for 10 years, and that adds up to
a number that is $222 billion, which is the number that is
published. But as GAO has noted, that is not comparable to what
anybody in the real world would consider. There is about $103
billion that is potentially realizeable receivables, that is,
about half that have some potential for collecting. But when
you really get down to what GAO considers to be, you know, the
normal receivable, the actual financial receivables, that gets
down to about $23 billion, which is a more realistic estimate
of what the total receivables are, that we are in the
collection business to go after.
Mr. Horn. So you are organizing a systematic collection
business to go after it?
Mr. Rossotti. We are, but I again want to be very frank and
realistic about this topic, OK? I mean we have massive room for
improvement in the way the IRS goes about our whole collections
process. Collection is one of our main businesses, but we have
some very archaic computer systems. They, in turn, constrain
what we can do. We have some organizational structures that are
not very conducive to a modern approach. So a major part of our
whole reorganization, our new technology, those two pieces are
going to address the issue of really positioning us to do what
I consider to be a far more modern kind of approach to doing
collections. There is very significant room for improvement
over time, but it is not going to be fast.
Mr. Horn. Before you arrived, I suggested that they use
regular bill collectors, and I was given this argument: oh, no,
the privacy laws. The privacy laws I don't think pertain here.
Just give them the address, give them the amount, have them
knock on the door. If they can't get it and there is something
that the IRS, the client, customer thinks about and says, gee,
you know, that is where my fight is, fine, bring IRS into it.
But in the meantime, if you don't go after debts, people think
it is a grant within a few months. Gee, you know.
Of course, I regarded the $110 billion back in 1995--it
started mostly in 1991, but really accelerated. I regard that
as a national scandal that we can't lower that amount. And I
don't know--you know, people listening today say, gee, why
should I file my tax form when somebody is in that pile of $110
billion or whatever. So that bothers me.
I will save my final question for the next round, and I
will yield to Chairman McIntosh now.
Mr. McIntosh. I notice that our colleague, Mr. Ryan, came
in, so I will yield my time to him if he has a question; and
then I will take mine on the next round.
Mr. Horn. Fine.
Mr. Ryan. Commissioner, I would like to ask you a couple of
questions about the complication of the duplication required in
our various tax forms. Have you made a crosscutting analysis on
how we can weed out the type of duplicative information
required on different tax forms? Specifically, I just went
through the experience of going through my schedule D, looking
at schedule E, a lot of the same information is required on
those things. Have you identified a solution toward routing out
that type of duplication? If not, what is the status?
Mr. Rossotti. Well, could I ask my colleague here to come
up and answer that specific question? This is Lynda Willis who
has joined us. She was formerly with GAO and is working with me
on this particular initiative.
Ms. Willis. Congressman, we have not put in place a program
that would look at every single item on a form or a set of
forms for redundancy. One of the things that we hope to do
under the new burden methodology we are developing is that
after we identify sources and causes of burden, we will then go
in and look at the entire inventory of forms used by a
particular set of taxpayers and do exactly what you are talking
about. Specifically, is there a way that we can take the whole
inventory and streamline it in such a fashion that we reduce
redundancy; and make it less burdensome and easier for the
taxpayer to comply.
Mr. Ryan. When is this going to be ready?
Ms. Willis. We are into the design phase of the new burden-
estimating methodology. By that I mean we are identifying the
survey instruments that we need to collect the data. We are in
the process of getting feedback from focus groups of taxpayers.
One of the things that we want very much to know from
taxpayers is an issue that came up earlier, around what are the
circumstances under which you decide to use a preparer, or
preparation software. We hope to be out and have the structure
of the model finished with this summer, but my best guess is it
probably will not be up and operating until fiscal year 2001.
Mr. Ryan. Do you have a time line that you have prepared as
an objective? And what are the final results that you hope to
achieve with this?
Ms. Willis. We hope to achieve a burden model that will not
only estimate the amount of time that taxpayers spend complying
with the Tax Code from start to finish, prefiling, filing and
postfiling, but also to be able to develop a model in such a
fashion that we can look at segments of taxpayers, as well as
types of activities, and essentially disaggregate the data to a
point where we can identify specific types of initiatives that
IRS can undertake that will reduce burden across the board.
For example, in some cases when we are looking at
postfiling burden, we are better off looking earlier in the
process and preventing the problem in the first place. This
model is designed to allow us to look at that and also to look
at where our resources can best be spent in assisting taxpayers
to comply and understand the Tax Code.
Mr. Rossotti. Could I just make one additional comment. One
of the reasons that we really need to rethink this whole thing
is because of technology. I mean, with tax preparation software
and with things like including some that is now available for
free on the Internet, it really changes the whole way that you
do things, because, for example, you can enter something once
and it picks it up on the other form. So it is not just the
forms design; we need to look at the technology that people
use.
Mr. Ryan. I understand that we need to do a new model, but
we have a lot of duplication that exists right now; and in the
interim, with the fiscal year 2000, with the fiscal year 1999
tax work we are doing in preparation of the new codes for next
year, aren't there interim things you could do to weed out this
problem of duplication we have?
Mr. Rossotti. Just before you came in I made a commitment
to Mr. McIntosh that we would take another look at the 2000
program. Because of a number of things we discussed, our
organizational capacity, the Tax Code changes, that chart would
show what we have to do to change one line on the form. We
can't, frankly, commit to say we will review every form for
duplication, although I don't want to imply that there is
nothing we can do. I think it is certainly a very good request
and a fair request that we take a look at the plan that we have
for 2000 and see if--there are some things under way, but
perhaps there is more that we can do, and we will take a look
at that. As a matter of fact, we will report back to you.
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Mr. Ryan. Yes, because when we have a goal 2 years out, it
always seems to be pushed back every 2 years.
Mr. Rossotti. We are trying to do basically everything on
two paths. One path is what we can do now in the next year; and
we can only do a few things, but we have quite a few under way.
We have to prioritize those. And then we are developing a whole
new methodology in order to get us in better shape for the
future. Naturally, there is a lot of pressure to put more
things into the current year, and we can't always accommodate
them; but we will take a look at the suggestion. I think it is
a good one, and we will see what we can come up with for 2000.
Mr. Ryan. Thank you. I yield back to the chairman.
Mr. McIntosh. Mr. Chairman, I have a whole different
question--this is a different subject matter--but while I have
you, it is an area I have been working on. Jerry Weller and I
have introduced a bill to eliminate the marriage penalty and
there are several ways of doing that. But I wanted to ask you
if you have focused at all on that, and if you would agree with
us that the marriage penalty undermines or causes harm to the
family structure when you place that additional financial
burden on them.
Mr. Rossotti. Well, I don't want to appear to be ducking
your question, but I think in this case I have to say that we
have a pretty clear delineation between what the Treasury's
responsibility is, and what IRS's is; and a question like that
is really one that is not within my scope. I have a big scope
at the IRS, but there are some limits on it. I think that that
really is a tax policy question, and I am afraid I will have to
defer to the Treasury on it.
Mr. McIntosh. OK. I might ask your help in getting someone
over there to focus on that as well, but I thought I would
check while you were here. Thank you.
Mr. Horn. Well, I am sure the Commissioner is in favor of
marriage.
Mr. Rossotti. Yes. I don't think that is outside my scope
to say that I am in favor of marriage, yes.
Mr. Horn. I yield 5 minutes to the gentleman from Ohio, the
ranking Democrat.
Mr. Kucinich. Thank you very much, Mr. Chairman.
Commissioner, when Congress acted in the last term out of
concern for how the American taxpayers were being treated by
IRS personnel, the intention was to make the IRS more taxpayer
friendly.
Can you give us an accounting as to how the work which
Congress had asked for was done inside the IRS to communicate
to the employees the importance of being gentle with those
taxpayers who may have some conflicts with the IRS or may have
some questions that they need help in answering?
Mr. Rossotti. I think that you are right. That basic
direction is the direction we have been given. I think it goes
even a little bit more than just being friendly. I think what
we are trying to do is go beyond that and actually understand
what the taxpayer's problem is, and we are trying to be as
helpful as we can in trying to solve problems. There are many
things we have done, but let me just summarize a few.
For sort of a typical average taxpayer we have tried to be
more accessible this filing season by opening the phones 24
hours a day, 7 days a week and opening on Saturdays for people
to come in in person and get information and help. That has
been very important for the filing season.
A second thing is for the people who have more difficult
kinds of problems that have been lingering--and we
unfortunately have some of those. For those, we have set up
what we call problem-solving days, where each month, in every
area of the country, we have special days where people can come
in and make appointments. We have quite a few people there from
different parts of the IRS, so they can solve problems quickly.
We have also reorganized the whole national taxpayer advocate
organization which is there to basically assist any taxpayer
that doesn't get the service that they need.
More broadly than that, we have developed a whole new
system of measurements, and this really goes to the heart of
your question about how do we get across to people what they
should be doing, whereas previously the focus was very heavily
on only how much ``enforcement dollars'' were brought in. We
have eliminated that system and we are rolling out a whole new
system of the way we measure performance for our organization.
We are also rewriting all of the job descriptions for every one
of our frontline contact employees. I could go on and on. I
don't know how much longer you want me to say it, but there is
an entire program of training that goes beyond--goes with this.
Millions of person-hours of training, are being invested this
calendar year and this fiscal year to basically deal with these
kinds of subjects.
So it is a very broad comprehensive program, but even with
all of that, it is a multiyear program. It is not something
that we are going to claim is going to be successful or
completed this fiscal year.
Mr. Kucinich. Well, as painful as the experience of having
to meet the tax man happens to be, I am sure the American
people want to know that you are taking steps to make sure that
such an encounter is done with less intimidation, which the
American taxpayers feel they have experienced in the past.
Mr. Rossotti. I couldn't agree more.
Mr. Kucinich. So is there a way that you can communicate to
the Congress the kinds of success that you have experienced in
this new attempt by the IRS to be more responsive and even more
service oriented?
Mr. Rossotti. I think that there are a number of things
that we could communicate. I would be glad to give you
additional information about some of the activities we are
getting. Of course, the feedback from the taxpayers is
something that is going to take time, but one of the key things
that I think will be a measurement, is that we are actually
surveying. Every time we have a transaction with a taxpayer,
whether it be audit, collection actions, phone call, we now
have an outside market survey firm that is doing a statistical
sample of the people we interact with and getting ratings by
the taxpayer of how they feel about this. Now, this is going to
take some time to accumulate the data, but by the end of this
fiscal year we will have some of that data to report.
Mr. Kucinich. I think that is good. Congress obviously
would be interested in getting some feedback about how our
constituents are being treated and we would also welcome
hearing from constituents on the issues and how the IRS's new
approach is working. I am confident that under you, Mr.
Rossotti, that the IRS is going to respond to the challenge;
and I know that you have a lot--you know, you have a lot of
really good, competent employees who I think are easily
adaptable to a call for more responsiveness, more service
oriented, and more congenial approach to this very difficult
job of collecting taxes.
Mr. Rossotti. Actually, I appreciate that comment, and I am
sure our employees do. Because I have to tell you that I
haven't met very many employees who like to make taxpayers
unhappy. Sometimes they have to give them an answer that they
don't like, but I think with this training and additional
support we are already finding that there can be a far better
relationship. In the vast majority of cases there does not need
to be an adversarial relationship between an individual one-on-
one and an IRS employee.
Mr. Kucinich. Please let the employees know that we
appreciate their efforts to be more responsive.
Mr. Rossotti. I will. I appreciate that very much.
Mr. Horn. I agree with the gentleman from Ohio, and what
has been lacking in IRS, very frankly, is good management. And
I would hope--and I think you will provide that good
management--and I would hope that extensive training goes on
from supervisors up to management.
Mr. Rossotti. I really want to stress that I know it is not
the subject of this hearing, but in the appropriations hearing
and in the other hearings, I want to stress that in terms of
short-term and the most immediate need, rectifying what I call
the training deficit or the training gap is absolutely
critical. I mean every employee that I have talked to virtually
identifies that as the No. 1 constraint they have in terms of
providing good service to taxpayers, and we are investing a
very significant amount of time and training in this fiscal
year.
