<DOC>
[106th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:70435.wais]
REINVENTING PAPERWORK?: THE CLINTON-GORE ADMINISTRATION'S RECORD ON
PAPERWORK REDUCTION
=======================================================================
HEARING
before the
SUBCOMMITTEE ON NATIONAL ECONOMIC GROWTH,
NATURAL RESOURCES, AND REGULATORY AFFAIRS
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
__________
APRIL 12, 2000
__________
Serial No. 106-193
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpo.gov/congress/house
http://www.house.gov/reform
______
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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
HELEN CHENOWETH-HAGE, Idaho (Independent)
DAVID VITTER, Louisiana
Kevin Binger, Staff Director
Daniel R. Moll, Deputy Staff Director
David A. Kass, Deputy Counsel and Parliamentarian
Lisa Smith Arafune, 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-HAGE, Idaho HAROLD E. FORD, Jr., Tennessee
DAVID VITTER, Louisiana
Ex Officio
DAN BURTON, Indiana HENRY A. WAXMAN, California
Marlo Lewis, Jr., Staff Director
Barbara F. Kahlow, Professional Staff Member
Gabriel Neil Rubin, Clerk
Michelle Ash, Minority Counsel
C O N T E N T S
----------
Page
Hearing held on April 12, 2000................................... 1
Statement of:
Kingsbury, Nancy, Acting Assistant Comptroller General for
the General Government Division, General Accounting Office. 47
Noe, Cindy, owner, IHM Facility Services, Fishers, IN........ 70
Rosenberg, Morton, specialist in American law, Congressional
Research Service........................................... 81
Rossotti, Charles O., Commissioner, Internal Revenue Service,
Department of the Treasury................................. 18
Runnebohm, Nick, owner, Runnebohm Construction Co., Inc.,
Shelbyville, IN............................................ 76
Spotila, John T., Administrator, Office of Information and
Regulatory Affairs, Office of Management and Budget........ 34
Letters, statements, etc., submitted for the record by:
Chenoweth-Hage, Hon. Helen, a Representative in Congress from
the State of Idaho, prepared statement of.................. 117
Kingsbury, Nancy, Acting Assistant Comptroller General for
the General Government Division, General Accounting Office,
prepared statement of...................................... 50
Kucinich, Hon. Dennis J., a Representative in Congress from
the State of Ohio, prepared statement of................... 13
McIntosh, Hon. David M., a Representative in Congress from
the State of Indiana, prepared statement of................ 5
Noe, Cindy, owner, IHM Facility Services, Fishers, IN,
prepared statement of...................................... 72
Rosenberg, Morton, specialist in American law, Congressional
Research Service, prepared statement of.................... 85
Rossotti, Charles O., Commissioner, Internal Revenue Service,
Department of the Treasury, prepared statement of.......... 20
Runnebohm, Nick, owner, Runnebohm Construction Co., Inc.,
Shelbyville, IN, prepared statement of..................... 78
Spotila, John T., Administrator, Office of Information and
Regulatory Affairs, Office of Management and Budget,
prepared statement of...................................... 37
REINVENTING PAPERWORK?: THE CLINTON-GORE ADMINISTRATION'S RECORD ON
PAPERWORK REDUCTION
----------
WEDNESDAY, APRIL 12, 2000
House of Representatives,
Subcommittee on National Economic Growth, Natural
Resources, and Regulatory Affairs,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 10 a.m., in
room 2154, Rayburn House Office Building, Hon. David M.
McIntosh (chairman of the subcommittee) presiding.
Present: Representatives McIntosh, Ryan, Terry, Chenoweth-
Hage, and Kucinich.
Staff present: Marlo Lewis, Jr., staff director; Barbara F.
Kahlow, professional staff member; William C. Waller, counsel;
Gabriel Neil Ruben, clerk; Michelle Ash and Elizabeth
Mundinger, minority counsels; and Ellen Rayner, minority chief
clerk.
Mr. McIntosh. Welcome. The Subcommittee on National
Economic Growth, Natural Resources, and Regulatory Affairs is
in order, a quorum being present. Today the subcommittee is
conducting a followup to its April 15th, 1999 hearing on the
Clinton-Gore administration's record on paperwork reduction.
Once again the record shows a minimal number of actual
paperwork reduction accomplishments and a minimal number of
specific paperwork reduction initiatives in the
administration's last 2 years.
Last year's hearing revealed basically no involvement by
the Vice President in paperwork reduction even though he heads
the administration's Reinventing Government effort. That
hearing also reveals the Office of Management and Budget's
mismanagement of the paperwork burden imposed on Americans.
Today we will examine if the Vice President and OMB's track
records have indeed improved. The Paperwork Reduction Act
requires OMB to be the Federal Government's watchdog for
paperwork, making OMB responsible for guarding the public's
interest in minimizing costly, time consuming and intrusive
paperwork burden. Yet OMB failed to push the Internal Revenue
Service and other agencies to cut existing paperwork burdens on
taxpayers. In fact, last year the IRS, which accounts for
nearly 80 percent of the governmentwide paperwork burden on
Americans, identified no specific expected paperwork reductions
for the year 2000. None.
Worse, the General Accounting Office confirmed at last
year's hearing that OMB misled the American people, providing a
falsely inflated picture of the administration's paperwork
reduction accomplishments. The way they do this is they count
as reductions in paperwork when the computer drops off its list
those forms which have expired for their approval by OMB even
though the agency continues to use the form. This would be like
a company saying to the IRS I'm only going to report to you
those sales that we keep in our computer for 6 months and
nothing before that. If they did, I think you would send them
to jail, Commissioner. And, OMB unfortunately, is taking that
same cavalier attitude toward reporting their responsibilities
for reducing paperwork.
They did identify 872 violations of law last year and 710
violations of law this year where agencies levied unauthorized
paperwork burdens on the American people. GAO stated that there
is a troubling disregard, in their words, by the agencies for
the requirements of the Paperwork Reduction Act. GAO further
stated, ``As disconcerting as those violations are, even more
troubling is that OMB reflects the hours associated with
unauthorized information collections ongoing at the end of the
fiscal year as burden reductions.''
We all know the direct costs of the Tax Code, the $2
trillion Americans pay Uncle Sam. But there is also a hidden
cost that adds an extra 8 percent, according to the
Government's estimate, on how long it takes to fill out IRS
forms, or $160 billion, to that burden. Each year Americans are
estimated to spend a total of 6.1 billion hours complying with
the 691 tax forms. This doesn't count the outside accountants
they hire, the cost of computers, and other mechanisms by which
taxpayers keep track of their obligations and the huge amounts
that taxpayers pay to those entities and accountants to help
them complete the IRS forms. This cost is an enormous burden
for Americans.
Please note the large stacks of paperwork requirements on
display in front of the hearing room. The first stack includes
IRS paperwork forms imposed on small businesses. The second
stack includes other IRS paperwork forms imposed on Americans.
It also includes the regulations and the laws relating to those
stacks.
Soon after last year's hearing I met with IRS Commissioner
Rossotti, who suggests dramatically decreased IRS paperwork
burden was one of his primary objectives. One idea I suggested
is to have the IRS send taxpayers a simple booklet similar to
what accountants send to their clients to complete so the IRS
can complete the complicated forms for each taxpayer. Another
idea I suggested is to have the IRS send taxpayers partially
completed tax forms, including all information previously
forwarded to the IRS by third parties, such as interest earned,
dividends received, mortgage interest paid, real estate paid,
charitable contributions over $250, etc., so that taxpayers
would only have to complete the remaining fraction of
information on the forms.
I also recommended that the IRS sample the forms filed by
actual small businesses to identify opportunities to reduce
duplication and to simplify reporting. I look forward to
hearing how the IRS has analyzed each of these possibilities
and if they're being pursued or what other ideas they're
pursuing to reduce the paperwork burden.
Now, let me turn to the entire government's paperwork,
which OMB has dramatically mismanaged. The Paperwork Reduction
Act principally intended to, ``minimize the paperwork burden
for individuals, small businesses, educational and nonprofit
institutions, Federal contractors, state and local and tribal
governments and persons resulting from the collection of
information by or for the Federal Government.'' The act sets
governmentwide paperwork reductions goals of 10 or 5 percent
per year from 1996 to 2000.
Now, the first chart on display reveals that the Clinton-
Gore administration has increased, not decreased, that's
increased, paperwork in each of these years. What should be
going down is indeed going up, and in fact further, higher this
year.
After last year's hearing we requested that, starting in
July, OMB keep basic information about its role in
governmentwide paperwork reduction. The law requires OMB to
keep the Congress fully informed. Incredibly OMB has repeatedly
refused to comply with this oversight request, even claiming
that doing so ``would impair our ability to serve the public.''
Because OMB refused to keep track of its own paperwork
reduction actions, in December 1999, we surveyed 28 departments
and agencies to identify any substantive changes in agency
paperwork submissions made by OMB pursuant to the law and any
paperwork reduction candidates added by OMB in the time period
of July 1, 1999 to December 31, 1999. As chart 2 displays, over
this 6-month period, OMB independently identified no paperwork
reduction candidate from the over 7,000 existing paperwork
requirements in OMB's inventory. None. And only reduced by
about 2000 hours from the agency generated paperwork. This
trivial amount hardly makes a dent in the 7.3 billion hours of
paperwork that OMB keeps track of.
I believe the American people deserve better results from
their Vice President, who chairs the effort, and better results
from OMB, the agency.
The subcommittee's investigations reveal a disturbing
pattern of contempt for congressional oversight that goes
beyond OMB's disregard for its own paperwork reduction
responsibilities. From March 1998 to March 2000, the
Subcommittee on National Economic Growth, Natural Resources,
and Regulatory Affairs sent 14 oversight letters to OMB on
paperwork reduction, 6 oversight letters on governmentwide
guidance to the agencies, 14 oversight letters and a subpoena
to OMB to understand the President's request for a $6.3 billion
increase in funding for their climate change proposals.
Here's what we found. First, they refused to provide basic
accountability information so the subcommittee can determine
their role in paperwork reduction. Second, OMB has refused to
issue complete Congressional Review Act [CRA] guidance even
after Congress in the 1998 appropriations act provided OMB an
additional $200,000 to do so at my request, the Appropriations
Committee provided that, and even after Congress in the 1999
appropriations act directed OMB to issue additional CRA
guidance to ensure that agencies would fully comply with the
law. I am not sure what we can do there but maybe we ought to
ask some of the folks at OMB if they want to reimburse the
taxpayers that $200,000 out of their own paychecks.
