Opening Statement of the Hon. Amo Houghton, a Representative in Congress from the State of New York,
and Chairman, Subcommittee on Oversight

Hearing on the 2002 Tax Return Filing Season and the IRS Budget for  Fiscal Year 2003

April 9, 2002

Good afternoon.  Voluntary compliance is the foundation of our tax system, and I can’t tell you how troubled I am about recent reports that show an erosion of trust in its fairness.  This apparent erosion coincides with a persistent decline in enforcement statistics;  the percentage of taxpayers who are audited has declined, and some tax professionals say they can no longer convince clients to fear the IRS.  One tax advisor has taken to posting a depiction of heaven and hell on her wall to supply the fortitude that fear of an IRS audit once supplied. 

I don’t want to add to this problem by failing to observe that the vast majority of taxpayers are indeed honest and comply faithfully and with great integrity, but we need to address the problem.  I will ask each of our witnesses today what we can do to turn this situation around.

Our witnesses have specific knowledge or experience with different aspects of IRS operations.  In addition to sharing their views on tax compliance, they will focus on the 2002 filing season, the President’s budget request, and current developments at the IRS.

Despite the progress the IRS is making in customer service, as highlighted in the Commissioner’s testimony, there are still troubling reports that IRS performance is lagging in some areas.  For example, taxpayers continue to complain about various aspects of the offer in compromise program, and independent reviewers have expressed concerns about the quality of telephone assistance and walk-in assistance to taxpayers.   On the other hand, the IRS appears to be doing better this year to encourage electronic filing.

On Wednesday, the House is scheduled to consider the Taxpayer Protection and IRS Accountability Act of 2002, legislation that I sponsored.   Commissioner Rossotti played an important role in advocating the modification we are making to the so-called “Ten Deadly Sins” provision of the 1998 IRS Restructuring Act, and the President, in his budget request, proposed a 15 day extension for electronic filers that we are adopting.  I hope that the 15 day extension further accelerates the pace of electronic filing, and that the change to the Ten Deadly Sins improves morale at the IRS while continuing to protect taxpayers from arbitrary and unlawful conduct.

Additionally, I note that the Administration will be submitting to Congress a series of recommendations on individual tax simplification in the next several weeks.  I look forward to reviewing those recommendations, and I hope we can act on them in the near future.

During his tenure, Commissioner Rossotti has transformed the IRS from an outdated structure, based on geography, into a modern, customer-focused agency organized around the tax needs of American citizens.  He has also laid the groundwork for technological changes that will carry the IRS far into the 21^st century.  We are just beginning to see the fruits of those innovations today, for example, in the Electronic Funds Transfer Payment System that has greatly simplified the remittance of payroll taxes.  I understand your term will expire in November and that you have announced your intention to move back to the private sector.  Thank you, Commissioner, for your exemplary public service, and I wish you success in your future endeavors.

I am pleased to yield to our ranking Democrat, Mr. Coyne.