Mr. Horn. My last question--and we will go into recess for
a few minutes, Mr. McIntosh will be back--the IRS Restructuring
Act of 1999 required the creation of an Internal Revenue
Service oversight board. Under that law, the President was
required to submit nominations within 6 months of enactment. It
has now been almost 10 months and the President has not yet
sent one name even for consideration by the Senate. I want to
read to you into the record a letter which went today to the
President from the Majority Leader of the House, Mr. Armey, the
distinguished Ph.D. economist, and also one who is vitally
interested in good management in the executive branch and works
very closely with our subcommittee.
He said,
Dear Mr. President: Last summer after extensive review of
the abusive practices of the IRS, this Congress passed, and you
signed, the Internal Revenue Service Restructuring and Reform
Act of 1999. This historic piece of legislation forces the IRS
to be more honest, open and fair to the American taxpayer. A
major part of that law was the creation of the IRS Oversight
Board for which you were required to submit nominations within
6 months of enactment. It has now been almost 10 months, and I
am deeply disappointed that you have yet to submit even one
name for consideration by the Senate. In passing and signing
this law, you joined us in not only reforming the IRS, but in
promising to vigilantly oversee its future actions. Your
failure to submit nominations for the oversight board breaks
that promise. Today, on the day when so many Americans are
struggling with the intrusive complicated Tax Code, I urge you
to meet your legal obligation to IRS oversight. Ignoring this
duty demonstrates to the American people that IRS abuses are
not a major concern for this administration, and American
taxpayers deserve better. Respectfully, Dick Armey, Member of
Congress, Majority Leader.
Now, do you have any idea, Commissioner, why the President
is not meeting his legal obligation to IRS oversight?
Mr. Rossotti. Well, the only information I have is that the
nominee--there has been a set of nominees that are going
through the vetting process which takes some time, but beyond
that, I really don't know. I have no idea.
Mr. Horn. So some have been submitted to the White House
from various sources?
Mr. Rossotti. I really think it is better to talk to the
White House. I really am not part of that process except very
indirectly, so I can't really comment.
Mr. Horn. Well, obviously the Secretary of the Treasury is
the one that should be submitting them, and I am sure that
either the letter will be sent to him by the White House, but
somebody ought to conform with the law, and I think that is
what this gets down to. I realize you aren't in it. That is
above your pay grade, as the saying goes.
Mr. Rossotti. That is correct.
Mr. Horn. But we thank you for coming here, and we thank
you for your excellent testimony, and as I have told you for
years, you are the guy that can get the job done. So thanks
very much.
Mr. Horn. Panel two can be seated now, and Mr. McIntosh
will preside in a few minutes. We are in recess until he
returns.
[Recess.]
Mr. McIntosh [presiding]. The subcommittee will come to
order.
I now call forward the second panel. Let the record reflect
that Chairman Horn asked each of the witnesses to take the
appropriate oath and they are duly sworn in.
Our first witness on the second panel is Mr. Nye Stevens,
who is the Director of the Federal Management and Workforce
Issues of the General Accounting Office. Mr. Stevens, as Mr.
Horn pointed out, your written testimony will appear in the
record. Feel free to share with us a summary of that testimony.
STATEMENTS OF NYE STEVENS, DIRECTOR, FEDERAL MANAGEMENT AND
WORKFORCE ISSUES, GENERAL ACCOUNTING OFFICE; DEIDRE A. LEE,
ACTING DEPUTY DIRECTOR FOR MANAGEMENT, OFFICE OF MANAGEMENT AND
BUDGET; AND JAMES R. WHITE, DIRECTOR, TAX POLICY AND
ADMINISTRATION ISSUES, GENERAL ACCOUNTING OFFICE
Mr. Stevens. I will be very brief in describing the work
that we have recently done on the Paperwork Reduction Act,
which required OMB to establish goals for the executive branch
to reduce the paperwork burden that it imposes on the American
public by 25 percent, from the approximately 7 billion hours
that it imposed in 1995.
The bottom line is that there has barely been any
reduction, less than one-half of 1 percent over that 3-year
period, and projections in OMB's latest Information Collection
Budget that are just released show that the burden, rather than
going down in the next 2 years, is actually going to be going
up, and up by hundreds of millions of hours.
There is no question that IRS, from whom you just heard,
accounts for the vast majority of this burden, more than 80
percent of it. And it was an increase in the IRS burden that
offset a 23 percent reduction among the other agencies of
government and resulted in the fact that the overall government
burden on the American people was kept about even for that 3-
year period. If it were not for a 7 percent increase in the IRS
burden, the rest of the government would have come close to
meeting that 25 percent goal for the past 3 years. IRS also
accounts for about 85 percent of the 468 million hours of
increased paperwork that is projected for the next 2 years.
It is the Office of Information and Regulatory Affairs at
OMB that is meant to monitor and control the paperwork load.
Our reviews of their actions have shown that in many ways they
have fallen short. For each of the past 3 years, for example,
they did not set agency goals for paperwork reduction until the
year was almost over, and it was far too late to serve as a
goal in the sense of affecting agency behavior during the year.
OMB also sees no necessary connection between the
governmentwide goal which is set in law and the goals of
individual agencies. So even though OMB can show you in writing
that it has a goal of reducing paperwork by 5 percent this
year, in fact the Information Collection Budget will show that
the individual goals add up to an increase, not to a decrease,
and of course that is led by IRS.
The second general issue you asked us to address was the
matter of expired OMB authorizations to collect data. The
Paperwork Reduction Act prohibits agencies from collecting
information from the public unless OMB has approved the data
collection and given it a control number so that the public
will know that it is authorized. OMB may not approve a
collection for more than 3 years at a time.
Now, our review of information that OMB provided to you,
Mr. Chairman, shows that there is a troubling disregard by the
agencies for this control mechanism. First of all, the current
information budget contains a 59-page listing of more than 800
violations of the act, including continuing collections whose
authorizations have expired, and collections that were never
authorized in the first place. The information that OMB
provided focused on the largest of these collections, those
that involved more than 500,000 burden-hours. Seventeen were
being carried out after OMB's approval had expired, and we
added to that another 11 that had continued for a period of
time, a limited period of time because they were reauthorized;
but they were operating without an authorization for some
period of time. These added up to more than 111 million hours
of unauthorized burden. And I would point out that this is a
real cost for the American people. Using an OMB figure of
$26.50 an hour of time that is devoted to tax paperwork, we
estimated that those 111 million hours cost the American public
more than $3 billion.
As disconcerting as these violations are, it is even more
troubling that OMB treats the expirations of authorized
collections as a reduction in burden. So if the authorization
for a collection has expired, when OMB totals up the burden at
the end of the fiscal year, OMB counts it as a reduction. Even
though in many cases the information continues to be collected,
and the public notices no difference.
I can use the Department of Agriculture as an example of
this, Mr. Chairman, because you are about to hear from them.
USDA can be seen as one of the success stories. It reduced its
reported burden by 59 million hours since the end of fiscal
year 1995 to a total of 72 million hours. However, this total
ignored five large data collections where the authorizations
had expired and they were not in effect at the end of the year,
even though the information was still being collected. This
totaled about 15 million hours. We found another 3 million
hours that were associated with 57 other collections in the
list of violations of a somewhat smaller scale. So the real
agriculture burden we calculate at about 90 million hours
instead of the 72 that are shown in OMB's current report.
OMB is certainly on record as taking the compliance problem
seriously, but it claims it does not have the power to do much
about it other than publish the violations as they have indeed
done in the list that we just referred to. We think that OMB
could do more than that, including bringing to bear the
influence of the budget examiners, the resource management
officers and even the Vice President who is charged under
Executive Order 12866 with a coordinative role over regulatory
review and policy. I would be glad to respond to any questions
you have.
Mr. McIntosh. Let me ask you to repeat that to make sure I
understood it fully. What was that that you said at the end of
your testimony?
Mr. Stevens. I said that OMB is not really powerless in its
ability to police violations of the act which are substantial,
that it can certainly use the budget powers of the agency, but
it could also--I believe our statement calls for using the
influence of the Vice President, who is charged under Executive
Order 12866 with a coordinative role over regulatory policy and
review.
Mr. McIntosh. Thank you, Mr. Stevens.
[The prepared statement of Mr. Stevens follows:]
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Mr. McIntosh. Our next witness on this panel is the Acting
Deputy Director for Management of the Office of Management and
Budget, Ms. Deidre Lee. She is also a full-time position of
administrator in the Office of Federal Procurement Policy
[OFPP]. I appreciate the difficulty of coming in as an acting
in that position, but thank you for coming and testifying
today, Ms. Lee. Again, your full testimony will be put in the
record and feel free to summarize and respond to anything Mr.
Stevens has said.
Ms. Lee. Thank you, Mr. McIntosh. Good afternoon. You
invited me here to discuss the paperwork reduction in fiscal
years 1999 and 2000. I am pleased to have the opportunity to
appear.
We have recently presented to you the Information
Collection Budget of the United States for Fiscal Year 1999,
and I know you are familiar with that rather thick document;
and there are also copies available on the table in the back,
and we will be discussing that today. This extensive report
provides a detailed accounting of agency paperwork activities,
accomplishments, and planned initiatives. However, we also
recognize that we need to continue working to minimize
paperwork burden to the public. We look forward to working with
the Congress, the agencies, and the public to build on these
successes and to address the challenges which are described in
this year's budget.
The enactment of the Paperwork Reduction Act of 1995 was an
important step in improving the way the Federal Government
functions. In providing a framework for managing information,
the Paperwork Reduction Act sets out a number of purposes that
include reducing information collection burdens imposed on the
public; increasing the productivity, efficiency, and
effectiveness of Federal programs; and balancing the practical
utility of information collection against the burden it
imposes.
Under the Paperwork Reduction Act, the agencies and the OMB
have specific roles intended to help achieve the purposes of
the act. The Paperwork Reduction Act requires the head of each
agency, supported by his or her Chief Information Officer, to
be responsible for the agency's information collection
activities, including the reduction of paperwork burden.
Through the development of the Information Collection Budget,
OIRA, Office of Information and Regulatory Affairs located in
OMB, oversees agency paperwork management. OIRA, through the
ICB process, reports on significant improvements in agency
information collection during the previous fiscal year,
identifies burden decreases or increases, and indicates areas
where further improvement is needed.
This year's Information Collection Budget highlights a
large number of paperwork accomplishments and improvements. The
ICB details these efforts and plans agency by agency. My
written testimony describes them in detail and gives some
specific examples; but in the interest of time here, I would
like to just summarize the initiatives.
Agencies are reducing information collection burden by
revising existing regulations to eliminate unnecessary
requirements. And I think we saw some examples there from the
IRS. They are also raising thresholds to reduce the number of
reports; making their forms simpler to read and easier to fill
out and thus improving programs for the general public's
application process; cutting frequency of periodic reporting
requirements, and trying to reduce duplicative information from
one report to the next, one of the other concerns expressed by
a subcommittee member; putting in place electronic systems that
can speed the exchange of information between the government
and the public and allow respondents to use their own
information technology to ease reporting burdens. They are
consolidating information collections both to simplify the
collections and to avoid collecting similar information several
times from the same people, and working together across
agencies to share information so that people need only respond
to a single collection from an agency, rather than multiple
collections from multiple agencies.
The Information Collection Budget is also the management
oversight mechanism through which agency CIOs and OIRA
establish agency paperwork reduction targets. They establish
these for the coming year; and they take into account the
agency's anticipated program and statutory initiatives. And
again, this was discussed in detail in the IRS presentation.
The targets for fiscal year 1999 and 2000 do not meet the
cumulative government 5 percent reduction goal. The aggregate
goal for 1999 is plus 2.6 percent, and for fiscal year 2000 it
is plus 2.3 percent. However, some agencies have done extremely
well. For example, FEMA, Veterans Affairs, Federal Energy
Regulatory Commission, Energy, and Education, all have planned
reductions for 1999 exceeding 10 percent; but this is offset by
increases in other agencies, specifically, the IRS, as we
discussed earlier, which accounts for 80 percent of the burden,
and they have the new tax measures. Also, HHS has several
important health programs that have upped the burden and
Commerce has patents and census, which will increase the
burden. I know you are going to hear from Agriculture and some
of the other activities they have today.
So while the Paperwork Reduction Act acknowledges Federal
agencies' legitimate need for information to perform their
missions, it also requires agencies to obtain OMB approval of
this information collection. In the 1999 Information Collection
Budget, we list agency violations. These occur primarily when
agencies continue to use collections for which OMB approval has
expired. And the lists are long. They are too long, and they
indicate a substantial problem that we must address and
resolve; and we are taking agency violations very seriously and
will be working with the agencies to improve compliance with
the act.