Third, OMB does not make a complete search in response to
our June 26, 1998 subpoena for information on proposed funding
of global climate change programs and activities.
As a consequence of this pattern, I have asked an expert in
the Congressional Research Service to present options available
to Congress when faced with agency non-responsiveness to
congressional oversight, including subpoena requests for
documents and letter requests for specific information.
So today in our hearing we will pursue both the IRS plans
and the general scope of government efforts to reduce
paperwork.
I want to welcome back the IRS Commissioner, who testified
at last year's hearing. The Clinton administration will also be
represented by John Spotila, who is OMB's OIRA Director. I
asked Mr. Spotila to discuss substantive changes in paperwork
made by the OMB staff.
I also want to welcome Nancy Kingsbury, who is the Acting
Assistant Comptroller General for the General Government
Division at GAO, and Morton Rosenberg, specialist in American
Law at CRS.
Finally, I also want to welcome two folks from my home
State in Indiana, Cindy Noe, who is owner of the IHM Facility
Services in Fishers, IN, and Nick Runnebohm, who is owner of
Runnebohm Construction Co. in Shelbyville, IN. They will
discuss paperwork issues of concern to real Americans outside
of Washington who are operating small businesses in Indiana.
Welcome to everyone here.
[The prepared statement of Hon. David M. McIntosh follows:]
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Mr. McIntosh. Let me now turn to the gentleman who is a
very active and helpful partner in this committee, our minority
leader, Mr. Dennis Kucinich.
Mr. Kucinich. Good morning. Mr. Chairman, it's good to be
with you this morning. I want to welcome our guests and our
visitors who will be testifying. For those who are here from
Indiana I want to give you a special greeting and let you know
you would be very proud of Mr. McIntosh. He serves this
Congress well. I'm glad to have the chance to work with him
here today. I want to thank him for holding this hearing on
paperwork reduction.
I am especially pleased that Commissioner Rossotti could
join us here today. As we know, about 80 percent of the
paperwork burden which Americans have to deal with is related
to the business of the Internal Revenue Service. And with tax
day just around the corner it's a good time to reflect on the
job that the IRS is doing and whether or not it's limiting the
paperwork burden that it places on the American taxpayer.
Mr. Chairman, I share your concern that we're not meeting
the Paperwork Reduction Act goal of reducing the paperwork
burden by 30 percent over the last 4 years and I'm concerned
that the paperwork burden actually increased by about 3 percent
over that period of time.
From what I understand, much of that increase is due to our
actions here in Congress. For instance, when Congress passed
the Taxpayer Relief Act in 1997, which cut capital gains,
estate and gift taxes. The IRS, the information I have,
estimated that these changes increased the paperwork burden--
they actually increased paperwork burden by about 64 million
hours.
Much of the remaining increase is apparently due to the
increased economic activity in our booming national economy.
Furthermore, the methodology for estimating the paperwork
burden may not be giving enough credit for the time saved by
the increase in the use of electronic and telephone filing. I
look forward to hearing from the witnesses who can provide
further insight into the underlying causes of the increased
burden and as to your ideas as to what we might be able to do.
Mr. Chairman, I'm not going to belittle the importance of
the information we collect. Without taxes our government would
not be able to provide the protections, benefits, and services
Americans depend on and often take for granted. It's imperative
that the IRS successfully fulfills its mission to collect the
right amount of tax. Similarly, other agencies need the data
they collect in order to fulfill their important missions.
It may be that in this Information Age that reduction of
paperwork will prove to be most challenging, and it would
appear that improvements in data base and electronic
information gathering would enable us to reduce paperwork. On
the other hand, in a free society with the proliferation of
more information, there may be more paperwork created as we
become more efficient at implementing laws. And it is a
paradox. But then again we often have a way of legislating
paradoxes.
You know, I also think it's important to keep in mind that
there's a sense in which paperwork can reduce the overall
burden that government would otherwise need to place it on the
American public and in small businesses. For example, and I
think we've talked about this before, reporting requirements
proposed by the Environmental Protection Agency under the
Regulatory Right-to-Know Act provide it with information about
onsite toxic materials that pose a danger to the surrounding
community. If the EPA did not collect this type of data, it
would need to conduct onsite inspections which are
significantly more intrusive than reporting requirements. And
much of the increase in paperwork proposed by the IRS reflects
the fact that the Government is imposing less of a financial
burden on American taxpayers by offering more tax breaks.
Nevertheless, I agree with Chairman McIntosh, we need to
make sure that the information the Government is collecting is
information it needs, and it's being collected in the least
burdensome and most efficient manner. Paperwork can be very
costly on our small businesses and individuals. And I know it's
that concern which motivates Chairman McIntosh and I think
that's a concern that always needs to be stated. That's why
we're here, to try to make things a little bit better for the
American people. So I appreciate the job that you're doing in
that regard.
We have to make sure that the agencies are doing their best
to eliminate unnecessary burdensome requests, to streamline
forms and to consolidate requests. And I'm sure that this
hearing will shed some light on the IRS and other agencies'
fulfillment of these important responsibilities.
Again, Mr. Chairman, thank you for holding this hearing. I
look forward to the testimony.
[The prepared statement of Hon. Dennis J. Kucinich
follows:]
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Mr. McIntosh. Thank you, Mr. Kucinich. As always, your
perspective has contributed another good idea. Perhaps the
subcommittee ought to ask the agencies to identify those areas
where Congress is creating paperwork burdens and we can pass
those on to other committees and try to work on our colleagues
as well.
Mr. Kucinich. I think that's good. And, again, I salute you
for caring about this because Americans need individuals who
are--you know, who want to make this process work better, and I
thank you for doing that.
Thank you.
Mr. McIntosh. We'll work and develop a letter to all the
agencies. Maybe we can send that. Let's plan on sending it out
so we can then solicit some ideas of where the law can be
changed to help reduce the burden as well.
Let me now ask Mr. Terry, who is a great member of this
committee, if you have any opening remarks.
Mr. Terry. I don't have any prepared remarks but I do want
to place a couple of observations into the record. One is I
agree with my friend and colleague from Ohio that it is
frustrating when we try and do something right, like deal with
the estate tax, death tax, and one of my frustrations in
Congress is sometimes we have to take little steps toward the
right direction. Nothing would please me more than to help the
Code by just eliminating the estate tax section. That would be
easier and we could reduce that level of paperwork instead of
trying to ease the burden and thereby increasing paperwork.
But it is frustrating that there hasn't been sufficient
steps taken I think by a variety of agencies to reduce their
workload, the paperwork load on particularly small businesses.
When I'm around in my district talking to small business
owners, particularly those that deal with Federal agencies,
that's one of their single most frustrations. Their No. 1 is
labor availability and No. 2 is that so much of their small
labor force that they have on staff is dedicated to simply
complying.
And here's the rhetorical observation that I'm just going
to put into the record, Mr. Chairman. In your statement you
pointed out this administration's increase in paperwork. And
that shouldn't come as any surprise considering this
administration has a philosophy of bypassing Congress and
legislating through regulation, regulation equals paperwork on
businesses. These folks that are here today to justify their
noncompliance are part of the executive branch. So to me it's a
simple answer to that rhetorical question of why there has been
little to no effort in the last year to reduce the paperwork
burden on American citizens.
Mr. McIntosh. Thank you. Let us now hear from our witnesses
today. It is the policy of the full committee to ask all
witnesses before each of the subcommittees to be sworn in. So
let me ask each of you to please rise now.
[Witnesses sworn.]
Mr. McIntosh. Let the record show that each of the
witnesses answered in the affirmative. Let me now welcome Mr.
Rossotti, Commissioner of the IRS. I know it's a tense time as
we're approaching that April 17th deadline but I appreciate
your coming and spending some time with us on this critical
question. Share with us a summary of your testimony. The entire
remarks will be put into the record. And welcome. Thank you.
STATEMENT OF CHARLES O. ROSSOTTI, COMMISSIONER, INTERNAL
REVENUE SERVICE, DEPARTMENT OF THE TREASURY
Mr. Rossotti. Thank you very much, Mr. Chairman and Mr.
Kucinich and Mr. Terry. I really do appreciate the opportunity
to be here this morning to testify concerning some of our
efforts related to paperwork and more generally, administrative
burden, particularly on small business taxpayers. Since I last
appeared before your committee we have made some progress to
simplify forms and optimally, to reduce the number of taxpayers
who would even have to file certain forms.
Our efforts are detailed in my written testimony. I would
just like to mention in my oral testimony two initiatives.
First one, I'm very pleased to announce here this morning that,
beginning in the 2001 filing season, paid return preparers will
be able to use the third party authorization check box on all
Form 1040 series returns with the exception of those filed by
phone. This means we expect that taxpayers will initially save
about 2 million hours by using this check box feature instead
of having to file separate forms for authorizing third party
disclosure authorizations or powers of attorney declarations.
Further--that's just the initial saving. For many taxpayers
and for people who prepare their returns the real savings in
both time and frustration will be in eliminating the need for
the taxpayers to receive and respond to notices and
correspondence which we know they would prefer to have sent to
their designees. So we estimate that this will save about
another 1.8 million hours by allowing the IRS to work directly
with these designees in resolving such items as error notices
and original correspondence related to taxpayer accounts. This
change is not only, we think, an important step in reducing
burden and improving service; it's also an excellent example of
our new approach, which is to solicit input directly from
taxpayers and their representatives on how we can improve
things.
This particular proposal I want to stress was actually
originated and championed by citizens on our Citizens Advisory
Panel in south Florida, which is one of our four advisory
panels.
The second initiative I want to mention this morning
involved the Schedule D. As you know, Mr. Chairman, due to the
booming market many more people have capital gains than they
used to. Now for tax year 1999, which is the year that people
are currently filing returns for, those taxpayers whose only
capital gains are from mutual fund distributions may not need
to file a Schedule D at all. Instead, what we have done is we
allowed them to report these gains directly on Form 1040, line
13. So rather than filing a 54-line Schedule D, they will be
able to use a worksheet which they don't even have to file with
us, which will allow them to then enter these data directly on
the Schedule 1040. This will represent we estimate about a 24
million hour reduction, this one change, for 6 million
taxpayers that are filing right now in this filing season.
Now, Mr. Chairman, having mentioned these two which I think
are very positive and some others in my written testimony, I
still want to acknowledge, as you noted in your statement,
there is much more room for improvement. We take very seriously
the charge of this committee and our taxpayers to reduce
paperwork and appreciate your leadership in calling attention
to this issue.
