Committee on Ways and Means, Full Committee, 9-16-97 Testimony

TESTIMONY OF THE HONORABLE BENJAMIN L. CARDIN
ON IRS GOVERNANCE
BEFORE THE WAYS AND MEANS COMMITTEE

SEPTEMBER 16, 1997

I am pleased to have this opportunity to appear before the Committee today to testify on the crucial issue of reform of the Internal Revenue Service. I am especially pleased to join Rep. Portman, and Senators Kerrey and Grassley, who deserve our thanks for the work they have done over the past year on the National Commission on Restructuring the Internal Revenue Service.

I also want to commend my colleagues on the committee, Rep. Rangel and Rep. Coyne, for their work on this issue. While we have differences over the specifics of the legislation we have each sponsored, I am confident that we share the same objectives and will be able to work fashion legislation we can all support.

Mr. Chairman, I am pleased that the Committee will have the opportunity today to hear from Secretary Rubin. The Secretary has provided strong leadership in beginning the needed reforms of the IRS. He has recognized the need for legislation in this area to continue the overhaul of the agency. The Administration's proposal differs in important ways from the Portman-Cardin bill, but we share the goal of a more efficient, better-managed, more taxpayer-friendly IRS. I look forward to working with the Secretary as the legislative process moves forward.

Reform of the Internal Revenue Service is important on two levels. First, it is vitally important to put in place systems that will change the way the IRS interacts with its customers, the American taxpayers. Paying taxes as required by law is a fundamental responsibility of citizens. Treating taxpayers with professional courtesy, respect, and competence is a fundamental responsibility of government. It is too clearly understood by too many taxpayers, through personal, often painful experience, that the government is not meeting this responsibility nearly often enough.

Second, reform must be carried out in a way that will begin to restore the confidence of the American people in their government. More Americans have contact with their government through the Internal Revenue Service than through any other agency. With more than one hundred million individual tax returns filed each year, the IRS plays an indispensable role in collecting the revenues needed to fund the government. This essential government function must be carried out in a way that gives people confidence that the government is in fact working for them.

This bill is not about abolishing the IRS. It is about making the IRS more responsive and efficient in assisting taxpayers and collecting revenue.

Today we are discussing the most significant aspect of IRS reform, governance. No institution in America is more in need of a sign that says "Under New Management" than the IRS. H.R. 2292, the bill I have introduced with Rep. Portman, treats the management problems at the IRS seriously by proposing serious reforms.

First, we would establish a new Oversight Board to bring private sector expertise to bear on the Service's customer service failures. The bill creates, within the Treasury Department, a nine-member board, appointed by the President, and subject to removal at will by the President.

The Secretary or the Deputy Secretary of the Treasury will serve on the board, as will a representative of the employees of the IRS. The remaining board members will be appointed based on their demonstrated expertise in areas the IRS most needs it -- management of large customer service organizations, information technology, and organization development.

The Board's members will serve staggered five year terms. This will help establish and preserve continuity, which is sorely lacking both in the current structure and in the proposals advanced by the Treasury.

The major thrust of the bill is to empower the Commissioner to run the IRS. The Board will provide oversight, expertise, guidance and advice to the Commissioner. By giving the Commissioner the opportunity to bring in his or her own senior management team, the bill will give future Commissioners a fighting chance to change course at the IRS.

The bill provides that the Commissioner, working with the Board, will prepare a budget for the IRS, and that the Commissioner's budget request will be sent to Congress. This informational budget, which tracks the process used by the Social Security Administration, will be sent to Congress by the President along with his official budget proposal. The added information will provide Congressional budget-writers a fuller picture of the needs of the Service.

By involving the Board in the budget process, this system will create a powerful advocate for the IRS in the Congress. The members of this Committee know the difficulty of securing adequate funds for the administration of the IRS. The Committee has routinely urged the Budget Committee to give the IRS the money it needs to do its job, only to have those requests ignored in the final funding. The Board members will bring needed credibility and stature that will, with the reform of IRS, help win approval of adequate funding.

Mr. Chairman, H.R. 2292 as introduced includes one change in the management of the IRS which I believe will not work to strengthen the role of the Commissioner. I am speaking of the proposal to transfer from the President to the Oversight Board the power to appoint the Commissioner.

I believe it is vitally important that the appointment of the Commissioner remain with the President. I am troubled by the constitutional issues raised by a provision to rest appointment by the Board. Perhaps more seriously, I am convinced that the success of IRS reform depends on strengthening the office of Commissioner. Removing the appointment from the President, in my judgment, will distance the Commissioner from the source of executive branch authority, and thereby weaken the office. When the time comes to mark up this bill, I would hope the Committee will change that provision.

The Oversight Board created by H.R. 2292 has been criticized for allowing a dangerous level of private control of the IRS. While I applaud the work of the Commission, it is important to point out that H.R. 2292 differs significantly from the recommendations of the Commission. Those differences are concentrated on the role of the Oversight Board in running the IRS.

Let me briefly outline changes in the bill regarding the Board's authority.

The bill specifically denies the board any authority with respect to the development and formulation of Federal tax policy, and specific law enforcement activities of the IRS, including compliance activities.

The board has no authority with respect to the day-to-day operational plans of the IRS, which remains properly within the authority of the Commissioner. The board has no authority with respect to the appointment of the Chief Counsel of the IRS.

Management of the more than 100,000 person workforce of the IRS, and the collection of the revenue needed to run the federal government, is a vital job. By strengthening the role of the Commissioner in running the IRS, we will improve the accountability and continuity of the management of the agency.

On a bipartisan basis, the Commission on IRS Restructuring has made recommendations that will make it possible to improve the service the IRS provides to the American people. H.R. 2292 continues that bipartisan process. I look forward to working with my colleagues in the House and the Senate to enact legislation to reform the IRS and regain the confidence of the American people for this vital function of government.