Information is vital to the government and provides its
citizens with necessary services, and although the government
has always depended on accurate and timely information, in
today's complex, rapid-paced, globalized world, the ability to
collect information and use the information to benefit citizens
and improve service delivery is more critical than ever before.
The 1999 ICB, the GAO report, the GAO testimony, and
communications with your committee and your staff have pointed
out some of the positive steps that have been taken and also
some steps that we need to be taking in order to reduce burden
and ensure agency reporting accuracy. We look forward to
working a partnership among OMB, the agencies, the
Congress, and the public to achieve this important goal.
I would be happy to take any questions.
Mr. McIntosh. Thank you. We will have questions for you
along with the rest of the panel.
[The prepared statement of Ms. Lee follows:]
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Mr. McIntosh. Our final panelist will be Mr. James White,
who is the Director of Tax Policy and Administration Issues at
the General Accounting Office.
Mr. White, again, your full testimony will be put in the
record. Feel free to summarize it for us today.
Mr. White. Mr. Chairman, thank you. I am pleased to be here
today to discuss management challenges facing the IRS. As you
know, over recent years IRS has faced criticism and increased
congressional scrutiny over its inability to serve taxpayers
and replace its antiquated information systems. Several key IRS
program areas such as accounts receivable have been on our
high-risk list of government programs susceptible to waste,
fraud, abuse, and mismanagement. The increased congressional
scrutiny culminated in the passage of the IRS Restructuring and
Reform Act of 1998.
In response, the Commissioner is leading a massive
restructuring of the whole agency that focuses on business and
information systems modernization. My statement makes three
points, summarized in bullets beginning on page two, that
illustrate the management challenges posed by this kind of
modernization effort.
First, one challenge for successful business modernization,
that is, modernization that results in significant improvements
in the service provided to taxpayers, will be developing a
balanced performance measurement system and then aligning those
performance measures from the top of the organization down to
the frontline staff. IRS's history shows the dangers of
imbalanced performance measures that rely too heavily on
enforcement statistics. IRS is seeking to develop more
appropriate measures of business results, customer
satisfaction, and employee satisfaction.
An example of a business results measure is voluntary
compliance, but developing such a measure will be a challenge.
At this time only limited data exists on voluntary compliance.
Developing a reliable measure of voluntary compliance will
require addressing concerns about the burden doing so places on
some taxpayers. The new performance measures must also be
aligned throughout IRS. This will require new employee
evaluation systems and training, including orientation training
for all 100,000 employees and managers, leadership courses for
managers and executives, and technical training.
Second, successful systems modernization is essential to
successful business modernization. IRS's systems modernization
is essential because it is intended to implement IRS's
modernized business practices. For example, modern systems
would provide employees and taxpayers with current information
about taxpayer accounts. IRS has developed a blueprint for
systems modernization, but did so before the current
restructuring initiative. IRS intends to validate the blueprint
in light of restructuring, working as a partner, in its words,
with a systems integration contractor. However, we have said in
the past that using contractors for systems development is no
panacea. Succeeding at systems modernization will be a
challenge because it depends on whether IRS can effectively
partner with, and manage, its contractors.
Third, the sheer magnitude of undertaking both business
modernization and systems modernization will strain IRS's
management and staff. Such an ambitious undertaking, along with
the need to stay in business, makes the restructuring
initiative a high-risk venture and one that will take years to
implement. While undertaking both is ambitious and risky, there
is no alternative. As I said above, successful systems
modernization is essential to business modernization.
In conclusion, IRS has equipped itself with a new mission
statement that focuses on customer service. Business
modernization holds promise for achieving this goal of
improving service to taxpayers, but successful modernization
will need to be sustained beyond the term of the current
commissioner. That means dealing with challenges such as those
that I have discussed; developing a balanced set of performance
measures; aligning the organizational measures with the
employee evaluation system; training 100,000 staff; validating
the information systems modernization blueprint in light of
restructuring; and effectively managing information systems
contractors.
Mr. Chairman, that concludes my statement. I would be happy
to answer any questions.
Mr. McIntosh. Thank you, Mr. White.
[The prepared statement of Mr. White follows:]
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Mr. McIntosh. Let me ask unanimous consent to keep the
record open for 10 days, because I think Mr. Horn, who is not
able to be with us for the conclusion, may have some specific
questions for you. But if any of the other members of the two
committees do, we will get those to you in writing as well as
the other panels.
Let me ask very quickly, Mr. Stevens, you estimated, I
think, that for 28 of the 872 violations of law on failing to
get the paperwork approved before it was required of American
citizens, that it cost about $3 billion.
Were you able to get information from OMB on the cost of
the others, either in the man-hours that are associated with
them, or otherwise make an estimate of the costs for all of
those violations?
Mr. Stevens. The Information Collection Budget does not
include the hours that are associated with each of the
violations, so it is not readily apparent from their
publication. We did go back to OMB and ask for the hours of
burden that were associated with the Department of
Agriculture's information collection violations, and they
provided that readily. We made some extrapolations from that.
In general, the ones that the 28 were drawn from were the
largest collections of government. If you make some assumptions
that the Department of Agriculture is similar to other
agencies, and that the volume that we had there would be
similar across government, we figure there are about 50,000
hours for each of those collections. It would add about another
$1 billion if we extrapolated that to the rest of the
government. It was something of a stretch--it wasn't easy to
do--but it would make it about $4 billion instead of $3
billion.
Mr. McIntosh. Additional to the--so three to four, not an
additional four on top of the three?
Mr. Stevens. Yes, because the additional ones were from
smaller collections than the ones we looked at first.
Mr. McIntosh. So we are looking at $4 billion of additional
costs.
Mr. Stevens. That would be a reasonable assumption, based
on our calculations.
Mr. McIntosh. Let me ask you, Ms. Lee, to respond to some
of the comments that Mr. Stevens had made. Actually, just to
start it off, has Vice President Gore been involved in the
paperwork reduction activities of OMB in a supervisory role?
Ms. Lee. In a day-to-day role, no.
Mr. McIntosh. But in terms of reviewing the final outcomes
and the general supervision?
Ms. Lee. To the best of my knowledge he is not familiar
with this level of detail.
Mr. McIntosh. OK. So that--well, we can come back to the
recommendation.
How do you respond and how does OMB respond to the
criticism that they counted the hours for the illegal forms as
reductions when, in fact, the forms were continuing to be used
by the agencies and $4 billion of cost was imposed?
Ms. Lee. With great concern. We don't want that to happen.
The Information Collection Budget is a good planning tool, and
what we have realized by collecting this rather detailed report
is that it has made agencies more aware of their commitments
and more aware of the process; but it is not perfect, and we
recognize we have a long way to go.
What we do want to do is accomplish the goals and----
Mr. McIntosh. So does OMB have any plan to change its own
operations so that those aren't double-counted? I mean it
appears as if they reduce more paperwork than actually is
reduced, if the form is no longer valid and OMB says that is
not a valid form any more, so we are going to count it as a
savings, but the agencies continue to use it.
Ms. Lee. We did make corrections in the Information
Collection Budget. We tried to correct for the collections that
had expired. And I know this is a discussion of programs and
adjustments, but there is corrected information in the budget.
We have tried to capture those violations, and we are looking
for ways in the future to prevent that from happening and then
to act quickly should it happen and consider all of these
recommendations.
Mr. McIntosh. Good. Because I think it would be important
to have the bottom line number be accurate there.
How about in response to what Mr. Stevens said was perhaps
even more troubling, the failure to be proactive in getting the
agencies to implement the paperwork reduction initiatives?
Ms. Lee. Certainly we have desk officers who are each
involved with agencies, and they do review the activities on a
regular basis. We have even discussed how we can improve that
and are looking at some of the recommendations that are before
us here to see which ones of those are readily implementable.
Mr. McIntosh. Well, let's look at some of the specifics
that were in the written testimony. Do you think it is a good
idea that OIRA would, in advance of the expiration, notify the
agency it is about to expire and seek their action to correct
that?
Ms. Lee. They currently send out on a quarterly basis, a
list of regulations that are about to expire, and I think what
we are talking about here is a little bit more aggressive
followup.
Mr. McIntosh. OK. And then some of the others, when they
find that one has expired, will they--do they list publicly,
announce the agency is out of compliance, notify the budget
side of OMB, notify the Vice President and notify the Federal
Register? Are those four good suggestions?
Ms. Lee. Those are suggestions that we are looking at: how
do we put these into the system? How and when and at what
phase?
Mr. McIntosh. Let me ask you today, is that something that
will be done?
Ms. Lee. I expect it will be.
Mr. McIntosh. Because they seem like very good common sense
suggestions to me.
How about the comment that perhaps OIRA needs more
employees, that there has been a reduction in the work force
not only under President Clinton's watch but prior to that, and
perhaps we actually need to give you some additional staffing
and resources to do all of these things?
Ms. Lee. I was not at OIRA previously with the higher head
count; and I know that the office is relatively small--it is
about 40 people--and they do turn out a tremendous amount of
regulatory review, et cetera and I know there is an ongoing
discussion with other committees as to what is the appropriate
staffing.
Mr. McIntosh. Well, just for our record today, is that a
good suggestion for GAO that Congress should look at?
Ms. Lee. I am in kind of the same boat as Mr. Rossotti. I
don't specifically have an individual comment on that. I think
we need to look at the agency as a whole and see if we can do
some of this reduction. We can look at other ways to simplify
our processes and then align the appropriate personnel to that
approach.
Mr. McIntosh. The other thing that this committee has
recommended, and when the agency hasn't wanted to increase
personnel, is to fence off some of the budget and say, unless
these things get done, you can't spend it in other places.
So let me ask you to go back--and we are holding the record
open for 10 days--and see if there is an official response from
OMB on that question of whether we should increase the
staffing.
Ms. Lee. I would be happy to.
[The information referred to follows:]
The President's FY 2000 Budget request for the Office of
Management and Budget maintains the OIRA staffing level at the
FY 1999 level. OMB is committed to maintaining budgetary
restraint, even though recent Congressional action has created
numerous additional responsibilities and significantly added to
the organization's workload.
Mr. McIntosh. Thank you.
The final question--and then I am going to go and vote and
Mr. Ryan will come and continue this part of the hearing--what
about this idea of encouraging the Vice President to take a
more active day-to-day or at least supervisory role under his
authority under the Executive order? I will share with you, I
did work for a former Vice President who was very active in
that, and so it seems to me like a good idea. I think you can
have different views coming from the Vice President's office,
but the institutional structure struck me as a good one where
you had someone close to the President paying attention to
these questions on paperwork and regulation.
Ms. Lee. Mr. McIntosh, that is certainly a possibility, but
I think as you pointed out at this hearing, we have some more
staff work to do and I think we need to do some of that and
ensure that we have done the best we can before we present this
issue to the Vice President for his action.
Mr. McIntosh. OK. And certainly anybody who is as busy as
the Vice President--and there are many things on his plate--we
need to make sure he is well staffed in doing that, and OIRA
did that for us when we were in the Office of the Vice
President.
Let me ask one other quick question: should Congress
consider sanctions for even the agency or policy officials in
an agency who, once they had gotten the notice that the
paperwork is about to expire, knowingly violate the act and let
it expire and then continue to collect those paperwork
requirements from the public, so that there is some teeth
behind the requirement there?
Ms. Lee. The sanction activity, again I am going to leave
that to the Congress for their decision. I think as the
administrative side of the house, we need to do a better job of
aggressively following up on those activities and then present
you with accurate results so you can properly make that
decision.
Mr. McIntosh. Mr. Stevens, let me ask you that question.
Would GAO feel that that would be one way to strengthen the
provisions of the act?
Mr. Stevens. Well, it is certainly true there is no
consequence of a violation now. You just get your collection
published in a book; your name is not attached to it. There are
really no adverse consequences at all. And I would think it
would be reasonable to have that be a performance element in
the SES contract of the Chief Information Officer, for example.
But I also think that it is too early to give up on OIRA and
its role and its policing, its ability to use the pressures of
the budget and the overall controls they have over agencies. We
do have a mechanism in place; I think we should try to make
that work before we impose a new one on top of it.
Mr. McIntosh. Or maybe strengthen it that way and provide
the incentive at the agency to cooperate with OIRA.