I do want to note, even as we discussed last year,
paperwork per se does not actually capture the full range of
taxpayer burdens in dealing with the IRS nor does it represent
all the opportunities we have to reduce the burden. I think in
order to truly reduce all of the burdens the taxpayers have to
comply with the Tax Code we need to be creative and look not
only to redesigning and simplifying forms but other
opportunities. If you look at the broader economy I think you
would find that most successful businesses are improving
customer service and efficiency, not so much only by
redesigning their forms but by taking advantage of new
technologies and new business practices. And that's also a
major thrust of the IRS.
Similarly, as many have noted and as we discussed last
year, I believe after this hearing, Mr. Chairman, we also need
to revisit our methodology about how we actually calculate
burden. Frankly, in the world of new software we need to find a
more comprehensive and better way. We are working actively on
that.
Now, quite frequently the Tax Code, as several members have
noted, also limits our options and opportunities as to where we
can redesign or eliminate tax forms. And in some cases, in
order to actually help taxpayers comply with the Tax Code and
avoid filing errors, we actually increased the number of lines
on a form or publication or in a worksheet, as we recently did
with the EITC. Although it's counted as an increase in burden
the extra lines may actually be easier for the taxpayer.
So those are some issues that we continue to deal with in
trying to look broadly at reducing the overall burden while we
still try to update our methodology.
Let me just stress, in conclusion, that we are attempting
within the constraints of the law and the regulations to reduce
the paperwork burden, but we're also looking at this broader
spectrum of taxpayer burden of which paperwork is a part. For
the long and short term we will work with the Congress, the
taxpayers and our small and large businesses and their
representatives to determine how we can best help them meet
their obligations, pay what they need to pay, with the least
burden and the least chance of error.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Rossotti follows:]
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Mr. McIntosh. Thank you, Mr. Rossotti. As I said, your
entire remarks will be put into the record.
Let me now recognize Mr. John Spotila, who is Administrator
of the Office of Information and Regulatory Affairs. Welcome.
STATEMENT OF JOHN T. SPOTILA, ADMINISTRATOR, OFFICE OF
INFORMATION AND REGULATORY AFFAIRS, OFFICE OF MANAGEMENT AND
BUDGET
Mr. Spotila. Good morning, Mr. Chairman and Mr. Kucinich.
You may not realize I'm also from Cleveland. I remember you
well there and my family does as well and sends greetings.
Thank you for inviting me here to discuss how the Federal
Government can improve the quality of the information it
collects, while reducing associated burden on the public. At
OMB we understand the importance of helping agencies balance
these objectives. Our fiscal year 2000 information collection
budget, the ICB, highlights a number of these agency efforts.
Although it shows there has been progress, clearly much more
needs to be done.
We need information so that government can better serve the
people. Better information can help us make better decisions
about how well the Government is working, whether new services
are needed, and whether existing programs are still necessary.
Indeed, providing information to citizens can be an
important service in its own right. Investors need quick and
easy access to SEC filings. Communities want to know if they
have exposure to pollutants. Taxpayers expect the IRS to
respond quickly to their questions. Often giving information to
the public can eliminate the need for an expensive regulatory
approach. Agencies like the Food and Drug Administration with
nutrition labels, the SEC with corporate financial disclosures
and the EPA with community right to know efforts rely on the
disclosure of information to protect the public's health,
safety, and welfare, without the need for further regulation.
Most of the information needs of the Federal Government
flow from statutes passed by Congress. Some reflect agency
decisions on what information they need to implement programs.
New statutes can lead to new information requirements. The
Taxpayer Relief Act of 1997 and the Tax and Trade Relief
Extension Act of 1998, for example, made numerous changes to
the Internal Revenue Code. These and other acts required new
reporting requirements that increased the paperwork burden for
taxpayers by some 150 million hours in fiscal year 1999.
Similarly, the Balanced Budget Act of 1997 created the
Medicare+Choice program at HHS with a new burden of almost 1.3
million hours in 1997 to determine eligibility.
While information plays a critical role in good government,
the collection of that information imposes a cost on the
public. It takes time to supply information. The Paperwork
Reduction Act of 1995 emphasizes that, subject to statutory
constraints, agencies must strike a balance, collecting the
right information while not requiring what is unnecessary or
unavailable. We agree that agencies should only collect
necessary information and should always look for simpler,
easier, and faster ways for citizens to provide that essential
information.
As we describe in the ICB, agencies have been trying to
improve the quality of Federal information collection while
reducing burden. We are seeing progress. EPA intends a
rulemaking in fiscal year 2000 that will reduce reporting
requirements under the Resource Conservation and Recovery Act
[RCRA]. It plans to lengthen periods between facility self-
inspections, streamline paperwork and reduce the data
collected. As proposed, the burden reduction could be 3.3
million hours, which, when added to previous reductions, would
be a 40 percent reduction from the program's 1995 base lining.
The Federal Motor Carrier Safety Administration at DOT
plans to complete a zero-based review of its motor carrier
regulations this year. It expects to eliminate many regulatory
requirements and information collections, streamlining most of
the rest and leading to a 90 percent reduction in burden hours.
DOT and the Department of Labor both require truck drivers
to record their driving time. DOT has required that drivers
keep logs while DOL has required them to use time records. DOT
now has decided to rely on DOL's time records. When its
rulemaking action is finalized, it expects to eliminate more
than 28 million hours of paperwork.
Raising reporting thresholds can also reduce burden hours.
Under EPA regulations, businesses disclose information about
chemicals on their premises to alert community members of any
potential risks. These chemicals include gasoline and diesel
fuel. Since we know that normal amounts of gasoline will be
present at retail gas stations, EPA increased the threshold
level for gasoline and diesel fuel for reporting, effectively
exempting retail gas stations from reporting at all. This saved
about 588,000 burden hours.
Agencies increasingly use electronic technology to
streamline reporting and recordkeeping. Converting to a new
electronic filing system that reduces by over two-thirds the
time needed to file a shipper's export declaration cut burden
by about 160,000 hours in 1999 and should reduce burden by
another 47,000 hours this year.
Although agencies are working to minimize collection
burdens, there is more to do. Their successes can be overcome
by new information collections that are required by new
statutory and program responsibilities. While information
technology offers great potential for streamlining paperwork,
we do not yet take full advantage of that potential. We need to
broaden the public dialog on how to make further progress.
In this regard, OMB this month is launching a special
initiative, with Federal agencies engaging small business
owners and other interested parties in a cooperative effort to
examine these problems and develop constructive solutions. This
initiative will emphasize public input and participation. We
are inviting hundreds of small business owners, academic
experts, industry and public interest groups, representatives
and other interested parties to participate in this endeavor.
They will join senior representatives from SBA and the
participating agencies, IRS, EPA, OSHA, HCFA, DOT, the
Department of Education and the Department of Agriculture, in a
public forum on April 27th. After initial presentations that
morning the agencies will hold roundtable sessions with our
private sector participants. We invite you and all members of
the committee to attend if you would like, Mr. Chairman.
We will continue this work in the following months.
Additional roundtables will take place as we search for new
insight and new ideas. The roundtables will focus on best
information collection practices and new ways of collecting
information, particularly as agencies reengineer business
processes to transact business and deliver services
electronically. We would like the discussions to produce
recommendations on how to improve the quality and reduce the
burden of specific collections while also offering lessons that
the agencies can apply more broadly.
We are particularly pleased to have the full cooperation of
the IRS in this endeavor. It has agreed to hold three of these
full day roundtables. This is an important undertaking. We
intend to proceed in a focused way and will look to develop
recommendations by midsummer of this year. We welcome the
committee's participation and support for the initiative and
certainly will make available to you the results of our
efforts. We appreciate this opportunity to work with you on
these issues. We know that our efforts are important to the
American people.
Thank you.
[The prepared statement of Mr. Spotila follows:]
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Mr. McIntosh. Thank you, Mr. Spotila.
Let us now turn to Ms. Kingsbury. If you would summarize
your testimony for us, and the entire testimony will be put
into record. Thank you.
STATEMENT OF NANCY KINGSBURY, ACTING ASSISTANT COMPTROLLER
GENERAL FOR THE GENERAL GOVERNMENT DIVISION, GENERAL ACCOUNTING
OFFICE
Ms. Kingsbury. I'll be happy to do that, Mr. Chairman. We
appreciate the opportunity to be here to talk about our work on
the implementation of the Paperwork Reduction Act. As you know,
we have been doing it for some time and testified in some of
your previous hearings and we're always happy to do that.
Although the PRA envisioned a 30 percent reduction in
Federal paperwork burden between fiscal years 1995 and 1999,
our review of this year's information collection budget
indicates, as you observed in your opening statement, that
paperwork burden has increased during this period. Overall,
after small changes during fiscal years 1996 to 1998, Federal
paperwork burden increased by 233 million burden hours during
fiscal year 1999 alone, the largest increase in any 1 year
period since the passage of the act. If projections of fiscal
2000 are realized, this record will not stand for long.
Paperwork burden is expected to grow again in 2000 by an
estimated 263 million hours.
Nearly 90 percent of the governmentwide increase during
fiscal year 1999 was attributable to increases at IRS, as Mr.
Rossotti has described. One agency, DOD, appears to have
exceeded the burden reduction goals envisioned in the PRA by 5
percent for fiscal year 1999. Another agency, the Department of
Agriculture, also seems to have done so, but further analysis
indicates that the reductions were largely due to expiring
authorizations for information collection, a matter I'll
discuss further in a moment.
Some other agencies reported smaller reductions, but it is
not clear whether those reductions are meaningful and some
evidence suggest they may not be in some cases.
The paperwork burden process recognizes that some increase
may occur because of newly authorized activities or programs
that require information from the public to implement. However,
the process also encourages agencies to carry out their
responsibilities with the minimum burden possible and to
continue to seek ways to reduce existing burden; that is, by
taking nonstatutory actions as they are recorded in OMB's
counting system.
In that regard we note that non-Treasury, mainly non-IRS
agencies showed a growth of more than 4 million burden hours in
fiscal year 1999 from such nonstatutory actions rather than the
reductions one might expect.
We have expressed concern in the past that many Federal
agencies were in violation of the PRA because they collected
information from the public without OMB approval or because
their approval to collect information lapsed after OMB's
authorization has expired. At last year's hearing OMB said that
it would address this issue. Nonetheless the problem of PRA
violations continued in 1999.
OMB's information collection budget identifies about 700
violations by 27 agencies in fiscal year 1999; that is, self-
reported failures on the part of the agencies to have their
information collection activities approved under the act. The
real number may actually be larger because there's no way to
ensure the timely approval is sought for all the collections
that are initiated and OMB may simply be unaware of some.
