Mr. Speaker, the legislation before the Committee contains important improvements in taxpayer rights and IRS accountability. This bill is very similar to legislation approved by the House twice in 2002. Practically all the taxpayer…
Mr. Speaker, the legislation before the Committee contains important improvements in taxpayer rights and IRS accountability. This bill is very similar to legislation approved by the House twice in 2002.
Practically all the taxpayer provisions in the bill are based on recommendations by the Joint Committee on Taxation, the Treasury Department, the IRS, the National Taxpayer Advocate, and on hearings held by the Ways and Means Subcommittee on Oversight during the past several years.
The provisions also are consistent with, and in some cases are a refinement of, the IRS Restructuring and Reform Act of 1998 that enacted important taxpayer protections and reforms of the IRS.
Just to mention some of the provisions in the bill before us today:
1. It encourages greater use of the more efficient electronic filing by taxpayers.
2. It authorizes more support for Low Income Taxpayer Clinics to help provide legal assistance to more low-income citizens involved in disputes with the IRS.
3. It ensures that taxpayers receive the confidentiality they deserve, by reforming the punishment for code of conduct violations by IRS employees, and providing for dismissal of IRS staff who browse tax records without authorization.
4. It adjusts the so-called ``ten deadly sins'' in other ways to give the Commissioner more discretion.
5. It reforms penalty and interest provisions by raising the safe harbor for failure to pay estimated taxes and allowing taxpayers to enter into installment agreements for less than the full amount of their tax liability, and it includes many other pro-taxpayer provisions.
The bill has a small revenue impact. The Joint Committee on Taxation estimates that it will raise $607 million over 5 years and lose $352 million over 10 years.
Our colleagues, Oversight Subcommittee Chairman Amo Houghton and ranking member Earl Pomeroy played key roles in constructing this legislation and we appreciate their efforts.
One new provision allows individuals greater access to the healthcare tax credit previously adopted as part of the Trade Act. Individuals would be permitted to waive certain requirements in TAA and thus receive coverage under state based healthcare plans. This is a short transition measure, effective for less than two years, and will increase the availability of qualified health insurance for individuals who would otherwise not have access to such coverage.
Another new provision would extend the joint House-Senate review of the Internal Revenue Service.
Let me provide some details on this provision, as it was not considered in the Ways and Means Committee. This legislation would reauthorization for 5 additional years, the annual joint review of the strategic plans and budget of the IRS. Unlike other federal agencies, the IRS is subject to oversight by six committees of Congress and the Joint Committee on Taxation. The National Commission on Restructuring the IRS, that I co-chaired, recognized that the IRS would be better managed if the committees that share primary jurisdiction over the IRS budget and IRS administration coordinated their efforts. The Joint Review grew out of a recommendation by the National Commission.
While the Joint Review has met the objective of coordinating Congressional oversight of the IRS, the original legislation imposed a burden on the Joint Committee on Taxation to report on every aspect of the IRS's budget and strategic plans on an annual basis, even when the Joint Review hearing has focused on a more narrow set of issues. The reauthorizing language that is included in this legislation therefore allows the JCT to confine its annual report to the issues addressed at the annual Joint Review hearing. It is anticipated that the topics to be addressed at the Joint Review will be decided well in advance of the annual hearing by the JCT Chairman, in consultation with the staff of the JCT and the six participating committees.
I believe it is important to continue the joint review, and this provision will increase the focus on key areas of the IRS that need attention by the relevant committees of Congress.
In summary, Mr. Speaker, this is a good bill. I urge my colleagues to support this legislation that promotes common sense solutions to some of the most frustrating and time-consuming aspects of our tax system.
Mr. Speaker, I rise in opposition to the substitute.
Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I rise today in part to remind us as to where we are in this process. Yesterday we talked about the underlying legislation, which is a very good combination of taxpayer protections and health care protections for workers. I think it would be helpful to start by reviewing that, only because I think by adding this substitute, we would jeopardize so many of those good provisions.
Yesterday, we talked a little about the importance of moving quickly on those provisions. After all, these are the result of over 2 years of work by the Taxpayer Advocate, by the Internal Revenue Service, by the Treasury Department itself, and by the Committee on Ways and Means, based on oversight hearings, to basically strengthen and protect the rights of average, honest taxpayers.
Let me give you an example of some the things in the underlying legislation. It prohibits IRS employees from unauthorized browsing of tax returns. We do have a series of prohibitions in the Code. This is not one of them. It would now make browsing of your tax return or mine part of those prohibitions. This is very important, and, again, it is based on good testimony we have had from the IRS and some obvious problems that have resulted from unauthorized browsing.
It also simplifies tax filing in a number of ways. One I really like is it helps the mom-and-pop businesses of America. It says that now- married spouses would be allowed to file a sole proprietor return who are in business, which is a Schedule C, instead of a partnership return.
This is far simpler. It allows for spouses to account separately for their respective self-employment income from the business. It allows family businesses to take full advantage, therefore, of Social Security and Medicare, and, at the same time, greatly simplify tax filing.
Again, this comes out of hard work by people at the Joint Tax Committee, at the Treasury Department and elsewhere, to try to figure out ways to simplify our current system.
It also, very importantly, extends the filing deadline for E-filers to April 30. This one is not only added to, therefore making it more difficult to enact, but it is actually substituted, it is replaced, it is eliminated in the substitute.