Let me now have the committee stand in recess. Mr. Ryan
told me he would be coming right back after the vote, so he is,
as the vice chairman, will continue. He may have some questions
for you all on this panel. If not, he will move on to the next
panel.
Thank you very much. I do appreciate you coming today.
[Recess.]
Mr. Ryan [presiding]. We will reconvene the hearing.
I would like to start by asking Mr. Stevens a couple of
questions.
Mr. Stevens, can you tell me what OMB's or--excuse me, what
GAO's recommendations are for improvements in OMB's management
of the paperwork burden imposed on the public?
Mr. Stevens. One perhaps, Mr. Ryan, would be to take a
larger, more systemic view of the problem of information
collection. Typically right now, within the Office of
Information and Regulatory Affairs, the individual desk
officers are inundated with individual information collections.
One of them we talked to said she had 20 or 30 of them on her
desk at the time we spoke to her. And it is not hard to
understand that they deal with these serially, one by one, and
that it is hard to take an overview of the impact of that on
the clientele of the agency, on the government, on the overall
burden. It seems to us that somehow, taking a larger view of
that problem, dealing with these in larger aggregates could be
a step forward.
Mr. McIntosh also recounted some of the specifics in our
statement, but those have to do with dealing with individual
violations of the act, and we do make those suggestions there.
Part of the problem is that it is just not very prominent, no
real penalty or adverse consequences flow from violating the
act, and some higher level of attention to that could
presumably be effective.
Mr. Ryan. If you had to rewrite the system, how would you
bring a higher level of attention to that?
Mr. Stevens. One of the basic reasons the Office of
Information and Regulatory Affairs is in the Office of
Management and Budget is because that is where the clout
resides. The perception and the argument is that OMB can bring
pressure to bear on agencies through its control of the budget
process, through its control of legislative clearance, and to
our knowledge, that is not used very systematically within OMB.
We think that closer relationships between OIRA and those
budget examiners can make a difference, particularly for
agencies that are endemically in violation.
Mr. Ryan. Have you looked at OIRA in prior administrations
and witnessed that OIRA had had a strengthened role, say, in
past administrations in the 1980's versus the role OIRA plays
now? Does OIRA seem to be playing second fiddle versus its role
in prior administrations? Are there models that we have
employed within OMB that have strengthened OIRA that you think
we ought to go back and take a look at, or what are some
structural things we should do with OIRA to elevate their
importance, their involvement within OMB? Have you taken a look
at that in the past?
Mr. Stevens. Well, we have looked at OIRA since it was
first put together, and we have done many studies over the
years. It used to be a larger organization than it is now in
terms of staff. And we have not recommended directly, but
pointed out in our testimonies the effects of the attrition
that they have suffered there.
It is also true that OIRA has been more dictatorial with
regard to agencies in the past. It controlled more. And they
took some negative press--they got some negative reaction to
that. I think Congress at one point has had the point of view
that OIRA should not be so active as it has been before.
So they have a balancing role. I think it is not as strong
as it used to be, but perhaps----
Mr. Ryan. Was that more style or structure? I mean the old
OIRA was one that was just how you described. Was that because
of the style of the leadership within OIRA, or was that a
difference in structure within the agency; and was the
attrition that we have seen within OMB with respect to OIRA
much more significant than the rest of the attrition within the
agency? Was OIRA singled out, do you believe, in the last 6
years over other cutbacks within the agency?
Mr. Stevens. Well, actually, since OIRA is a statutory-
based agency, I think it was protected somewhat from the
restructuring that the rest of the management functions in OMB
have gone through. So I don't think it has been differentially
affected, but it certainly is smaller. It is certainly our
perception there that people are not sitting around with spare
time on their hands. They are extremely busy, they work very
hard, and we respect that.
Mr. Ryan. Well, thank you, Mr. Stevens.
Ms. Lee, I would like to ask you a couple of questions.
Given that the IRS accounts for nearly 80 percent of the total
governmentwide paperwork burden on the American public, given
that fact, what change did OMB make in IRS's proposed
Information Collection Budget?
Ms. Lee. Mr. Ryan, I don't have the specifics on IRS, but I
would be glad to get them for you for the record.
Mr. Ryan. That would be great. If you would do that, I
would appreciate it.
It is my understanding the IRS did not identify any
specific paperwork reduction accomplishments in fiscal year
2000. Can you comment on that? Can you comment on why OMB
accepted that?
Ms. Lee. Well, I think Mr. Rossotti discussed it in detail
and committed to look at whether they make additional
reductions and try to balance the burden and the benefit for
the changes in the Tax Code.
Mr. Ryan. OK. In your role, though, wouldn't it--what I am
trying to get at is, we heard Mr. Rossotti's testimony with
respect to paperwork reduction. OMB--it is OMB's role to find
other recommendations, maybe to check on the work. Why hadn't
OMB come up with a separate recommendation for the IRS, or is
there a history there that you can shed some light on to this,
why there was no recommendation?
Ms. Lee. I don't believe there is a specific history, but I
would be glad to get the details for you.
[The information referred to follows:]
[GRAPHIC] [TIFF OMITTED] T8810.089
Mr. Ryan. OK. One thing I did want to quickly ask you,
since the HHS is expected to levy the third largest paperwork
burden on the American public, why did OMB accept the
Department of Health and Human Services, the act of not
identifying any specific paperwork reduction accomplishments in
1999?
Ms. Lee. We are working with HHS. They have some increases.
In many cases, that is because they have some key legislative
initiatives: they have the Prescription Drug Marketing Act;
they have the Health Insurance Portability and Accountability
Act; they have the Personal Responsibility and Work Opportunity
Reconciliation Act; and the Medicare reform initiatives. So
those added burden, and now we are trying to again balance that
burden and responsibility and find out what reductions can be
made to offset the increased burden.
Mr. Ryan. So we shouldn't pass so many laws, you are
saying.
Ms. Lee. I will leave that up to you to decide.
Mr. Ryan. Ms. Lee, I have a question from Chairman Horn.
Chairman Horn asked Commissioner Rossotti about the President's
failure to submit nominations for the IRS oversight board. Mr.
Rossotti did not know why no names had been submitted. Do you?
Ms. Lee. No, sir, I don't; but I, again, would be glad to
look into that and tell you if we have any knowledge.
Mr. Ryan. If you could, and if you could give that to
Chairman Horn, I sure would appreciate that.
Ms. Lee. I will do that.
[The information referred to follows:]
The President is firmly committed to making the strongest
possible appointments to the Internal Revenue Service Oversight
Board. The individuals who serve on this Board will have access
to sensitive tax information and play an important role with
respect to the Internal Revenue Service. The background review,
which includes a review of financial information and tax
history, is thorough and takes time. The Administration is
moving as expeditiously as possible and intends to make these
appointments soon.
Mr. Ryan. I would like to ask Mr. White another question
from Chairman Horn. Could you touch on why the IRS has failed
in its efforts in the past, and if you feel this effort is
proceeding in a way that is different?
Mr. White. In terms of its efforts to modernize?
Mr. Ryan. Yes, I am sorry, in terms of modernization.
Mr. White. I think that what IRS is doing right now is a
much larger effort than it has attempted in the past. One of
the points that we made repeatedly in our past work is that,
systems modernization, which is an area in which IRS has had a
number of problems over the past years and wasted a lot of
money, needs to be done in an integrated fashion with business
process modernization; and the current commissioner is
operating that way. They are in a planning phase right now
where they are trying to do both. It is ambitious and it
increases the risks, but I am not sure that there is an
alternative to it.
Mr. Ryan. You do think it does increase the risk for
failure?
Mr. White. It is a huge undertaking; and therefore, it is
risky. But I don't think there is an alternative. If you are
going to change IRS and the way they do business, the way they
operate with the American taxpayer, you have to modernize both
their business processes and their information systems.
Mr. Ryan. OK. Well, thank you very much. I appreciate the
panel attending.
We will now call our next panel. We will begin with Sydney
Hoff Hay from Phoenix, AZ; Kay Whitehead from Muncie, IN;
William Lindsay, who is the president of the Benefit Management
and Design, Inc. of Denver, CO; and John Nicholson, owner of
Company Flowers in Arlington, VA.
Ms. Hoff Hay, we would love to hear from you first.
STATEMENTS OF SYDNEY HOFF HAY, PHOENIX, AZ; KAYE WHITEHEAD,
FARMER, MUNCIE, IN; WILLIAM N. LINDSAY, PRESIDENT, BENEFIT
MANAGEMENT & DESIGN, INC., DENVER, CO; JOHN NICHOLSON, OWNER,
COMPANY FLOWERS, ARLINGTON, VA
Ms. Hoff Hay. Mr. Chairman, thank you for asking me to
testify before this subcommittee. I am here because I am a
patriotic American. I don't really want to be here, but when a
staff Member of the U.S. Congress calls and asks you to appear
in these august halls and participate in this process, you feel
it is your duty as an American to respond. So I am here to tell
you my story.
May I first express to you that I am not a tax protester,
not by any stretch of the imagination. This is not even about
paying taxes. Now, I have been a tax activist at the State
level. I have a history of that. I organized an initiative at
the State level to require a two-thirds majority for tax
increases in Arizona. I worked on that with Congressman John
Shadegg. It was successful. I have other of those types of
successes to my credit. But this is not even about that. This
is about the fact that I am a taxpayer.
I am self-employed. Now, I have two assets which enable me
to make a living as a self-employed consultant. No. 1 is my
knowledge and my abilities. No. 2 is time. The IRS has zapped a
whole lot of my time over the recent past. There is a third
thing: it is my creative energies and my enthusiasm for what I
do, and that may be an even greater loss to the IRS.
Now, this past weekend, upon returning home from a grueling
business trip, a very difficult trip indeed, the latest
communication appeared in our mailbox from the Internal Revenue
Service. Now, when you see that envelope, you immediately
panic, your blood pressure goes up. You go, oh, my gosh, what
now, you have this heavy sigh, and then the ``what now'' was an
unexpected bill from the IRS. It was a bill when I opened it
for 16 cents.
Now, can you imagine that? They sent this bill with a 33
cent stamp at a cost of how much time and computer time and
staff time, and I don't even know how you write a 16 cent
check; and I have to respond and take my time and my 33 cent
stamp in order to comply. This is just another invasion of my
valuable time. But more than that, what is so annoying is this
invasion of my precious few moments in my home with my family
to deal with this after a long and grueling business trip.
Now, how did this come to happen? Well, a few weeks ago I
received a bill, an unexpected bill from the IRS for about $54
which they said I owed from an underpayment of my daughter's
1996 taxes when she was 18 years old and still living at home.
Now, when you get a bill for $54 from the IRS, you do what any
normal person would do. You pay it, because you don't have time
to take out of your life to even look into why you are getting
the $54 bill. I still don't know why, but I paid it. Now, you
know, it would have cost me hundreds of dollars in time, let
alone my enthusiasm and energies in order to even look into it,
so I just paid it. Now, that latest example, the $54 and the 16
cents may seem very trivial. But it came to me at a time that
came after a very grueling experience that I had over the last
year with the IRS. Here is what happened.
After an examination of my husband's and my 1996 tax
return, which took about 4 months, an amount we owed as a
result was agreed upon. It was settled upon. A large portion of
that amount was agreed that it was deductible. It is just that
I paid those expenses in December 1996, and the IRS said they
really belonged deducted in 1997, so they were deductible; but
what I needed to do was write a very large check to the IRS and
then get my accountant to refile 1997 and a large portion of
that check would come back to me. So December 3 of that last
year I wrote a large check to the IRS for the precise amount.
We hand-delivered it, date-stamped it in at the IRS Phoenix
office. Then our accountant redid the 1997 return, as had been
suggested; and it requested a refund.
Now, a month or so later we received a bill from the IRS.
It was for the amount of the check that we had written in
December. Now, it said in there, if you have already paid your
tax, you can ignore this notice. Well, we had already paid it,
date-stamped it in. We had the proof. We ignored the notice. A
couple of weeks later comes a certified letter from the IRS
with the words, we may seize your paycheck, bank account, auto,
other property. We can file a notice of Federal tax lien, plus
there was $200 in penalty and interest for a check we had
written. We proved it. We showed them the date stamp. Uh-uh.
The burden was on us. We had to prove it to them by going to
our bank, getting a copy of both sides of the check, and then,
so that they could find out where they had applied our money,
to whose account. More time lost, more creative energy spent.