Because of the way in which OMB counts paperwork burden when an
authorized collection lapses and is not renewed, the associated
burden counts as a burden reduction for purposes of reporting
to the Congress. If the collection is subsequently reapproved
in a future year it would be recorded as a burden increase in
that year.
Meanwhile, the affected citizens have been burdened all
along and the data available to Congress for decisionmaking
about paperwork burden are clearly inaccurate and in some
serious ways it is misleading. There are also reported
instances of information collections being initiated without
obtaining prior approval of OMB, as PRA requires. These would
be very real increases in public paperwork burden that are not
authorized and not recognized in the data provided to Congress.
We recognize that OMB discloses these violations in its report,
but this perverse counting practice distorts the overall
numbers that Congress uses to determine if paperwork burden is
in fact increasing or decreasing.
At the request of your staff and based on some data that
became available in the last couple of days, we developed a
rough estimate of the largest information collection burdens or
the cost of them imposed by the violations of PRA that were
reported in the 1999 information or 2000 information collection
budget; that is, those estimated to be 100,000 hours annually
or more. Using an OMB estimate of the opportunity costs
associated with each hour of paperwork burden that we used, a
more limited but similar estimate last year, we calculate that
these large unauthorized information collections imposed nearly
$4.8 billion in lost opportunity cost on the public from 96
collections in fiscal year 1999.
A part of the problem of incomplete burden estimates and
PRA violations clearly lies with the agencies involved. The
evidence shows that some agencies have very small numbers of
violations despite relatively larger numbers of approved
information collections. But we believe OMB and the agencies
could do more to avoid or eliminate violations. When we raised
this issue with OMB, OIRA officials told us that they notify
agencies of information collections that are scheduled to
expire soon but they have no authority to require agencies to
come into compliance. We don't believe that OIRA is as
powerless as this explanation would suggest and both last year
and this year we suggested actions they could take to encourage
agencies to come into compliance.
For example, we suggested that OMB could issue public
notices in the Federal Register to the affected public that
they need not provide agencies the information requested in
expired information collection. OMB told us that they had taken
some steps, such as discussing paperwork burden problems with
CIOs and the President's Management Council, but for example
they had not issued the suggested public notices. We've also
suggested that they consider informing the Vice President, who
has overall responsibility for information--or for regulatory
affairs but they also said they had not done that.
I think with that, since Mr. Rossotti has pretty well
covered the IRS side of this story, Mr. Chairman, I'll stop
here and we'll handle the rest of these matters in questions.
[The prepared statement of Ms. Kingsbury follows:]
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Mr. McIntosh. Great. Thank you. Your review of that is
startling in many ways.
Let me turn to our next witness, Ms. Cindy Noe, from
Fishers, IN. Cindy, welcome to Washington and the subcommittee.
Please feel free to summarize your testimony and we'll put the
entire written prepared remarks into the record.
STATEMENT OF CINDY NOE, OWNER, IHM FACILITY SERVICES, FISHERS,
IN
Ms. Noe. Thank you, Chairman McIntosh, and committee
members. I appreciate your continued interest in the impact of
paperwork and regulation upon small businesses. I am Cindy Noe,
co-founder and operator of IHM Facility Services and Integrated
Housekeeping Services, located in Fishers, IN. We provide
facility services for industry and food processing plants in
about a seven-State region. And I serve on the Indiana
Leadership Council of the National Federation of Independent
Business.
For me, dealing with the overwhelming requirements of my
government, i.e., the IRS and other regulatory agencies, and
the accompanying paperwork that comes with that, represent the
greatest moral dilemma I face as a business owner today. You
see, I desire to be an upright, moral person in everything that
I do and say. Our company's tag line is ``Doing the Right
Thing.'' We reinforce that throughout our company, with our
customers as well as with each other.
So what is the moral dilemma that I speak of? Well, there
are basically three parts. One is the complexity of compliance,
the second is the cost of compliance, and the third is knowing
that we still are not in compliance even though we have tried
our very best to comply.
The complexity of compliance. Seemingly simple business
related actions get snarled in pages of paperwork and
instructions. Moving an employee and their family to a new
State requires digesting 16 pages of directions, calling our
CPA because there's probably a needed point of clarification,
as well as making sure that we have then completed and
distributed the appropriate IRS forms to distribute. And this
is not simply for moving expenses. Similar gyrations are need
for business expenses, travel, entertainment, and gifts.
Stockholder distributions have 11 pages of totally undigestible
instructions and then we have the cost studies and various
surveys that we are requested to do on an irregular basis.
And that's just the IRS. Add to that OSHA, DOT, DOL, EPA,
EEOC, FDA, HHS, and we are absolutely drowning in regulations
and instructions that we must digest and be able to execute.
Then you have the training on how to properly document for all
of this. And above that you have to make sure that certain
language appears in just the right way in company manuals, etc.
It is totally overwhelming for me as a small business owner.
Second, you have the cost of compliance. And here's an
example. Our industry has inherently high turnover. We now must
send new hire employee information to the Department of Health
and Human Services to find deadbeat dads. We have chosen to
comply by paying our payroll company $2 per employee to submit
that information. Our cost does not stop there, however. We're
finding that when the Government catches up with the employee,
sometimes they just quit and move on to the next job. We are
left to absorb the additional hiring and training expenses to
cover that increased turnover.
You just sit there and scratch your head and say, oh, the
games we play. But in preparing for this testimony, I was
shocked to find that over one-third of our administrative
salaries are spent toward achieving compliance of the
Government regulations that apply to our business. And that
does not include items like the $23,000 we have budgeted for
the professional services of our CPA or the indirect expenses
of increased turnover that I mentioned before.
The third is knowing that we are still not in compliance,
and here is the crux of the moral dilemma. I love America. I
consider it as an absolute privilege to have been born in this
country. And Jesus, referring to the government of his day,
instructs us to ``render to Caesar what is Caesar's.'' The
problem is, I know I do not. I know I cannot ``render unto
Caesar what is Caesar's'' because Caesar has become so complex
that Caesar, himself, would disagree internally on how much I
owe and when I am in compliance.
To achieve the unachievable goal, that is the position in
which small business owners find themselves. You always feel
like you are one step away from a penalty, a claim, or a
lawsuit, that could severely disrupt or even close down your
business, no matter how much you've tried to do the right
thing. It puts IHM and every other company at the mercy of a
growing and ever more intrusive and power hungry government.
Would I choose to start over as a small business owner in
today's overly regulated and complex business environment?
Frankly I don't know. Maybe not. I do know that 2 years ago my
daughter was real excited about starting her own business. She
abandoned it after about 9 months because of all the required
government paperwork, it just squelched the excitement and
satisfaction that came from meeting her customers' needs. And
that is profoundly sad. But resolve the issue that we are
addressing here today, and both she and I would very much enjoy
operating our small businesses.
So what should be done? Well, while there are many short
term Band-Aid measures that you should continue under the Small
Business Paperwork Reduction Act Amendments of 1999, I would
encourage you to take a step toward long term resolution. Vote
for the passage of H.R. 1041 to terminate the Internal Revenue
Code of 1986 and replace it with something that is simple and
just as is outlined in the bill.
Thank you very much.
[The prepared statement of Ms. Noe follows:]
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Mr. McIntosh. Thank you Cindy. Thank you very much for that
testimony.
Let me now turn to our next witness, Mr. Nick Runnebohm.
Nick is a good friend from Shelbyville. Welcome here to the
committee. And feel free to summarize your testimony and we'll
put the entire remarks into the record.
STATEMENT OF NICK RUNNEBOHM, OWNER, RUNNEBOHM CONSTRUCTION CO.,
INC., SHELBYVILLE, IN
Mr. Runnebohm. Mr. Chairman and members of the House
Subcommittee on National Economic Growth, Natural Resources,
and Regulatory Affairs, thank you for asking me to testify
before you today. I am here to ask you to reduce the paperwork
burden and especially that IRS tax form burden on small
businesses like mine.
I founded Runnebohm Construction in Shelbyville in Indiana
1968. Since that time, the Tax Code has become so complicated
that it's almost impossible for a small business person to
prepare their own taxes. This year it cost me $9,575 in
accountant's time to prepare my company's 1999 taxes. And this
doesn't include the substantial time spent by myself and my
bookkeeper throughout the year for dealing with issues.
Simplifying the IRS forms would allow more time for my
company to concentrate on the construction business. Like Cindy
says, I love construction, what I don't love is all the
Government paperwork that I have to deal with today and the
feeling that you're never in compliance.
There are four particular tax burdens on small businesses
that I wish to speak about today. The first three involve
substantial paperwork and recordkeeping. First, the look-back
calculation for percentage of completion method of reporting
income is very burdensome. These calculations cost between $600
and $1,000 in accountant fees to prepare plus several hours of
the bookkeeper's time. Moreover, forcing us to use this method
means that we must project profits on projects that may be only
10 to 20 percent complete and which entail a high degree of
risk because of weather issues, labor issues and many other
unknowns. In other words, we have to pay taxes on income that
we might never receive.
Second, the alternative minimum tax, AMT, requires
taxpayers to calculate their tax using two methods. Certain
preference items must be calculated and subsequently added back
to determine AMT income. Examples include the difference
between regular and accelerated depreciation and the
differences between completed contracts versus percent complete
accounting for long term contracts. Once these AMT preference
items are calculated AMT and related taxes are determined and
the taxpayer is required to pay the higher of the regular or
the AMT tax. The cost of both of these calculations can be
$1,000 to $3,000 per year for a small contractor like me. The
AMT should be eliminated or simplified to reduce the cost and
the time of figuring the tax due.
Third, section 125 of the Tax Code is unfair to minority
owners of sub S corporations and partnerships which include a
large number of small businessmen. Anyone who is more than a 2
percent owner of a sub S corporation loses the right to pay for
group health insurance with pretax dollars. Every other
employee enjoys that right. In addition, a 2 or more percent
owner is not eligible for many other tax free benefits to which
other employees are entitled. These provisions are very harmful
to small businesses, especially now when small companies are
trying to prevent good employees from being raided by large
firms. Big business employee stock ownership is not as affected
because most of them are C corporations and are not subject to
this rule. These provisions should be changed so that they do
not adversely effect the value of minority ownership of stock
in small business.
Fourth, I would like to thank Chairman McIntosh and the
other representatives that voted to repeal the death or estate
tax. I am a third generation general contractor and hope to
pass the business to my son Mike. Mike is part owner of the
company now, and I hope that the death tax will not force him
to sell or otherwise cut back on that business. I also pay a
hidden tax and I am distracted from my business because I have
to pay an accountant to help me with estate tax planning.
