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

Testimony Before the Subcommittee on Oversight
and Subcommittee on Select Revenue Measures
of the House Committee on Ways and Means

Hearing Series on Tax Code Simplification

July 17, 2001

Good Afternoon. Let me begin by noting that this is a joint hearing of the Oversight and Select Revenue Measures Subcommittee. I think I have the gavel either because I outweigh or out-age my colleague Chairman McCrery. The Oversight Subcommittee has a long history of activity on tax simplification and I welcome the participation of the Select Revenue Measures Members in the important need to simplify our tax code.

What I have here in my hand is the total number of pages used for our income taxes in 1913 - four simple pages. By 1937 the tax return had grown to four pages with another four pages of instructions. But the current tax code is so complex I couldn't begin to hold up all the forms and pages of instructions put out by the IRS - thousands of pages - and they are displayed here in front of me.

Our past hearings have given us a range of numbers on the cost of complexity in the tax code. The lowest estimates, in the range of $75 billion per year, commonly include only the cost of preparing federal tax forms. If you add up all the costs of the federal income tax system, including the cost of:

• education;
• record-keeping;
• preparing returns;
• paid preparers;
• governmental administration;
• tax litigation;
• and the substantial costs associated with tax planning the total overhead cost of our federal tax system is probably in the range of $200 billion per year. Think of what we could do it we had that available for heath care or other important activities.

Today's hearing will begin our quest to simplify the tax code. We will hear from several witnesses who have studied the complexity in our tax system and its cost to society. We will also review the excellent report produced by the Joint Committee on Taxation, for which we commend Ms. Paull and her staff.

Future hearings will examine a host of other simplification recommendations. I understand that the Treasury Department is reviewing the simplification study done by the Joint Committee on Taxation together with simplification proposals advanced by the IRS Restructuring Commission, the National Taxpayer Advocate, and a number of professional associations. In addition, the Treasury Department will be developing proposals that were not addressed by the other reports.

A future hearing will provide the Treasury Department the opportunity to present specific proposals that would simplify the tax system and provide for enhanced economic growth. We look forward to hearing the Treasury Department's recommendations when the analysis is complete and will welcome the views of other groups on this important topic.

I am pleased to yield to the Chairman of the Subcommittee on Select Revenue Measures, Mr. McCrery.