Eventually they were satisfied, I think up to this point, I
understand, but then came the next blow. That certified letter,
another one, came in the mail, denying the refund for 1997.
So now I realize I am just about out of time, but I would
like to go into--I had one employee up until about a month ago.
I had one employee. I don't have any employees right now, so I
hope that you will give me an opportunity to talk a little bit
about the payroll tax burden for one employee. Thank you.
Mr. McIntosh. Thank you, Ms. Hoff Hay. Certainly in the
questioning I will make sure that we get that into the record.
[The prepared statement of Ms. Hoff Hay follows:]
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Mr. McIntosh. Our second witness for this panel is Ms. Kaye
Whitehead. Ms. Whitehead, who is familiar to this committee,
she has testified before this committee before in a field
hearing and here in Washington. I appreciate your coming from
Indiana. It is a pleasure to have you here once again. Your
entire testimony will be submitted for the record. Feel free to
summarize it today before us.
Ms. Whitehead. Thank you. I am a farmer from Delaware
County, IN, and on our third-generation family farm we grow
corn, soybeans, wheat, hay, and hogs. I would like to thank the
subcommittee for this opportunity, but let me say that I am
very concerned that our family will have the opportunity to be
a fourth-generation farm.
There is no question that American agriculture will enter
the next millennium as the world's leader in food production,
but will we occupy this same position in another 10 years? If
we don't want American agriculture to slip--and I really don't
think that is the intent--we need to change thinking in
government. We have got to quit tying farmers in knots with
ill-conceived, costly regulation. We have got to stop imposing
sanctions on U.S. agricultural trade. We can't give developing
nations a pass on restrictions that would be imposed by a
global climate treaty.
I bring all of this to your attention in order that you may
better understand the frustration of producers out there in
rural America as we attempt to abide by the law, but it keeps
changing and growing before the ink is dry on the paper.
Between EPA and IDEM, which is Indiana's version of EPA--and
every State has one--agriculture is being driven from this
country at an alarming pace. Is this the true intent of
Congress and this administration?
Just as an example, Indiana has had, since 1971, statutes
for confined-feeding operations. In the 1998 inspections
completed by IDEM, still utilizing that old guideline process
of 1991, the results show that only 2.4 percent of the
inspections conducted revealed significant and/or repeated
problems. These results prove that Indiana producers are doing
a very good job of protection of water resource and, thus,
public health. In Indiana we have a zero-discharge requirement.
It is a strong performance standard, but it is working. But
recent actions show me that agencies and government are more
worried about developing regulatory procedures and paperwork
than accomplishing results.
On March 9, 1999, EPA and USDA presented their unified
national strategy for animal feeding operations. I was present
at the meeting in March 1999 in which an official from EPA
presented this document to an IDEM rulemaking meeting. This
official stated that this program was 95 percent voluntary and
only 5 percent mandatory. However, after listening to what he
actually said, the fact is, if a producer does not develop a
CNMP, which is a comprehensive nutrient management plan, and
obtain an NPDES, non point discharge elimination system, which
is a permit to discharge, but agriculture would not be allowed
to do so, the storm water exemption currently provided for in
the Clean Water Act would not be honored.
Indiana producers, as do producers in many other States,
currently must provide by-law documentation to obtain an
approval before they can build a confined-feeding facility.
Part of that documentation is a manure management plan, which
is an MMP. The question was specifically asked by this
rulemaking meeting of that official of whether the current
approval process that producers must go through in Indiana, and
the current MMPs that we must provide would meet EPA's needs.
The answer was an emphatic no. So producers will now be
required to complete another level of bureaucratic paperwork,
and this will not only be applied to new facilities, but
existing ones as well. Existing operations that already have
approvals will now have to meet the new improved government
regulations at two levels.
Then, to add more fuel to the fire, I as a producer cannot
provide my own CNMP. The EPA/USDA document specifically states
that it must be completed by a public official or a certified
private party, another cost that makes no sense. I will be the
user, I will implement the plan, and yet I will have no
ownership of that plan; and it will cost me to obtain this
plan, which is probably a standard prescribed document that
will not consider any of the assets of my current practices on
our farm. My current manure management plan was developed by me
and is flexible to allow our farm to incorporate new technology
into our management procedure. The new plans are very
prescriptive and imprisons our management into today's
technology. It is an enforceable, immovable plan.
USDA will require me to do additional recordkeeping,
records to indicate the quantity of manure produced, how the
manure is utilized, including where, when, and so forth of the
amount supplied. We have no way to pass this cost along.
Farmers are price takers, not price makers. Although not a
solution to the additional cost of this requirement, the first
things that farmers are going to be forced to do is to increase
in size, and that is to spread the cost out over more units. I
am not opposed to recordkeeping. I think records make good
sense. We do that on our farm. It is part of good business
practice. But mandates by the government to regulate management
is unacceptable.
In the essence of time, I am going to come to a conclusion
here. There is just one thing I want to know from this
committee and from Congress, and its administration. As a
farmer, I want to know--I would like an answer as to the intent
and the direction of this administration. If everyone's intent
on providing more jobs in the regulatory arena by continuing to
create more costly regulatory burdens for agriculture, I need
to know that. My family needs to know that. So that we can get
out of this business while there is still some equity left in
our farm, and before the fourth generation becomes too
involved. Perhaps we could all get jobs in the regulatory
arena. It does seem that is quickly becoming the future of this
country. Thank you.
Mr. McIntosh. Thank you, Ms. Whitehead. Let me say it will
be the intention of this committee to make sure we hold back
the regulators so that you all can continue farming. The same
thing for small businesses such as Ms. Hay's. We are up against
a large regulatory entity here in Washington. EPA is only one
of many, but we are doing the best here in Congress to hold
them in check.
[The prepared statement of Ms. Whitehead follows:]
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Mr. McIntosh. Let me now turn to our third witness, Mr.
William Lindsay, who is the president of Benefit Management and
Design, Inc. of Denver, CO. Mr. Lindsay.
Mr. Lindsay. Thank you, Mr. Chairman and members of the
Subcommittee on National Economic Growth, Natural Resources,
and Regulatory Affairs and the Government Management,
Information, and Technology Subcommittee. Thank you for
allowing me to appear before you.
My firm is an insurance broker and an employee benefit
consultant. I am also a board member of the National Small
Business Association, the Nation's oldest small business
advocacy organization.
Foremost I want to thank Representative McIntosh and
Representative Horn as well as others for their leadership and
understanding of the serious dilemma that paperwork represents
for America's 23.3 million-plus small businesses. I applaud you
and support you in this effort to bring sanity to the paperwork
requirements we face.
By their very nature, unnecessary Federal regulation and
paperwork burden discriminates against small businesses.
Without large staffs of accountants, benefits coordinators,
attorneys, personnel administrators, et cetera, small
businesses are often at a loss to implement or even keep up
with the overwhelming paperwork demands of the Federal
Government.
Big corporations have already built these staffs into their
operations and can absorb new requirements that could be very
costly and expensive for a small business owner. If you ask any
small business owner anywhere their opinion of their required
paperwork, the responses overwhelmingly will indicate that
there's redundancy and excessiveness in the filing process;
duplication is also a serious concern.
Agencies must seek ways to eliminate the duplication of
paperwork. We have two national public policy issues that are
very important to this Congress; and that is, first, to provide
more insured workers in the work force, and second of all, to
increase retirement savings among America's workers.
My experience with paperwork dealing with pensions and
health care is, as you might expect, extensive. And I will
share with you a couple of personal examples of how Federal
paperwork impedes these two national priorities.
At the top of my list is the unnecessary paperwork and
burdensome requirements critical to health insurance
requirements. In small businesses, virtually every health plan
requires some degree of employee contribution toward premium
costs. The law allows employers to establish so-called flexible
benefit plan or section 125 plan so that employees can make
their contribution on a pretax basis.
This tax saving feature reduces the net cost to the
employee and enables the employer to increase employee
enrollment as a result. It's an obvious positive, on both
sides. In my experience, virtually all small businesses
structure their plans to operate on this basis. There's no
reason not to.
The IRS requires that employers have a plan document and a
summary plan description, along with filing IRS Form 5500 at
year end in order for such premium payments to qualify on a
tax-preferred status. Failure to file form 5500 can result in a
penalty of up to $1,000 a day, without a limit. The form 5500
was designed for pension tax reporting. It is over 6 pages long
with 10 schedules and, according to the IRS, takes 11 hours to
complete. I don't think I even have to comment on how
shortsighted their time estimates are.
Yet the form is not intended for this purpose, and the IRS
does virtually nothing with the forms that are filed. As a
result, this may be the single greatest abuse by small
businesses in America. They simply don't file the form, but by
so doing, expose themselves to significant penalties by the
IRS.
Another example is the very complicated area of IRS Notice
9852. And this is a brand new requirement recently published by
the IRS. It requires that all 401(k) plans and other forms of
retirement plans with employee contributions provide employees
with an annual notice of their rights under the plan. This
notice duplicates virtually every point in the summary plan
description that the Department of Labor requires plan trustees
to provide eligible participants.
Employers who fail to provide this annual notification
stand the risk of being fined and possibly having their plan
disqualified. If the summary plan description is a valid
summary of employee rights, then I would ask: Why is another
notice, which is completely duplicative, required to repeat
what employees have already been given?
This poses a real threat for small businesses attempting to
establish retirement plans. It is more work and also lays a
trap to catch them if they fail to provide this annual notice.
As Congress and the administration work toward increasing the
abysmal savings rate in this country and making it easier for
small businesses to provide retirement plans to their
employees, doesn't this paperwork requirement run completely
counter to that?
I would suggest that IRS Notice 9852, only adds another
layer of ``gotcha'' in the process and serves as a barrier and
a disincentive for small business owners. There are two very
important pieces of legislation that the House passed earlier
this year: H.R. 439, the Paperwork Elimination Act of 1999, and
H.R. 391, the Paperwork Reduction Amendments, sponsored by
Chairman McIntosh, that would be significant in our efforts to
improve compliance and reduce the requirements that are
fostered on small businesses.
Another critical step is to increase the dialog among the
agencies, to get them to be more understanding and more
responsive to the concerns of small businesses. And if we have
time during the questions, Mr. Chairman, I have an idea in that
area. And the message I finally want to leave with you is that
paperwork burdens are excessive, and they are dragging our
small businesses down.
It is imperative that the Federal Government reduces in a
tangible fashion the paperwork that requires of America's 23.3
million small businesses--legislation and agency initiatives
are good starts, but a real, credible, governmentwide drive to
make this process more workable is needed and needed now. Thank
you for your time.
[The prepared statement of Mr. Lindsay follows:]
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Mr. McIntosh. Thank you very much, Mr. Lindsay, and
certainly I couldn't agree with you more about the needed
reforms and legislation. I look forward to talking with you
about those other costs and disincentives that are included in
there.
Our final witness on this panel is Mr. John Nicholson who
is the owner of Company Flowers, from Arlington, VA. Thank you
Mr. Nicholson for coming today.
Mr. Nicholson. My pleasure, and thank you for inviting us.
You're pursuing a very important but a rather dry or a drab
topic of paperwork and procedures and taxes, and so I brought
along some flowers to try to brighten up the scene a bit.
Mr. McIntosh. Thank you.
Mr. Nicholson. Our shop, called Company Flowers, which is
known around here as the best little flower shop in
Washington--to do a little advertisement--is like many other
mom-and-pop shops, family run. My wife is the chief designer
and flower purchaser who goes down to the wholesale markets at
5 a.m., to hand pick the very finest blossoms. My daughter runs
our shop and is constantly arranging our giftware, and the
finest in customer service. And I handle the books, the
promotion, and other tasks that most of our people in our shop
care not to do, such as testifying before Congress.
The task before us today is to explain how the burdens of
tax collection, which is of course never a happy process, have
multiplied and become especially burdensome. And let me point
out three general areas that I wanted to bring to your
attention: No. 1 is the attitude of the enforcers. No. 2 is the
difference among the different business filers, between small
and large corporations. And, No. 3, the congressional
responsiveness to special pleaders, which I think has been
mentioned earlier.
Regarding the attitude of the enforcers, our business
grosses less than $1 million a year, but we spend close to
$9,000 on CPA costs alone. That doesn't include the major costs
of collecting the accounting data that leads to the numbers
that the CPA uses. But if I make a mistake or I decide not to
pounce on each and every little detail during any one month, it
can affect my pocketbook or it can affect my bank's pocketbook.