My message here today is to ask Chairman McIntosh and other
representatives to keep up their effort to reduce paperwork and
foster small business growth. I would sincerely vote for the
idea of a flat tax with no deductions so we can eliminate all
this guesswork and trying to become compliant and pay our tax
and go on with our business.
Mr. Chairman and members of the subcommittee, thank you for
allowing me to be a witness here today.
[The prepared statement of Mr. Runnebohm follows:]
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Mr. McIntosh. Thank you very much, Nick. Thank you for that
testimony.
Our final witness on the panel will be Mr. Morton
Rosenberg, who is a specialist in American law at the
Congressional Research Service. Welcome, Mr. Rosenberg. Please
summarize your testimony and any materials you want in the
record will be included.
STATEMENT OF MORTON ROSENBERG, SPECIALIST IN AMERICAN LAW,
CONGRESSIONAL RESEARCH SERVICE
Mr. Rosenberg. Thank you, Mr. Chairman. Good morning Mr.
Chairman, Mr. Kucinich. You have invited me here today to
explore the range of options your subcommittee may have in the
face of perceived non-responsiveness by the Office of
Management and Budget to requests for information and documents
with respect to matters within your subcommittee's
jurisdiction.
One instance involves the failure to conduct a complete and
adequate search for documents encompassed by a subpoena. A
second involves a refusal to provide information about actual
substantive changes made by OMB during its review of
information collection requests submitted by agencies pursuant
to the Paperwork Reduction Act. The third concerns an
incomplete response to an explicit statutory direction to OMB
to issue guidance to executive agencies as to how to respond to
and comply with the requirements of the Congressional Review
Act.
Numerous Supreme Court precedents establish and support a
very broad and encompassing power in the Congress to engage in
oversight and investigations that reaches all sources of
information that enable it to carry out its legislative
function. In the absence of a countervailing constitutional
privilege or a self-imposed statutory restriction upon its
authority, Congress and its committees have virtually plenary
power to compel information needed to discharge their
legislative function from executive agencies, private persons
and organizations, and within certain restraints the
information so obtained may be made public. In the words of the
Supreme Court, the scope of Congress' power to inquire is as
penetrating and as far reaching as the potential power to enact
and appropriate under the Constitution.
Congress has a very formidable array of tools to carry out
its oversight and investigative functions, to gather
information. Committees and subcommittees can issue subpoenas
to compel testimony or the production of documents. Indeed,
it's not well known but even a letter request from you, Mr.
Chairman, in the course of an official investigation raises a
legal obligation to respond to your requests. If a committee
follows its rules for the issuance of a subpoena, it is
extraordinarily difficult to successfully challenge it for
legal sufficiency. The Supreme Court has ruled that the courts
may not enjoin the issuance of a congressional subpoena,
holding that the speech or debate clause of the Constitution
provides an absolute bar to judicial interference with such
compulsory process. As a consequence a witness's sole remedy
generally is to refuse to comply, risk being cited for
contempt, and then to raise objections as a defense to a
criminal contempt action. Perhaps one of the reasons that we
haven't had a criminal contempt prosecution since 1986 is that
there has been acquiescence once a contempt citation has been
voted by the full committee or the full House.
But while a threat or the actual issuance of a subpoena is
normally sufficient to achieve compliance it's basically
through the contempt power that Congress may act with ultimate
force in response to recalcitrance.
There are three different kinds of contempt--three types of
enforcement proceedings that are available. The one most
commonly used for the last 60 years is the criminal contempt
provision of sections 192 and 194 of Title 2. That mechanism
provides that a vote of contempt on the floor of the House may
be submitted to the U.S. attorney for prosecution which may
lead to imprisonment for up to a year or a fine of $100,000
upon conviction.
It is applicable to both private citizens and executive
branch officials. It's a punitive process. That is, the
contempt cannot be purged even if the information is turned
over at some point.
An enforcement difficulty, however, arises when a referral
is made to a U.S. attorney for the District of Columbia, as is
the usual case as is required by the contempt statute. The
Justice Department has taken the position that Congress can
neither constitutionally compel the U.S. attorney to bring the
matter before a grand jury nor require him to sign an
indictment should the jury hand up one.
This is an unsettled matter judicially and the only
experience we have with an executive official occurred in the
1983 contempt proceedings regarding Environmental Protection
Agency Administrator Anne Burford.
But that does not mean that Congress is powerless in
subpoena disputes with the executive branch. Congress still
retains a host of other tools to require information and
testimony it needs, not the least of which is public opinion.
Thus, even if a citation of contempt does not lead to a
criminal prosecution, experience has shown that few
administrations and fewer officials within an administration
welcome a contempt citation with its resultant publicity and
public criticism.
Historically, there have been 10 contempt citations, issued
all since 1975, and in 9 of those 10 cases at the point of the
contempt citation an accommodation was reached and in most
instances documents that were sought were turned over or made
available to the committee.
There are, however, several other alternatives to these
modes of contempt in the case of an uncooperative executive
official. The most promising and possibly the most expeditious
route for a House committee would be to seek a resolution of
the body authorizing it to bring a civil suit seeking
enforcement of the subpoenas. There is precedent for bringing
such civil suits under the grant of Federal jurisdiction in 28
U.S.C. 1331 and the Department of Justice has in fact indicated
that it would approve this course of action to resolve such
interbranch disputes.
But instead of prosecution or litigation, Congress has a
host of other tools to secure information and testimony it
needs. It can delay action on bills favored by the
administration or pass legislation that makes mandatory action
that is now discretionary and is not being done. The power of
the purse can be used discretely to put pressure on the
administration. Holds may be put on the confirmation process
with respect to particular groups of individuals, and
ultimately Congress can use the power of impeachment against an
executive branch official.
A brief examination of the three areas of subcommittee
concern with OMB action suggest that they may be more amenable
to a variety of different enforcement actions. For example,
your dispute with the Office of Management and Budget with
respect to the Paperwork Reduction Act appears to essentially
involve your interest in knowing whether the Office of
Information and Regulatory Affairs is effectively carrying out
its statutory mission to reduce the burden imposed by
information collection requests by agencies. The statute, the
Paperwork Reduction Act, empowers OIRA to review or reject
information collections in part or in their entirety. The
statute also requires that the information collection burden be
reduced by stated percentages, 10 percent each in fiscal years
1996 and 1997, 5 percent each in fiscal years 1998, 1999 and
2000. OMB has conceded that OIRA has failed to meet these
statutory objections in each year so far.
Your subcommittee seeks information about the effectiveness
of OIRA's administration of the Paperwork Act, including among
other things actual substantive changes made by OIRA during its
review of action information collections. OMB's response is
that, ``it is our view that a substantive change is made by OMB
only when OMB exercises its authority to disapprove a
collection or when an agency withdraws a collection during our
review.''
OMB does not deny that it may object to certain
requirements in an information collection, and that an agency
may agree to delete them as a condition of approval for the
rest of the information collection, or that OIRA has the
authority to do so. Section 3507(e)(1) of the Paperwork Act
indicates that the director has the power to instruct an agency
to make substantive material changes to a collection of
information and those decisions are to be made publicly
available and are to include explanations.
A similar power in the Paperwork Act applies to information
collections in rules. OMB simply refuses to reveal whether it
ever exercises this discrete review authority. This would
appear to be an unquestionably valid exercise of the
subcommittee's oversight authority. If OIRA is never exercising
such review authority, or is doing so in a manner the
subcommittee deems perfunctory, it is a matter it may deem of
legislative concern requiring remedial action.
Also it is within the prerogatives of the subcommittee to
suggest that in the future that OIRA record instances in which
it has vetoed or suggested changes in certain requirements. Of
course it may not require OIRA to do so, but the agency's
refusal to do so would provide further impetus for remedial
legislation. However, to hold the Director of OMB in contempt
for what may be in fact an obdurate refusal to implement the
law the way Congress may have intended----
Mr. McIntosh. Mr. Rosenberg, let me ask you to summarize
that and put the remaining of your written testimony into the
record.
Thank you.
Mr. Rosenberg. Also, with respect to the Paperwork Act,
it's interesting to note that the Executive order on regulatory
review, Executive Order 12866, in an analogous situation allows
for review of rules and requires public disclosure once a rule
is published in the Federal Register, of the draft that it
submitted and how OMB changed it.
And with regard to the subpoena, certainly the entire
background of your subpoena requests, the delays in responding
to it, the failure to make an adequate search can be all part
of the background and basis of a valid contempt citation by
your committee.
Thank you.
[The prepared statement of Mr. Rosenberg follows:]
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Mr. McIntosh. Thank you. Thank you very much. Let me now
turn to the question period of this hearing. I've got several
questions, but let me start with Mr. Rossotti. I wanted to
revisit some of the discussions that we had last year after the
last hearing and see what plans, if any, the IRS has in those
areas. I guess the first one I would ask about was the idea
that we spoke about of having the IRS send each taxpayer a
simple booklet similar to what CPAs send their clients. In
fact, just last week I filled mine out and got it back to the
CPA who said I was late already. But I begged and he said he
would get the forms filled out for me to sign next weekend.
But would it be possible for the IRS to do that? What plans
would you have, if any, to try to move in that direction?
Mr. Rossotti. Well----
Mr. McIntosh. That would allow the taxpayer to choose as
their option to have the IRS fill out the form which you
already provide as an option but it would be a way to
facilitate that.
Mr. Rossotti. I think, Mr. Chairman, the basic idea behind
your suggestion is that the taxpayers would have an option to
provide some or all the information that's required to fill out
the tax form and then would have the IRS, in some way, complete
the process. Or have a process where they wouldn't have to do
that work themselves. And that is a part of a broader issue we
refer to as return free filing. That's a topic which has been
studied over the years in a number of given ways, and the
Restructuring and Reform Act that was passed by the Congress in
1998 requires us to--it requires the IRS to study various
methods of doing that kind of thing, what's generally referred
to as return free filing. Basically, we do two things.
One is to produce a report each year on the progress that
we're making on doing that and second to try to see if we can
develop a way of doing it. I believe the year is 2007. There
are a variety of ideas for how this could be done. Many of them
revolve around the ideas of using the information, as I think
you suggested last year when we talked in your office, using
the information the IRS already has in the form of information
reporting such as 1099s and W-2s to prepare part of the return.
The issue then is if we did that, where would we get the rest
of the information on such things as the number of dependents
that you have and the filing status you have and other kinds of
deductions?
Mr. McIntosh. But that's exactly what you fill out on the
form for your accountant. I mean, and then they keep it from
year to year so you fill out a little box that says has it
changed from last year.
Mr. Rossotti. Exactly.
Mr. McIntosh. The answers to those questions aren't
complicated. Why does it take 7 years to come up with an
answer? My suggestion is you hire Celera if that's the problem.
They beat the human genome project and spent a lot less money
and just ask them to do it.
Mr. Rossotti. The real question is not whether it would
take 7 years to do it, although with the computer systems that
the IRS has, actually it probably would take a lot longer than
developing the human genome project, in all honesty, since
we're still using systems that were built in the 60's. But
there are some significant issues as to what the taxpayers want
and also, oddly enough, what kind of paperwork would we put on
small business in this area. One of the suggestions or one of
the ways that this information could be provided would be by
enhancing what's called the W-4 form, which is the form that
the employers submit to their businesses to do exemptions for
employees. That's one of the methods by which this information
is already partially collected.
So that is one of the suggestions. We would build on that.
If we were to require the taxpayer to send information about
some of these details to the IRS directly, we have learned from
previous research that that is not necessarily something that
the taxpayers would prefer to do, because it might actually
require them to send us more details about their personal
situation than they currently do, even though it would, on the
other hand, eliminate some of the computational burdens. So
those are some of the issues.
We have actually completed some initial focus group studies
on this subject with taxpayers and have found that actually
there is more receptivity than what there was 5 or 6 years ago
to this idea, although it's still very mixed. Some taxpayers
basically don't like the idea of sending more information and
having the IRS produce their returns effectively.
There are also some very significant, I have to say, issues
about how this would be done because, for example, today the
single biggest error that occurs on tax returns from individual
taxpayers actually has to do with the whole issue of
designating your filing status, whether you're married, head of
household as well as the number of exemptions you're entitled
to. It's actually quite complicated under the law to determine
in some cases whether you're entitled to an exemption for a
certain individual as a dependent. Also, it can be complicated
to determine other credits and exemptions that relate to the
taxpayer's personal situation, such as the EITC credits, child
credits, education credits. These all have to do basically with
the questions what is a dependent, who is a child, what is your
household status. Today that area of Tax Code and that area of
filing generates more errors than anything else.
As a result, the IRS has worked on a number of strategies,
including, of course, trying to match social security numbers
and other identification numbers that taxpayers put on these
forms, and that screen out a considerable number of errors.
It's not clear how that would be done. It's one of the
issues that we have to study.
I don't mean to bore with you a long litany. There is a
valid idea here. We are proposing it. As a matter of fact, I
have a hearing tomorrow in the Senate on this very topic. We
will be issuing our first preliminary report later this summer
on this subject.
Mr. McIntosh. Let me say I hope it's much better than what
you just described now because you're making the whole question
much too complicated. It doesn't have to be required, so it's
not black or white. You have to require it or not let people do
it. There is a middle ground of making it optional.
And second, all of those complicated questions on
dependents have to be resolved anyway and an accountant doesn't
know any more about a person's family relationship is than the
IRS does. They have to rely on the person answering the same
questions and then filling out the forms. So my question is:
why wouldn't the IRS be willing to say to the taxpayer let me
give you an option for us to do that? You fill out this form
that you would otherwise have to fill out for your accountant,
we'll calculate the tax you owe and you send us the money.
Mr. Rossotti. As I said, generally the idea is that we
would take some of the information from the taxpayer and take
other information we already have from W-2s and 1099s. I think
the issues that revolve around that are how much information
would you actually have to send the IRS to allow us to do that.
That's the point I was getting at. You know it may be more
information than even the taxpayers currently submit to the
IRS.
Mr. McIntosh. So they make a choice if they don't want to
do that, they do it themselves.
Mr. Rossotti. The other one is one of timing. 75 percent of
the taxpayers receive refunds today, roughly. And by statute
and by expectation we get those refunds out within about 6
weeks if they're paper returns and 2 weeks if they're
electronically filed returns. Currently we don't get W-2s, the
information from W-2's, from the Social Security Administration
until summer and we don't get much of the 1099 information we
would need to match up. We do get it in the first quarter, but
we usually get corrections that don't take place until the
summer.
So from the time standpoint, unless there was some major
structural change in the way that the wage information is
reported and other information is reported, we wouldn't be able
to actually produce those returns and send refunds out until
about October or November, which I think would probably not be
acceptable to most taxpayers.
So that is an issue that is not fully within the control of
the IRS. It would really relate to rethinking how that whole
process works, reporting wages and other information.
Mr. McIntosh. Let me make sure I understand. So my
employer, now the Federal Government, sends me a copy of that
W-2, they don't send you a copy of it at the same time.
Mr. Rossotti. No. It's to avoid a burden on small business.
The employer sends the information to the Social Security
Administration and the Social Security Administration processes
it and does editing and so forth. We generally get the
information around July or August. We do get the information
directly from--for example, if you had interest and dividends
and that's reported by your bank on a 1099 form we do get that
information either at the end of February or under the new law
it could be the end of March. But then there are subsequent
corrections that take place. We get a billion documents like
that. So it's a major operation. So by the time we actually
have that information in usable form from the Social Security
Administration and the vendors, it's late summer, which
obviously is too late to use for at least the current tax
processing cycle. Those are some of the issues.
Mr. McIntosh. I understand that. Let me make a
recommendation as you consider that report then because it can
help us here in Congress, and that would be to identify the
parts of those ideas that could be done immediately. And that
may mean the taxpayer has to send you their W-2 rather than you
add it in for them. You may want to do it optionally rather
than require. And start at that level, what could be done now,
what would need to be changed, what would you have to get from
the Social Security Administration so that we could start
implementing parts of it sooner and see how the public responds
to it.
I've got some more questions, but I have also used up my
time. So let me turn now to Mr. Kucinich for questions he has.
Mr. Kucinich. Thank you very much, Mr. Chairman. Before I
begin with a few questions, I want to ask the indulgence of the
Chair if I may make an introduction. We're pleased to have with
us visiting Washington today a member of Parliament and one of
our counterparts from the United Kingdom. I would like to ask
Member of Parliament Ian Stuart to please stand up and be
recognized. Welcome.
And I'm about to have a privilege that many Americans would
love as we approach the day of reckoning with the tax man, and
that is a chance to ask the Commissioner of the IRS some
questions. So I'm--and before I do that I want to say to Ms.
Noe, you know, I hear what you're saying. And I think it's
important that you and the other representatives from Mr.
McIntosh's constituency are here today because Congress needs
to be informed as to how people are impacted by the laws which
are passed and that you not be made to feel like you're some
kind of criminal because you can't figure out these forms that
you're given or that the demand to keep pace with that is so
strong that it really makes you feel what's the use.
So we, you know, that's why your chairman--our chairman is
holding these hearings and that's why I support this continual
look at why we are asking for this information and what's the
purpose.
I would like to ask Commissioner Rossotti what percentage
of the increase in the IRS's paperwork burden results from
legislative changes?
Mr. Rossotti. Well, according to the numbers I had during
fiscal 1999 there were about 200 million hours increase and
about----
Mr. Kucinich. I'm sorry.
Mr. Rossotti. About 200 million I believe was the total
increase and I believe 148 million, which would be about 75
percent, was statutorily driven.
Mr. Kucinich. You know, I note the report that was done by
the GAO, a very interesting report I might add. And as I was
looking at it where they really do substantiate the IRS has
this lag in responding to the requirements of the Paperwork
Reduction Act, but when you get to the chart, and you see that
the good news, Mr. Chairman, is that there is--that
Agriculture, Defense, Interior, Labor, Federal acquisition
regulation, Federal Energy Regulatory Commission, FTC, the
Nuclear Regulatory Commission and Small Business Administration
all are indicating reductions are occurring from 1998 to 1999.
So we are seeing some progress. And when you--if as the
Commissioner states the increase in paperwork is a result of
legislative changes, as I think--also the OMB report
characterizes by citing the specific statutes where an increase
in paperwork ensued, for example, and this is one of the ones
that was interesting, since I have a daughter who's about to
begin college, the student loan interest deduction to reflect
new code section 221 is a form of a paperwork increase. So
there are education credits as a form of a paperwork increase,
child tax credit paperwork increases.
So, on one hand, we have some increases in paperwork that
may actually be something that American people would find
beneficial. On the other hand, there are areas in paperwork
which we need to keep striving to reduce. I just wanted to
thank Mr. Rossotti for pointing out that even though your
paperwork burden seems to be increasing and you're increasing
the burden in turn for Americans, that some of these statutory
requirements involve things that might actually be beneficial.
Would you agree with that?
Mr. Rossotti. Yes, I think that what tends to drive the 75
percent are the statutory items that have been put in the Tax
Code by Congress that benefit the taxpayer financially, such as
the child tax credit and the other education credits.
Mr. Kucinich. I wanted to go on record though that Congress
is passing some laws that would appear to improve or increase
paperwork, that the American people would know that those laws
are a benefit to them. I wanted to make that point for the
record.
I also want to ask you if you have other good news from the
IRS in terms of how is the electronic filing going since, you
know, hopefully that's helping to reduce paperwork. Could you
provide a brief report on that?
Mr. Rossotti. Yes. As a matter of fact, I think that is
actually good news. Because our electronic filing this filing
season is up about 16 percent. It's above what we expected.
We'll end up receiving about 34, 35 million returns
electronically--this is individual returns--about 27 percent of
the total. And, of course, in the Restructuring Act Congress
put a great deal of emphasis on this way of reducing burden by
setting a goal that we try to reach 80 percent electronic
filing.
I do want to note one thing along these lines, and I think
it's a bit responsive in a different way to the chairman's idea
of how we could set up a system where the taxpayer would not
actually fill out a return but would fill out a question and
answer form to provide the information. For the first time this
year we have providers that we've worked with who are offering
over the Internet the ability for a taxpayer to sign onto the
Internet and basically fill out their tax return online by
simply answering questions. And then the Internet system
computes the actual return and sends it to us.
Now it doesn't take advantage yet of the information that
we already have. You have to enter, for example, your 1099
information because we don't have that information yet but it
does go on those same lines. I want to point out that in the
President's budget for this year we worked with the Treasury
Department to get in an item which says that the IRS by 2002 is
required or supposed to get to a situation where we can offer
free filing over the Internet to any taxpayer, any individual
taxpayer.