But the greatest fear I have is that the IRS is going to
come after me for some simple mistake. That's why I've
interposed my CPA between me and the IRS filings. I respect his
interpretation of the IRS rules, which I have difficulty
understanding; and while there are times that I'm less than
thrilled by what he asks or says must be done, at least I'm
able to deal with someone who doesn't possess that police
mentality. The presumption of guilt until proven otherwise is
not the case, except with the IRS.
The second topic, difference among business filers, arises
because I compile my own employee income tax reports each
month. If the business were larger, I would ask for people more
skilled than I to do so, but the reality is I can't afford it.
Bigger businesses can afford their own bean counters, and they
can plead their cases before Congress more readily as well.
Because the big company managers are comfortable with
procedures necessary for nationwide operations, they are at
peace generally with IRS objectives or activities reflecting
its large-scale nationwide activities. But what's sensible for
the big guys doesn't often make sense for us little ``do it at
home'' types.
The third major topic I wanted to bring to you is the
congressional responsiveness to special pleaders. It may be not
a very popular topic up here, but the reality is that our Tax
Code is riddled with loopholes. While we may laugh at the Tax
Lawyers Relief Act that often arises whenever there's a change
in the code, the fact is those tax lawyer fees create business
costs that must be passed along to consumers.
Small business owners like myself can't afford those
special pleadings, and I'm not sure that I would be comfortable
asking for any anyway. But what's the solution? Well, while
some changes in law might result from some beneficial tinkering
here and there, I think what's ultimately required is a major
change, if not indeed scrapping the Tax Code.
I'm a member of the National Federation of Independent
Business, and NFIB has taken the lead, calling for an end to
the Tax Code as we know it today. I'm also a member of my
florist association, FTD, and it's a leading group of florists
who provide your $8 billion in flowers from neighborhood flower
shops. They too have suggested let's scrap the code and get on
with something better, more equitable and, most importantly,
most simple.
We need to dump the Tax Code and find a better way.
Exemptions aren't the answer; revision is. Thank you and good
luck.
[The prepared statement of Mr. Nicholson follows:]
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Mr. McIntosh. Thank you. And the momentum for that
sentiment, I think, builds every year as the code becomes more
and more complex. Certainly I share it with you.
Let me ask each of you some basic questions for the record.
What are your estimates for the total number of hours and
dollars you spend annually, either as individuals or in your
small businesses to comply with government paperwork
requirements? If you've got a ballpark estimate of how many
days out of your year it takes or how many hours a week, that's
helpful for us to get an idea of the magnitude.
Mr. Nicholson, I will just start with you and go down the
line.
Mr. Nicholson. I was just thinking it probably is at least
a day and a half a month, so figure that out. You know, maybe
some more, but that's about right.
Mr. McIntosh. Then on top, you mentioned an accountant's
bill for about?
Mr. Nicholson. An accountant's bill, right.
Mr. McIntosh. Mr. Lindsay.
Mr. Lindsay. Mr. Chairman, I would estimate--I was just
doing the same calculation in my head--our bill for our CPA and
our tax attorney is going to be about $9,500 this year. And the
amount of time, I would say, we have a bookkeeper who spends
time doing this, but I would guess that it's probably closer to
2 days a month just in terms of paperwork and filing and other
related requirements.
But I forget a payroll service that we also hire to be able
to do the tax reporting and all of the tax filing from
employees in the deductions on their wages.
Mr. McIntosh. So that would be 2 days of your time and then
a full-time employee?
Mr. Lindsay. A full-time employee and an outside service in
addition to the accountant and the attorney. And we're only a
firm of 9 people.
Mr. McIntosh. Ms. Hoff Hay. And, in fact, share with us
your story about the employee you had also.
Ms. Hoff Hay. OK. Mr. Chairman, I couldn't even estimate,
but I would like to make the point of one of the aspects of
time that isn't even reflected when you're talking about how
much time to do the paperwork, is the time spent worrying about
the paperwork, that wakes you up at 3 a.m., and makes you lie
there for 2 hours worrying about it.
That's a part of the time that's not reflected in any
government report, and it's real. And it's a burden on our
whole way of life, our whole economy.
But anyway, I will just give you a thumbnail sketch about
the payroll tax burden to have one employee, which I had up
until a couple of months ago; and believe me, I'm rethinking if
I ever want to do that again. The filing of a payroll tax on a
monthly basis--now I used to have to do it on a quarterly
basis, and I was very interested to see--to hear the
Commissioner of the IRS say that now for many small businesses,
it's back to filing on a quarterly basis.
This I did not know. Of course, when I used to file it on a
quarterly basis and they changed the rules and made me change
over to a monthly basis, they informed me of this fact. So I
don't know that I'm going to be--I will ask, do I get to switch
over to quarterly now or not? But I will just give you an
example of the notices, because of my monthly reports, that
I've received in the last month.
On March 15th, I got an IRS notice saying I had a credit
balance in this one employee payroll account of $571, asking
me, ``How do you want us to handle it?'' On March 22, about a
week later, I got a notice saying, ``Actually, you owe us
$28.25 in this employee account.'' Same day, March 22, another
notice, same mail, ``Actually you owe us $548.56 on this same
employee's payroll account.'' On April 5th, I got a notice
saying, ``No, you owe us $431.60.''
None of these notices seem to match up with one another in
any way. I have to take the time to sort it out. Another time
loss is totally on the horizon for me as I try to figure out
are these my mistakes, are these the IRS mistakes? Perhaps
they're just a result of the fact that the Tax Code is such a
mess even they can't figure it out; I don't know. But that's
the result for a person that has had one employee.
Mr. McIntosh. Did you get those notices after you no longer
had the employee, or was the employee still with you?
Ms. Hoff Hay. Yes, afterwards.
Mr. McIntosh. Afterwards. So you weren't obligated to make
any payments at that point?
Ms. Hoff Hay. These were for, you know, a month or two--
when you mess something up, it takes them several months to go
back to it, and then you get the notice about something that
maybe is not 90 days or 100 days old. So the paperwork from
them takes a long time to get to you.
Mr. McIntosh. Back to you.
Ms. Hoff Hay. To respond quickly though----
Mr. McIntosh. Mrs. Whitehead.
Ms. Whitehead. Yes. I estimated--I had an economist from
Purdue work with me, and we estimated the additional costs to
our operation just for the regulatory paperwork--this doesn't
include any bookkeeping or IRS, and that would be as high as $2
a head--that doesn't mean anything to you--$2 a head per animal
we produce.
Let me give it to you in these terms. In a normal year,
pork producers receive anywhere from $2 to $8 per head profit
on that animal. So if you took an average of $6 a head, I'm
looking at spending up to 30 percent of my profits just for the
regulatory burdens that are implemented to me by both the State
government and national government.
When you look--when you ask specifically for time
committed--and I tried to do a little bit of background on
this--in our operation, we spend anywhere from 20 to 25 hours a
week on the total burden of paperwork. Now that does include
both IRS and--I've tried to include everything. Now some weeks
it's much higher than that. It almost doubles, but----
Mr. McIntosh. How many are there in your family working on
the farming operation?
Ms. Whitehead. We have a farming operation. There's my
husband and myself right now. My son is a junior at Purdue,
hoping to come back to the farm, but he's involved in part of
that. And then we do have 5 employees besides. So we----
Mr. McIntosh. So 25 hours out of essentially a 7-person
full-time operation goes toward filling out paperwork each
week----
Ms. Whitehead. That's right.
Mr. McIntosh [continuing]. Almost more than a half time of
employee?
Ms. Whitehead. On the farm we work----
Mr. McIntosh. More than 40 hours a week.
Ms. Whitehead [continuing]. Longer than 40, yes. But I hope
that answers your question.
Mr. McIntosh. It does. It's especially striking on the $2 a
head when you think about current prices or prices the way they
have been in the last 6 months, where you're much below the
cost of production. I think it reached as low as $16, $17 a
head, wasn't it?
Ms. Whitehead. Some were down to $8. Some markets were
recorded at $8.
Mr. McIntosh. If $2 cost goes just to the government
paperwork for environmental and other social regulation, it
tells you exactly how much burden there is for the farmer.
Ms. Whitehead. What's so frustrating is when they do
inspections, they find there's very little problem, and yet the
burden increases.
Mr. McIntosh. Right. Let me turn now to my colleague, Mr.
Ryan, who is the vice chairman of the subcommittee, and ask him
if he has any questions for this panel.
Mr. Ryan. Yes. Mrs. Whitehead, I would like to ask you a
couple of questions. You said you do hogs, corn, soybeans, and
what else?
Ms. Whitehead. Wheat.
Mr. Ryan. I'm sorry. I'm sure you're having a tough year.
Commodity prices are at an all-time low. So your hog prices,
you're saying on your hogs, $2 a head. Are those contract hogs?
Ms. Whitehead. No, sir. We're an independent producer.
Mr. Ryan. You must be well below break-even with that.
That's $2 of an additional cost that is probably not taken out
of your profit from this past year; is that correct?
Ms. Whitehead. There was no profit this last year in hogs.
Mr. Ryan. That was $2 of additional costs on the losses you
incurred on your hogs today from the paperwork burden?
Ms. Whitehead. That's correct. Just the regulatory arena,
yes.
Mr. Ryan. Some of the things--and I will digress just for a
second. I have a strong concern about rural America. I hope one
day your son who is a junior at Purdue can come back to the
family farm. But it's my concern that what we're doing here at
the Federal Government is pushing the next generation of
farmers into the cities to work at banks, to work at
businesses--great, wonderful traits, wonderful professions--but
we are pushing the next generation of farmers out of farming.
And I think specifically you can point at the regulatory burden
and the tax burden.
We've talked about the regulatory burden in your testimony.
I would like to ask you a couple of questions about the tax
burden that is pushing the family farmer out of business, that
is consolidating farms, and that is pushing the next generation
of children who grow up on farms away from being able to run
their family farms.
What specifically are the tax provisions in the Federal Tax
Code that you think are the most onerous ones facing your farm?
Ms. Whitehead. The first one that is going to jump to my
mind--and I don't profess to be an expert about all the
provisions, because we spend about $10,000 a year on an
accountant like most of the others mentioned here--that is the
inheritance tax burden. It is very difficult for farmers to
pass along anything to the next generation because they have to
sell it to pay the taxes. And like I say, we are price takers,
not price makers.
So the cost of our production has nothing to do with what
we receive for our product. But that would be the No. 1 tax
that stands out for me as far as attempting to provide for the
next generation.
Mr. Ryan. So when you hear people say that we have to keep
the estate tax in place, it must exist in law because it gets
after rich people, you just reject that notion?
Ms. Whitehead. Absolutely.
Mr. Ryan. One thing that we did do in the Congress here is
to try and get income averaging back on a permanent basis. Is
income averaging something that is helping you with this burden
a little bit? Especially when you had such a bad year in the
hogs, looking at a bad year in soybeans, does income averaging
help you?
Ms. Whitehead. Yes, that was a vital tool. And I'm sure
that you've seen or will get the results of having implemented
a great deal of those this year. One thing I was surprised
about, though, because we were going to utilize that tool this
year, is that it doesn't automatically happen with the filing.
You have to utilize your accountant for more procedures so that
you can attain the form to income average. It's a whole new
procedure, it----
Mr. Ryan. That's exactly what I was getting at. So income
averaging which allows you to write your losses off over a
longer period of time, how is that compliance? Are you saying
that you have to get more paperwork burdens involved, you have
to get more fees to your accountant to try and get income
averaging on your books so you can try and release the pressure
that you're hitting this year? Is this adding a tremendous
amount of costs? Do you know quantitatively how much more you
have to pay for an accountant to help you get your income
averaging lined up?
Ms. Whitehead. Well, don't misunderstand me, I appreciate
the tool. It's good for agriculture, because we have to deal
with the weather and a lot of other factors that many other
businesses do not have to deal with. However, I was very
surprised when my filing was completed--and in agriculture,
March 1 is our filing date instead of April 15th--when there
was no attachment about income averaging.
And I specifically asked my accountant and he said, ``Oh,
well, that has to be done totally separately. It's a whole new
document. I will get that done when April 15th passes.'' So
that's a--that will be another set of costs to go about
providing or applying for a tool that I thought should have
come with the--been provided for in the original filing.