This could be done through cooperation with private
industry. But it would be basically building on what was
already done for the first time this year actually as an
option. Part of the 35 million returns we've got were this way.
I think, given the Internet is so important and popular, this
may be a practical way of trying to move to that idea where
there's really no paper in it. You just sign on to the
Internet, it asks you questions, you answer the questions, it
computes the return and sends it to us and that's the end of
it.
Mr. McIntosh. That's great.
Mr. Kucinich. I want to thank the Commissioner and I'll try
to--I will visit with Mr. Stuart for a second. I will try to
come back for further questions. But thanks for holding this
hearing.
Mr. McIntosh. Absolutely. Thank you, Mr. Kucinich, and I
appreciate that a great deal. I can't resist though to say the
solution to the problem of all these benefits we've added in
Congress have been given to us by the two folks from Indiana
and going to the flat tax where we don't have to confer
benefits to individual taxpayers but everybody gets a lower
rate.
Let me ask a question to Mr. Spotila. During the last
hearing I asked OMB's witness about Vice President Gore's
involvement in the paperwork reduction due to his various roles
on the Reinventing Government Initiative. The Acting Deputy for
Management testified that the Vice President had not been
involved at all in the Government's paperwork reduction efforts
as of that hearing.
As a consequence, on April 20th and May 11th I wrote the
Vice President again asking him about his efforts on paperwork
reduction. My question for you is since May 1999 what
involvement, if any, has Vice President had with OMB about
additional governmentwide paperwork reduction; i.e.,
Reinventing Government?
Mr. Spotila. Yes, Mr. Chairman, at least based on my
experience. I don't know that I can answer as to everyone at
OMB, but in terms of my experience, the Vice President's Office
and the National Partnership for Reinventing Government, which
works closely with the Vice President's Office, have focused
quite a bit on information technology initiatives, the
potential use of electronic technology to streamline paperwork
burdens and achieve other efficiencies. I think that their
focus has been more on that information technology area than it
has been on interacting either with us or with the agencies on
specific information collection.
So, at least to my knowledge, I think that's been where
they've decided it would be wisest to focus their efforts.
Mr. McIntosh. OK. Thank you. One other question that I've
got for the IRS Commissioner, Mr. Rossotti, and that was the
other idea that we had talked about in terms of using a group
of small businesses to ask them not as a focus group so much
but what their experience is when they look at the forms in
terms of where there's duplicate information and other ways of
trying to get input from small businesses.
Were you able to do any of that in that review process?
Mr. Rossotti. We have had a number of initiatives to ask
various taxpayers, including small businesses, for their input.
I mentioned the check box proposal which came out of the
citizens advisory panel, which includes several small business
owners. I think the very small businesses, the really small
self-employed businesses, will probably be the ones that
benefit by that particular proposal.
We have another initiative that we're just starting along
those lines. We have what we call a small business lab up in
the Seattle area, which is a group of IRS employees that work
directly with small businesses in that area to solicit inputs,
and one of the initiatives that we have for this year that we
are just starting is to do precisely as you suggest, which is
to solicit both over the Internet and in person comments on
specific forms that small businesses use and we're going to
analyze all those and try to correlate them with problems and
errors that taxpayers have on specific forms and use that as
feedback.
So those are two specific initiatives. I would also like to
note something that I'd welcome, Mr. Chairman, an opportunity
to perhaps visit a site with you. We have a site in
Indianapolis, an IRS site, that I have been to within the last
couple of months. What we did with their objective is
specifically to research this whole issue of forms and filings.
And up until now they have focused predominantly on individual
forms. And one of the initiatives that we have come up with,
which we've implemented, is to try to use the information we
have to find out people who don't have to file at all. We
actually have several million forms--you know, filings that we
get where the people think they have to file and they don't
have to. As a result of their research in Indiana, we have sent
out about 4 million letters to people, many of these are
elderly people, for example, that continue to file because they
just have always been doing it, but because of their situation
they don't have to. Research showed that about half of them,
once we sent this letter, realized they really don't have to
file.
They're now going to be working on some new things on the
business side, some corporate forms. It's a group of
researchers that are based in Indianapolis that really
energized this. We've now connected them up with the people
back in Washington and actually designed the forms. So we have
those initiatives.
Mr. McIntosh. Let me take you up on that offer some time
when you're traveling that way and I'm back there, whenever I'm
not here.
Mr. Rossotti. I'll do that. It just occurred to me at this
hearing, I didn't make the connection, but I was out there only
a couple of months ago, that they're doing that. So we have
those initiatives.
Could I just mention one other thing that I hope will
accelerate this process of not just the forms but the whole
issue of small businesses. Part of our broader modernization of
the IRS is reorganizing the whole agency and that was provided
for in the restructuring format. One of the major components of
this is setting up a whole new section within the IRS called
the Small Business and Self-employed Operating Division, which
will have complete responsibility for dealing with about 35 to
40 million small businesses as well as self-employed
individuals. One of their arms, one of their key arms will be a
taxpayer education and communication group. Their entire focus
will be working with small businesses to reduce burden and
figure out how we can get things right from the beginning.
That will be going into operation later this year and will
be over the following year really standing up, as we call it.
We hope that will provide a place where we will have a specific
group of people whose full time, only responsibility will be
working with small businesses to try to figure out how to solve
some of these problems.
Mr. McIntosh. Excellent. Let me also suggest to you that
one perspective that I found helpful in these oversight
hearings because it's easy to get into the abstract, but one
that brings it down to a very important question for citizens
is how do these small business paperwork requirements affect
the employment decision, and specifically what Cindy Noe
mentioned in terms of her daughter deciding to give up her
small business and therefore not employ people.
At a previous hearing we've actually compiled from small
businesses all the different forms and books that they have to
read through for each employee, and it's quite impressive. It's
not just IRS, as Cindy mentioned. There are a lot of other
agency requirements there too. So let me urge you to take back
to your folks in that group, which I am delighted to hear is
engaged, that conceptually think of a project at least that
would focus on the employment decision, the employer-employee
and how things that they might assume are unrelated to that
actually influence that decision.
Let me switch gears slightly here and ask Mr. Spotila, you
mentioned in your testimony several things that the agencies
are doing and planning to do. And I commend them for doing
that. Let me focus in directly though on the role that OMB, and
specifically OIRA, has had in helping the agencies to identify
specific paperwork reductions either in items that are up for
renewal or in existing items that are in their inventory of
forms approved by the Government. Can you list for me anything
that they've initiated at OIRA and the agencies have taken up
or even that they've rejected?
Mr. Spotila. I'm not sure if I'm entirely following the
question. So let me try to answer it and perhaps if I don't
quite get it focused the way you'd like it I would be happy to
clarify further. We work with the agencies on something like
3,000 to 3,500 information collection requests a year. We have
about 20 people at OIRA that do this along with their other
responsibilities, which include regulatory review, another key
aspect of their jobs. And our people I think for good reason
focus their efforts, A, on the ones that are most important, in
particular, and second those where it looks like there is some
opportunity for improvement.
In general, we try, and it's been our experience this is
the most successful way to actually gain good results, we try
to get the agency to see the benefits of taking a second look
and making more efficient decisions. We try and integrate their
efforts with information technology accomplishments. And we try
and develop a good cooperative working relationship with them
in an effort to get to the goal I think that you and I both
share, which is to try to streamline their collections and
reduce the burden while still enabling them to obtain the
information.
Mr. McIntosh. My question is can you report to me or have
you asked those 20 employees what ideas have they been
responsible for that have resulted in an actual reduction in
paperwork?
Mr. Spotila. It's difficult and I have asked them. What
they are telling me is that the process does not involve them
telling an agency to do this or do that necessarily as much as
it is working with the agency to try to tackle a problem and
improve it. So let me give you, as an example, we might look at
a request coming out of the Department of Labor to do a survey
on equal employment opportunity compliance. Our statistical
policy people who are experts on surveys will become involved
in this, looking at how many people you actually need to
survey. If the survey calls for asking more people than you
need, we'll make that kind of an observation, or we'll engage
statisticians at the Department of Labor.
Mr. McIntosh. But you have veto power. You can go beyond
observing and tell them they can't do it.
Mr. Spotila. What we found is that often we don't need to.
We've indicated to you those instances where we've had to use
the so-called veto power--and there really aren't very many of
those. What we find is that developing that relationship with
the department in this way leads to better results.
Mr. McIntosh. OK. I understand that sort of activity. And
those are, I take it, generally renewals or in most cases new
paperwork collections?
Mr. Spotila. They could be either one, right.
Mr. McIntosh. What about the set of existing paperwork
requirements and having your staff go back and review those and
call the agency up and say you know we found this and we think
you can reduce the burden by doing this to change it? So it's a
proactive rather than a reactive role. Does that ever occur?
Mr. Spotila. As you know, we review these at least every 3
years because the approvals cannot exceed 3 years. When we're
doing 3,000, 3,500 a year, in general I think we have focused
our efforts on the new ones coming in, whether a renewal or an
information collection, rather than going back over reapproved
ones to try to reexamine whether they could be done.
Mr. McIntosh. Let me just stop you right there though. That
is an absolute failure of your mission under the Paperwork
Reduction Act, which was to reduce the burden. Reduction
implies you take existing burden and go back and eliminate some
of it. That means you have got to review them and identify
which ones can be reduced. I mean you've just told me that you
absolutely failed in the mission of your agency under that act.
Mr. Spotila. Respectfully, I don't agree with you.
Mr. McIntosh. The numbers show you do. They're going up
rather than going down.
Mr. Spotila. Let me----
Mr. McIntosh. Now we know why because you don't do it.
Mr. Spotila. Let me make three observations here. First of
all, as we have said, the agencies bear the primary
responsibility under the Paperwork Act. As Mr. Rossotti has
explained, we often get great cooperation from agencies that
are at least looking at how to do this. They are often in a
better position than we are to generate those kinds of ideas.
Second, we are very much interested and have been working
with the agencies in the information technology area to take
advantage of the potential for streamlining in that fashion.
And so, our general work in the information policy area is one
that we think proactively will lead to improvements down the
line.
The third aspect is the initiative that I referred to. We
recognize that this is a difficult problem. The answer we think
is to engage people, including people in the private sector,
small business owners and others, in an effort to look at where
our efforts should best be directed most efficiently and for
the most effectiveness. So we acknowledge there is a great need
to be proactive here.
Mr. McIntosh. I'm going to have to recess the hearing
because I have to go vote on another committee. I must comment
that that's pretty late in the process for a bill that required
you to start doing this in 1996, but I guess better late than
never.