Why does it have to be so complicated? It's a good tool.
But why does it have to be so complicated?
Mr. Ryan. Thank you, Mrs. Whitehead.
Mr. Nicholson, I wanted to ask you, you touched a little
bit on scrapping the code. And I think--Mr. McIntosh and I are
both cosponsors of legislation to have a date certain in law,
whereby we would sunset the Tax Code, so Congress and the
administration would know when the Tax Code expires, and we
would have to replace it or extend the existing Tax Code of
that date certain.
Let's suppose we do pass this bill that does set a date
certain in the future. What are some ideas that you have? What
do you think would be the best way to replace the current
existing Tax Code?
Mr. Nicholson. Well, there are several proposals that have
been kicked around, and you're more familiar with them than I
am. I can say one principle that I think is overriding and more
important than anything else is simplicity. You're not going to
get general public support for--whether it's a flat tax or a
value-added tax or whatever variations come down the pike,
you're not going to get public support unless it's simple. And
that is, you know, the cardinal rule, No. 1. Whatever one is
best, you know a lot better than I do.
Mr. Ryan. But simplicity ought to be a guiding doctrine, no
matter what.
Mr. Nicholson. Absolutely.
Mr. Ryan. Going on that point, Ms. Hoff Hay, I would like
to ask you an additional question. Were you here when Mr.
Rossotti gave his testimony----
Ms. Hoff Hay. Yes, sir.
Mr. Ryan [continuing]. Commenting on the issues of
simplicity. It sounds like your dealings with the IRS are
anything but simplicity. What were your impressions of his
testimony? Did you feel as a taxpayer adequately assured that
the IRS is doing everything within their means to make sure
that we have a simpler tax collection system; that the IRS is
responding to the problems that we have out here, problems such
as yours? What was your reaction to his testimony? Were your
concerns allayed and could you just comment on that?
Ms. Hoff Hay. Mr. Ryan, I think my concerns could best be
expressed by his comment about the fact that he sends out a
survey to a representative sample of people who have
encountered the IRS over the past year. I was the recipient of
one of those independent surveys from an independent survey
research company.
Mr. Ryan. More paperwork.
Ms. Hoff Hay. I was pleased to get it. I filled it out. I
vented on that paperwork. I told the paperwork exactly--you
know, it says information--you know, put your comments here
after you filled in all the little boxes?
Mr. Ryan. Did they give you enough space on the comment
form?
Ms. Hoff Hay. About this big. Boy, I wrote big and then
extended it on another piece of paper. Then, when I was
finished, Mr. Ryan, I looked at it and I tore it up and I threw
it in the trash. I did not mail it back in, because for me, Mr.
Ryan, the Internal Revenue Service seems to be such a police
force. It makes us feel that they're the Secret Service and
they're all out to get us. I thought, I don't want to send this
in and make myself a target, and that's what I felt.
Mr. Ryan. You were concerned about retribution?
Ms. Hoff Hay. That's what I feel about being here today. I
don't know if the other panelists feel the same, but I
certainly do. That's why I said I'm here because it's my
American duty to be here, not because I want to be here. So I
did not even fill in that survey. I threw it away.
Mr. Ryan. I hope that you won't have any problems
associated with your testimony today. If you do, you'll make an
excellent witness another time around.
Mr. McIntosh. Rest assured it is the policy of this
committee--and we have had witnesses who appeared before us
that feel as if they have been harassed by an agency--and let
me put it to the record that this committee then is very
vigorous in pursuing that, and I will take it to the highest
levels of this administration, if it is your feeling that
there's been any retribution, any of you, for coming forward
today, because Congress needs this information in order to do
our job.
So we will definitely take steps, and have in the past, and
gotten the problems corrected. So thank you.
Let me mention one other thing, if I may, Mr. Ryan. Beside
you there is the stack of paper with the beautiful red ribbon
around it. It is a stack of paper that the committee put
together when we took forward the bill that Mr. Lindsay
mentioned, the amendments to the Small Business Paperwork
Reduction Act. That is the compilation of all the forms that we
were aware of that the small business has to fill out when they
hire a new employee over the first year of employment.
And, I will put into the record the list of the 22
different forms that are there. They were provided to me by a
small businessman in Muncie, who asked his human resources
person to just compile all of the different forms that she has
to fill out every time they hire somebody. It is not--not
incredible to me, sadly, that people like you, Ms. Hoff Hay,
make the decision every day not to hire people because of that
burden.
[The information referred to follows:]
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Mr. McIntosh. And, so it is one of the goals of this
subcommittee to figure out which of those are duplicative,
which we can get rid of, which are not providing any benefit
for the costs associated with it.
And, then a second point that you addressed, which is also
in that bill, is to relieve some of that worry factor by saying
to a small businessman or a small businesswoman, if you happen
to make a mistake in filling out all of that paperwork, we're
going to allow you a chance to go back and correct it, rather
than come in and slap you with a fine.
You mentioned, Ms. Hoff Hay, that there was a penalty for
one of the filings that the IRS had received or claimed they
didn't receive when you had made the payment. Similarly, many
of the agencies also have penalties that they associate with
not filling out the paperwork correctly or not keeping the logs
correctly on your place of employment. Very simple, and it
seemed to me straightforward, that we would allow small
businessmen an opportunity to correct it. So you put the
government on the side of the business coming in and pointing
out errors and then giving them a chance to correct it.
My experience is that the vast majority of small
businessmen and farmers in this country want to comply with all
of these rules and regulations. They find them to be a
headache, but in the same way you expressed, Ms. Hoff Hay, they
view it as a duty essentially, and they're law-abiding
citizens.
I was shocked when some of my colleagues on the House floor
came in and said, but if you do that, you allow people,
criminals, to get off the hook. Their view of America's small
businessman and small businesswoman is that they're potential
criminals. Our view is that they're decent people, trying to
get a job done, trying to hire people and putting up with an
enormous burden of paperwork put out by the Federal Government
to do that.
So we are now working with the Senate to try to move that
legislation forward, but I wanted to give you an update, and
show for those of us here exactly the magnitude of the
paperwork that goes with each new employee that a small
business hires in America.
So I appreciate all of you coming today and sharing your
testimony with us. I have no further questions for this panel.
Mr. Ryan, do you?
Mr. Ryan. No, Mr. Chairman.
Mr. McIntosh. And I truly do appreciate your willingness to
come here. Some of the things that you pointed out will lead to
questions directly to the IRS Commissioner that the committee
will be sending forward. I want to find out exactly what their
policy is on some of the examples that you've brought forward
and to some of the other agencies. And, we will keep you
informed on the further information that we gather in that
process. Thank you.
Ms. Hoff Hay. Thank you.
Ms. Whitehead. Thank you.
Mr. McIntosh. We have one more panel today. And I would ask
Ms. Anne Thomson Reed to come forward. She is representing the
U.S. Department of Agriculture and is the Chief of the Office
of the Chief Information Officer. So I guess you are the Chief
Information Officer.
And let the record show that Ms. Reed was sworn in along
with the other witnesses at the beginning of the session. Share
with us your testimony. The entire written testimony will be
put into the record, so feel free to summarize key points for
us today.
STATEMENT OF ANNE F. THOMSON REED, CHIEF INFORMATION OFFICER,
DEPARTMENT OF AGRICULTURE, ACCOMPANIED BY KEITH KELLY,
ADMINISTRATOR, FARM SERVICE AGENCY
Ms. Reed. Thank you. Chairman McIntosh, Mr. Ryan, I want to
thank you for inviting me here to share with you actions that
are underway at the U.S. Department of Agriculture to reduce
the paperwork burden on America's citizens and particularly on
farmers. With me today is Mr. Keith Kelly who is the
Administrator of the Farm Service Agency. And with your
permission, in addition to my formal statement, I would like to
submit for the record a statement by Mr. Kelly as well.
Mr. McIntosh. Seeing no objection, that statement will also
be included in the record.
Ms. Reed. Thank you. USDA's diverse programs include food
safety and inspection, food nutrition programs, programs to
create jobs and support the infrastructure of rural America,
natural resources and conservation, research and education, and
of course programs to support America's farmers.
We are committed to streamlining program delivery while
preserving fiscal integrity and preventing fraud, waste, and
abuse. In fiscal year 1998, citizens spent approximately 84
million hours--and that does include the hours associated with
the expired collections--providing information to USDA and
fulfilling recordkeeping requirements.
By the close of fiscal year 2000, we estimate that we will
reduce the actual paperwork burden to the public by
approximately 6.2 million hours, which should bring the total
to about 77.8 million hours. A key aspect of USDA's mission is
to provide financial and technical assistance to farmers.
This year with the supplemental passed by Congress, USDA
will provide about $31 billion in farm assistance. While we are
deeply committed to helping farmers through this farm crisis,
as with any financial institution, there are necessary
requirements for assuring eligibility and for meeting our
fiduciary responsibilities to prevent fraud, waste, and abuse.
In short, we want to be sure that the money goes where it's
supposed to, to help farmers in need. The agencies which
deliver programs through USDA's county-based Service Centers,
the Farm Service Agency, the Natural Resource Conservation
Service and the three Rural Development Agencies have a number
of initiatives underway to reduce the paperwork burden on
farmers and rural citizens.
Projects underway include developing common geospatial maps
and data that will allow greater sharing of land and crop
information between partner agencies as well as external
entities; an initiative to eliminate the need for customers to
provide the same information more than one time by sharing it
among agencies; and providing electronic on-line information
services to customers, employees, and partners of USDA.
In fiscal year 1998, the Farm Service Administration's Farm
Loan Program area initiated a comprehensive regulatory and
program reengineering effort which will conclude in September
2002. FSA's loan making and servicing processes as well as
documents associated with both the direct and guaranteed loan
programs are being reviewed to eliminate redundant and
unnecessary processes.
This year the application form for the Guaranteed Loan
Program was cut from 12 pages to 6, and the amount of
supporting documentation was reduced. Before the change,
applicants spent an estimated 2 hours on the form; today it
should take about 30 minutes. Recently implemented programs
such as the Small Hog Operation Payment Program, the Dairy
Market Loss Assistance Program, which began this week, and the
Crop Loss Disaster Assistance Program have been deliberately
structured to minimize paperwork requirements.
In each of these recent programs, the forms should take
about 15 minutes to complete and are available over the
Internet as well as through the county office.
In fiscal year 1997, the Rural Housing Service streamlined
the regulations for the Single Family Housing Program. By
developing one consolidated regulation and revising the
associated information collected, the agency collectively
reduced participants' paperwork burden by over a million hours.
To obtain the full benefit from any of these projects, USDA
must continue to invest in new technology.
The current computer systems used by the agencies and the
Service Centers are not interoperable, and therefore present a
real barrier to information sharing. The President's fiscal
year 2000 budget proposal contains funds for accelerating the
acquisition of the needed technology and continuing support for
developing common business operations.
Other significant accomplishments have been made in the
food stamp program and programs administered by the Grain
Inspection, Packers and Stockyards Administration and the by
the Rural Housing Service.
In conclusion, the Department will continue to work toward
full compliance under the Paperwork Reduction Act and toward
achieving the goals set by the act and by the Office of
Management and Budget. With your assistance, we will continue
to move forward in delivering better customer service with
minimal paperwork burden.
Thank you, Mr. Chairman.
Mr. McIntosh. Thank you, Ms. Reed. And, we will include the
full testimony into the record.
Ms. Reed. Thank you.
[The prepared statement of Ms. Reed follows:]
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Mr. McIntosh. Let me ask you about these unauthorized
paperwork information collections. And, I take it there are 110
from the Department of Agriculture that have been revealed. You
mentioned the 84 million hours reduced down to 77.8 million.
Are any of those reductions accounted for in collections that
have expired but continue to be used by the agencies?
Ms. Reed. The numbers that I gave you in my testimony
reflect the full amount of the burden, which includes both the
approved and the expired collections. So what I've reflected in
terms of a decrease is the true decrease in burden. We
anticipate making good on those expired collections. I think we
ought to focus on the real burden. We will commit to taking
care of the administrative problem that we have, but what you
see is the real burden reduction.
Mr. McIntosh. Is it the agency's intention to have those
expired ones reapproved? I mean, are there forms the agency
wants to continue using?
Ms. Reed. Absolutely. And in the case----
Mr. McIntosh. Is that in all cases or in most cases?
Ms. Reed. No. It is our intention to move forward. Now,
there have been some forms that we have made a determination
that we do not require. The number, by the way, that I have is
I'm not sure where the 110 number comes from is, I will have to
go back and understand the GAO's figures. In fact, there are
several things in there that aren't consistent with the
information that I have.
I will say that as of April 15th, we have 5 actions that
are at OMB now pending their review. We have about 18 that are
within my office, in various stages of review and discussion
with the agencies. And 28 that are yet to be filed with my
office by the agencies.
I have required every agency within USDA to submit a
remediation plan for their expired collections. It is our
intention to do everything we can to make good on those by the
end of this fiscal year.
Mr. McIntosh. OK, good. I think the 110 are listed in the
OMB report. But if you could go back and get ahold of that
annex and the staff will provide what we've got.
Ms. Reed. I will do what I can to reconcile those numbers.
Mr. McIntosh. Talk to OMB and talk to GAO. We're holding
the record open for 10 days, so if you could get us back
something in writing on the reconciliation of that, that would
be helpful.
Ms. Reed. Surely.
[The information referred to follows:]
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Mr. McIntosh. Let me ask you one other question. Then I'm
going to turn it over to Mr. Ryan to finish chairing the
hearing.
We talked briefly in one of the previous panels about
perhaps putting in some teeth to the bill. And, I guess I've
got a two-part question. Do you see some of the problems that
have occurred arising essentially from the subunits at the
Department not being responsive, or would you attribute some of
the problems being the interaction between you and OMB? I
guess, where in the link do you--because it strikes me you're
in the middle there.
Ms. Reed. Let me just share with you some of my experience
with OMB. I will not forget one of the very first meetings when
I came to the Department. This was well before I was the Chief
Information Officer. But I was summoned into the office of
Sally Katzen, who at the time was the head of OIRA, and she
absolutely read the Department the riot act. I mean, this was a
good many years ago.
We came back and we thought we had taken sufficient action
to correct that problem. I will tell you in the subcabinet
meetings that I've attended with the Secretary of Agriculture,
the subject of paperwork reduction and the importance of this
to the administration came up time and again. And it was my
understanding that, in fact, it has been the subject of
discussion in the President's Management Council, which is
chaired by the Vice President.
I don't have personal knowledge of that in having attended
those meetings, but I will tell you that those things rolled
downhill, and they rolled right into our subcabinet meetings.
So I know there has been administration attention to this.
Looking at it from the perspective of our agencies, it is a
challenge to get them to focus on paperwork reduction. There
are so many things on their plate right now. The Department has
gone through extensive downsizing over the last 5, 6 years,
really extraordinary downsizing. And we are faced with
delivering increasing numbers of programs. The legislative
mandates just keep coming.
Right now we're in the midst of a very serious farm crisis.
I think that Keith Kelly can share with you, if he has to
choose between getting a paperwork requirement in and serving
the customer, he's going to serve the farmer. But I will let
him speak about his commitment to paperwork reduction even in
the face of that.
Mr. Kelly. Mr. Chairman, Keith Kelly, Administrator, Farm
Service Agency. And to the example that the lady that was here
testifying, the hog operator that had hogs here, we implemented
almost overnight a $50 million hog program. And we're doing all
of these emergency programs, the Dairy Assistance Program, a
Livestock Assistance Program, a Major Disaster Program, and
we're doing it with the same staff resources as in fiscal year
1998. At headquarters its about a 33 percent cut of staff
resources in the last several years and about a 28 percent cut
in the field.
But the dollar outlays have increased significantly. The
decision comes down to making sure she gets her payment, as was
intended
by Congress when you passed the disaster legislation at the end
of Congress last year, or to get to these other things. And,
regrettably, the Paperwork Reduction Act, that went down the
priority scale, that's the logical place we went.
[The prepared statement of Mr. Kelly follows:]
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Mr. McIntosh. I appreciate your candor there. And, I
understand the bind that puts you in. So perhaps we need to
then look at whether to make that a more important priority is
including that in some of the performance standards, not only
for Ms. Reed but others throughout the Department. And,
recognize--frankly, I'm a big believer in using incentives--so
you can recognize in the bonus that's paid at the end, rather
than necessarily on a punishment side. If you're taking on
extra jobs, maybe people are staying extra hours and making
sure they get the paper done, have that reflected there.
Mr. Kelly. Mr. Chairman, I would like to raise another
issue along this line as well. You know, sometimes in some of
these Paperwork Reduction Act projects, we've got a major one I
know we're at odds with OMB and it's that's been out for quite
some time. We should be following their rules and we should be
taking it seriously, which we are trying to do. However, while
we have been working with the Office of Management and Budget
in this process, and there's been good people in these
different agencies with different approaches, sometimes it's
just differences of opinions.
And part of the thing is that sometimes--what I think I
would raise a question with is if you don't get it in in time
and you are in violation of the law, that there's another law
that is to be violated if you don't collect some of this
information somehow, and that leads to a dilemma: Which law do
I break today? And that needs to be put into consideration of
any incentive program. Otherwise----
Mr. McIntosh. Is there an appeals process if the agency and
OMB are at loggerheads on a paperwork collection item? Does the
administration have a mechanism where they bump it up into the
Cabinet? We used to have the Competitiveness Council when I was
in the administration, I know they don't anymore, but is there
a process there where you can do that?
Ms. Reed. I would have to say that it is very much the
exception and not the rule that we have this kind of
discussion. We work it at the staff level, and we work it at
the senior policy level. In this particular instance, the
Secretary himself is prepared to get engaged. So you do move
through a process of ratcheting up and trying to get closer.
Mr. McIntosh. And, the Director of OMB, if they can't work
it out, then I guess you go to the President at that point?
Ms. Reed. Hopefully it will not get there.
Mr. McIntosh. Hopefully you don't have to take those things
to him. I know what you mean. You want to try to solve what
appear to be smaller questions. Sometimes there are larger
questions reflected in there. So I appreciate that.
And let me now turn it over to Mr. Ryan to finish out this
hearing. Thank you both for coming and thank you for your
candor and sort of getting a feel for the dynamics of how this
is working. And I appreciate it.
Mr. Ryan [presiding]. Thank you for coming by, Mrs. Reed. I
appreciate both of--and thank you for your candor. That's
refreshing sometimes. It wasn't what you want to hear, but at
least it's an honest answer. I really appreciate that.
I wanted to ask you a quick question. Since OMB's standard
form for agencies to request Paperwork Reduction Act approval
includes the question, Are farmers going to be burdened? Have
you done a cross-cutting analysis with other agencies that
affect farmers with respect to paperwork burdens?
We just heard testimony from Miss Whitfield, hog farmer
from Indiana, I think she was from Muncie, where she had a
paperwork burden placed upon her from other agencies.
Have you taken a look at it from the farmer end and taken a
look at some of the paperwork burdens imposed on them, and have
you coordinated with these agencies to try and reduce that
burden?
Ms. Reed. Let me answer that in several ways. First, with
respect to the issue that she addressed: The Department of
Agriculture did engage in discussions with EPA in developing
the strategy for animal feeding operations. We did what we
could, I think, to try and represent, to get a balance in that
strategy.
Mr. Ryan. At the other agencies?
Ms. Reed. With, in this case, EPA. I believe that we will,
in fact, be able--the final strategy does, in fact, address
some of the issues that she raised. We can go into that later
for the record. In other respects, I have looked--well, I will
not say I spent a lot of time at this, I will be very honest
about that, but I have looked at the information that OMB
provides on other agencies and how they affect farms.
Quite frankly, from the data that is there, it's really
very difficult to get a handle on what the actual extent of
that is. To do that, we would need to do further study, and it
really may be something that we should do. But when I look at
that, the other major players are: Internal Revenue Service,
very clear; EPA, we've talked about that; the Department of
Transportation, that was one that I sort of scratched my head a
little bit over, and when I looked at that in more detail,
there are things like aircraft operations that many of the
farms have. So there are things that are in that arena.
But given the data that is available to me today, it's very
difficult to parse out exactly what the level of burden is on a
farmer, because the way in which OMB collects it--those forms
are filled out by anybody. They say it affects some farmers but
I don't know how many, so----
Mr. Ryan. As the USDA, as the ombudsman for the farmer, I
understand it's a fairly complicated burden, what I'm hearing.
What you're essentially saying, it's just not as high on the
priority list, given the fact that you're structuring and
you're trying to do other things. It doesn't sound like it's
very high on the priority list, I understand. I appreciate your
candor.
Do you see the eventuality of this getting knocked up on
the priority list of doing sort of an assessment of the nature
that we were just talking about here?
Ms. Reed. Let me say that reducing paperwork and doing what
we can to support the farmers is a priority for us. We juggle
the priorities in how best we can support farmers, but it is
very much a Department priority to do what we can and get it
engaged when we see that there's a regulation that's going--
whatever department it is--that is going to affect farmers.
Have we done a specific study on paperwork reduction across
the board for farmers? No. Are we engaged with other agencies
in efforts for paperwork reduction? Yes. In the geospatial
area, we see so much potential advantage in shared information.
We are active participants, not just across the agencies within
USDA, but across the Federal Government. There's a group that's
working to assure that we have common standards for how we
collect that information so that we can use it jointly, not
even just within the Federal Government, but also working very
closely in tandem with the States and the counties and the
other levels of government, so that we can collectively reduce
the burden. So we do have a commitment in this arena.
Mr. Ryan. Acknowledging your commitment, when will that
commitment be honored, in your opinion? It's my understanding
that OMB's draft report identifies no planned USDA paperwork
reduction initiatives to benefit farmers in fiscal year 2000.
Since that--I understand your commitment is there. When should
we expect that commitment?
Ms. Reed. Well, there are several sections to the OMB
report. There is a section that from which I believe you note 5
initiatives where we show the burden of reduction. But in a
second section of the report, we do address a series of
initiatives that are underway at the Farm Service Agency. We
have not yet pieced out exactly what the burden reduction will
be. But there are some very serious initiatives.
Mr. Ryan. That's what comes to the farmers, I think.
Ms. Reed. But they will result in a burden reduction. We
just haven't quantified it. So, Keith, if you could share
something.
Mr. Kelly. Yes, Mr. Chairman. Our agency is sponsoring a
companion initiative with the other primary agencies that
deliver services in the field: the Natural Resources, the Rural
Development and ourselves. And that whole effort is just to get
to a common reduced paperwork process--I don't want to be
misunderstood, because it is a priority--it is to let farmers
farm, not fill out papers. That is a goal at the agency.
And I would like just to reference the statement that
Secretary Glickman gave to us on this whole initiative, which
is being shared by our agency, but shared by all of the
agencies, that information is collected once and shared many
times by USDA Service Center employees and, where appropriate,
with other public and private entities.
Part of the things we feel are going on out there, is that
we're going out and collecting information, they're going out
and collecting it, somebody else is collecting it, and a third
of the information is all overlapping each other. We are given
the appropriate computer technology resources to go with the
initiative, we have great confidence that the one Ms. Reed
referred to in there, geospatial and that whole technology,
that we can make significant savings to ourselves as well as to
the farmers.
With our employment situation we have now, very selfishly,
we're trying to get what we can off our plates for ourselves as
well as to our customers. I think that's our goal. It is a
priority here. I don't want to downplay it wasn't.
It's when you get in a crunch, you set priorities on a day-
to-day basis, or sometimes week to week because of the crisis.
Mr. Ryan. I am sure we can see some additional actions
soon. I want to ask you one more quick question. You briefly
talked about the hog situation, the comprehensive nutrient
management plans. Could you give us some more details on that,
how that paperwork burden will be alleviated? I hear from hog
farmers throughout Wisconsin--we have a lot of independent
producers--this is going to cost them about $300 to $1,500 to
comply.
It sounds like you're in the midst of fulfilling the
national strategy. I understand you may not have the answer
right now, but could you please provide us with the answer or
with the efforts to reduce the paperwork burden with the new
management plans?
Ms. Reed. I would be happy to provide that for the record.
[The information referred to follows:]
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Mr. Ryan. All right. Thank you very much. Since there are
no more questions, this hearing is adjourned. Thank you for
coming.
Ms. Reed. Thank you.
[Whereupon, at 5:22 p.m., the subcommittee was adjourned.]
[The prepared statement of Hon. Jim Turner and additional
information submitted for the hearing record follow:]
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