Let me now recess this hearing and we'll come back after
the other committee has adjourned.
[Recess.]
Mr. Ryan [presiding]. The hearing will come to order.
Thanks for waiting, everybody. I understand Dave, the chairman,
had to leave. We have some votes coming up as well. I would
like to ask OMB, the representative from OMB a question if I
may.
The IRS accounts for nearly 80 percent of the total
governmentwide burden on the American public. Even after our
April 15, 1999 hearing OMB reported to us on March 24, 2000
that it continued to have only one staff member devoted part
time to work with the IRS on paperwork burden reduction
initiatives and review IRS paperwork submissions to OMB for PRA
approval. Why didn't OMB increase its staffing devoted to IRS,
No. 1, and what changes did OMB make in IRS's December 1999
proposed ICD submission to reduce paperwork burden in 2000? And
if none, why especially after the April 15th hearing last year
and our extensive correspondence with OMB since then?
Mr. Spotila. In terms of staffing, first of all, Mr.
Chairman, since the initial passage of the Paperwork Reduction
Act in 1990, OIRA has assigned one individual to review these
paperworks. We continue at that staffing level today. Our sense
is, as the Paperwork Act contemplated, the key responsibility
for this type of paperwork reduction necessarily rests first
with the agency and, as Mr. Rossotti had said earlier in his
testimony, the IRS has been working extensively at trying to
examine how they might try different approaches that would lead
to significant burden reduction. So our effort with them has
been aimed at working with them cooperatively.
As I had indicated in my testimony, our focus is also to
work with them and other agencies in a new initiative that will
engage people from the private sector broadly in an effort to
look at how we might proactively make significant reductions in
the paperwork burden associated with tax compliance. The answer
we think is not adding a second or a third person from OIRA to
reviewing individual IRS paperwork submissions, but rather to
work with IRS and with people from the private sector on
broader measures that will use information technology and
perhaps new approaches, including--the chairman earlier this
morning had some suggestions of his own, including suggestions
like that, to see what can be done that would have a
significant broad impact. In terms of the changes in the ICB
submission from the IRS, my recollection is that again in
working with the IRS we took their submission--I would be happy
to get to you more specifically, I can't recite to you a change
that we made off the top of my head now, but I would be happy
to respond in writing.
[Note.--See subcommittee's April 14, 2000 and June 20, 2000
fullowup letters (Question #2) and OMB's June 12, 2000 reply
(Answer #2, 2nd paragraph.]
Mr. Ryan. If you could respond in writing. Let me ask you
this, our chart 3--I think you saw that before--our chart 3,
which I think they will show on the flat screen there, shows
that 60 of the most burdensome paperwork requirements, each
totaling over 10 million hours of the public time, equals 85
percent of the total governmentwide burden on the public. Which
of these 60 are being targeted by OMB for reduction and the
rest of the Clinton administration? Have you considered
awarding a contract for an analysis of opportunities for
reduction in these 60 paperwork requirements or if you haven't,
would you consider doing so? If you could provide us for the
record the dates of the last substantive revision of each of
the top 60 and the number of hours reduced as a result of that
revision effort.
Mr. Spotila. We would be happy to supply that for you.
[Note.--See subcommittee's April 14, 2000 and June 20, 2000
followup letters (Questions #3) and OMB's June 12, 2000 and
July 19, 2000 replies (Answer #3.]
Mr. Ryan. If you could, I would appreciate that. I would
like to ask the witness from CRS a quick question if I may. On
page 16 of your written statement you point out that President
Clinton's regulatory reviews, Executive order, I think it was
12866, ``requires that an agency must identify in the Federal
Register notice accompanying the proposed rule any changes it
has made at the suggestion of OIRA.'' You questioned why the
administration would voluntarily disclose OIRA impact in its
regulatory reviews but find it unacceptable to voluntarily
disclose OIRA impact in its paperwork reviews. Please review
the options you indicated in your statement on how we get OMB
to fully report the results of its paperwork reviews.
Mr. Rosenberg. Well, certainly OMB could replicate
voluntarily the requirements of the Executive order which, as I
stated and which you repeated, impose an obligation on the
agencies when they publish a regulation in the Federal Register
to at the same time make publicly available the draft rules
that it originally submitted for review. And if there were
changes in those drafts in the rule that is published in the
Register for public comment, they must explain why they were
made. Also there is also an obligation in the Executive order
on OMB to do the same thing at the same time. That has been
interpreted by OMB, as I understand it, to include, for
instance, reviewing in its files the communications with the
agency, including reviewing the drafts. So that that could be
replicated either voluntarily by OMB, or perhaps the President
could issue an Executive order specifically with respect to the
Paperwork Act directing that kind of public disclosure, or
Congress could pass some legislation imposing that obligation.
Mr. Ryan. Would you recommend that?
Mr. Rosenberg. I think the easiest path would be to point
that out perhaps to the President and ask him to----
Mr. Ryan. Do an Executive order.
Mr. Rosenberg. That's quick, easy, and doesn't require
legislative process.
Mr. Ryan. Thank you.
Ms. Kingsbury, I just had one question I wanted to ask you.
In OMB's just issued report it identifies the last valid OMB
approval, if any, for each illegal information collection in
continued use for dates from 1978 to 1989, i.e., from 11 to 22
years ago. For example, the State Department's statement of
nonreceipt of passport dates back to 1978. Should Congress
consider sanctions for agency policy officials who knowingly
and repeatedly violate the Paperwork Reduction Act or who do
not promptly correct violations of law? If not, what does GAO
recommend?
Ms. Kingsbury. I think in the hearing last year we
recommended or we at least observed that it would be possible
to focus on paperwork reduction and responsibilities of those
officials who have that as part of their portfolio by making it
an explicit part of their performance contracts. And we have
found in GAO, certainly in our own internal activities, that,
when you focus on things at that level, things tend to get
done. There could also be created specific goals in the agency
to achieve the same purpose.
I'm not sure legislative sanctions are a very efficient way
of doing the same thing. I think it's probably better as
administrative process.
Mr. Ryan. OK. Thank you.
I would like to finally just ask Ms. Noe and Mr. Runnebohm
your take, your comments on what you've heard today. What do
you think after participating in this panel today, what's your
take on what you've heard from the other witnesses?
Ms. Noe. I guess the resounding question is, will anything
change because of what took place here today? But in deference
to Commissioner Rossotti, he has a tough job, a very, very
tough job. And it is a job that--you talk about trying to go
against the tide. I can't imagine any other setting that would
be tougher. And yet, he's working with a profoundly and
systemically broken system that has resorted to Band-aid
``fixes'' and the mentality of ``let's help this group a
little, now we have to balance it out by helping this group a
little and let's not forget about them.'' And, to his credit,
I'm sure he is always responding to legislation that has
passed, bringing the IRS code into compliance.
And I go back to, we need to clear the decks, set our
sights, and let the American people know that they will be
seeing changes. They will be dramatic. They will be just and
simple. Begin to talk to us like we have an ounce of sense and
communicate a broad message of, ``Our government does great
things for us.'' It's established by God that government is an
institution we must have. It does great things. Tell us what
those things are and begin to see in us that we want to join
forces and march in the same direction. We do understand we
have a responsibility to pay taxes to government, and instill
in people a sense of honesty and dependability and
resourcefulness. And gosh, we'd be so much better off.
Mr. Ryan. Here I've got to tell you as a freshman Member of
Congress I am still naive enough to think we can get that done
1 day.
Ms. Noe. Well, don't tell me we're not.
Mr. Ryan. Thanks.
Mr. Runnebohm. Did I pronounce your name correctly?
Mr. Runnebohm. I would have to second what Ms. Noe said. I
believe that's the route we need to take. You know, dealing
with this type of thing in a government always reminds me of
trying to fight with a 10,000-pound marshmallow. Where you do
start? But I believe we need to basically set aside what we're
doing now, especially with the IRS because you can't fix
something that is totally broken. And I believe that system is
totally broken. I believe it needs to be set aside.
You know, I for one think the idea of a flat tax with no
deductions that would be fair for everyone would work. I'm sure
there would be some problems at first getting it in place, but
there is no reason why it can't be done. Most of the business
people I know, the great majority of them, are very patriotic,
they're very willing to pay taxes. And they recognize that we
pay taxes for good causes for the most part. The problem is not
being able to know whether you're paying the right amount of
taxes or not and all the special interests, that special
interests that are involved today that pull the Tax Code in all
different directions and keep adding layers and layers of more
regulation instead of simplifying things. I think it's time to
call a halt to that and let's do a flat tax with no deductions,
everybody in the country pay their fair share and do more
productive things with our time.
Mr. Ryan. Well, thank you very much. I think some of the
interesting statistics about that, I think we spend 5.6 billion
man-hours a year just complying with the Tax Code. We spend
about $250 billion paying somebody to put our taxes together.
It is pretty crazy. Thankfully this year we got 2 extra days
because the 15th falls on a Saturday.
Mr. Rossotti, I want to ask you a quick question. We have a
bill on the floor today or tomorrow on sunsetting the Tax Code
by the year 2004. As you know, the Tax Code doesn't have a
sunset clause in it like most bills that come up for
reauthorization. I would venture to guess what your answer
would be but I would still like to hear what your answer would
be on the Date Certain Act. Maybe you have qualms of the
details but what do you think of the idea of saying a date
certain in the future, not tomorrow but 4 years from now
Congress has to act on either reauthorizing the current code or
offering up its replacement and have a sunset date in a good
distance in the future? What do you think of that?
Mr. Rossotti. Well, one of the things I have learned--I
have been in this office a couple years--is that I think about
where I have to stop advising Congress what Congress should do,
because I have enough trouble advising myself in my own agency
what we should do to cope with this. I think the question, with
all seriousness, is one that is a highly political question
that really is something that is appropriately answered by the
President and the Members of Congress.
Mr. Ryan. What does Citizen Rossotti think about that.
Mr. Rossotti. I will have to wait until I'm a private
citizen to answer that question. In all honesty, if it's a
question about my agency, I try to be very fair, but I think
it's a profoundly political question. I think you as Members of
Congress are the right people to answer that question.
Mr. Ryan. We'll let you off on that one. I'd like to thank
everybody for attending. Some of the Government witnesses, we
will be sending some followup questions. We would appreciate if
would you get back to us with answers as soon as you can.
Thank you very much for coming. This hearing is adjourned.
[Whereupon, at 12:22 p.m., the subcommittee was adjourned.]
[The prepared statement of Hon. Helen Chenoweth-Hage and
additional information submitted for the hearing record
follow:]
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