Let me just talk about that for a second. It says if you are willing to be an E-filer, you have until April 30. Why is this so important? It is important because we need to add another incentive to encourage people to electronically file.
Electronic filing is in the interests of taxpayers, and it is in the interests of the IRS. This is something over the last 6 years as we have reviewed the IRS through a commission, and then through the legislative process, we had a total consensus on, that it is absolutely critical that we encourage electronic filing.
We have gone from 15 percent to about 41 percent, but the Congressionally set goal of 80 percent electronic filing is not going to make it unless we provide some new incentives. This is one well worth undertaking.
Why? Right now there is about a 22 percent error rate, Mr. Speaker, if you can believe it, when you file your tax return by paper. Twenty- two percent of the time there is an error. That is unacceptable to any of us. Eleven percent of that error, half of it, is caused by the IRS, largely transposing numbers, where they take a paper return and transpose the numbers from paper on to a computer.
That does not happen with electronic filing, obviously, because you are electronically filing straight into the computer.
Second, the other 11 percent, about half, is caused by the taxpayer.
Electronic filing, the error rate is far less than 1 percent. This obviously saves the IRS a lot of money and is very good for the tax system, because you are going to have fewer people who will be filing by paper and, therefore, fewer IRS employees are necessary and
great efficiencies are put in place at less than half the cost to the
Mr. Speaker, I yield such time as she may consume to the gentlewoman from Connecticut (Mrs. Johnson), the Chair of the Subcommittee on Health.
Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I find the gentlewoman's comments a little puzzling listening because on the one hand, my colleagues are arguing it was wrong to put the important health care credit into the IRS reforms which are so important and so widely viewed as popular and the appropriate thing to do, and then the gentlewoman is saying but let us add something else to this mix, another 160 pages of controversial, and for a large part of them, untested, proposals. None of these substitute proposals to my knowledge have been reported out of the Senate Finance Committee. They have not even dealt with inversions, for instance. We have legislation sitting over there in the energy bill for weeks and so the gentlewoman says, well, we need to add child credit to this to get it done.
If you want the child credit issue to be resolved, and our side on the aisle, agree it ought to be resolved. In fact, we came up with a good balanced proposal to provide relief who do not have any income tax liability, have no federal income tax liability, to increase an existing 10 percent refundable credit for the child care that is going to the same families now. We said it ought to be taken to 15 percent immediately rather than waiting until 2005, when it is going to happen anyway.
We said, if you are going to make that permanent, the 15 percent on the refundable side, again, for people who do not have Federal income tax liability, and many of whom do not have payroll tax liability, then at the least, we ought to be sure that those people who do have Federal income tax liability have their $1,000 credit which we have now provided them until 2005, to continue as well, at least until 2010.
The President wanted to continue it until 2013. We said, as a balance, let us go ahead with the child credit for the refundable part and let us go ahead with making sure that those who do pay income taxes also get some benefit after 2005 as we would be doing for those who do not have income tax liabilities.
We think that is a fair and balanced proposal. That has just been sent over to the Senate and it is being worked out between the House and the Senate. Conferees are being named. We are trying to work through this process to try to get to a solution to resolve the child credit issue. And yet the gentlewoman says, this will make more sense to get it resolved to add it to these extremely controversial, as we will talk about in a moment, and untested proposals that have not even been reported out of the Senate Finance Committee, much less subject to hearings, and none have been reported out of the Committee on Ways and Means. I do not know how that helps us get on to child credit.
Let me talk about some of the other provisions the gentlewoman talked about.
The next provision was the inversion provision. Well, as the gentleman from Massachusetts, who spoke about inversion knows, we also passed an inversion provision on this floor and we included it in legislation that is sitting in the Senate, which provides specifically for a 2-year moratorium on inversions. We think that is the right way to go. There is some bipartisan support for that. The gentleman, instead is saying, let us go ahead and load up this bill with something more controversial that provides for a retroactive provision under inversion. So it would actually undue transaction which were entered into lawfully 30 or 40 years ago and you are now going back and penalizing.
We have dealt with the inversion issue. We have done it in a bipartisan way. It had some bipartisan support. And here we come up with this new idea again which would actually be retroactive on perfectly legal transactions. We do not think that is the right way to go. Instead, we think we ought to be having a moratorium in place and looking at the underlying causes as to why companies leave the United States. We are doing that very aggressively. Maybe too aggressively for some on both sides of the aisle. But in the fixed ETI bill, which deals with particularly the Europeans, but more generally our competitive position as Americans, it takes very aggressive action and it is going through the process of hearings now and will be before this Congress, I believe, in the next month, which says let us deal with the underlying causes. Why do companies leave? We do not want foreign corporations to come buy our companies.
I personally believe that would be the result of the inversion provision that is in this substitute. Rather, let us deal with these underlying causes. Let us make it better for companies to stay here, employ American workers, stay headquartered in this country.
Finally, there has been a lot of discussion about the refundable tax credit that is in the underlying bill and why that is not a good idea. Again, it deals with the very simple issue of 12,000 families cannot get health care unless we do this. We want to provide health care. Do a bridge program. We dealt with three concerns that were raised in the Committee on Ways and Means by the other side of the aisle. Those issues have been addressed. It is still not acceptable to some of my colleagues. I understand that.
But in terms of the legislation, the gentleman from Michigan earlier said that it allows people to go to the individual market and that is wrong. It does not. That is the point. It continues to require they go to the State options. That is what the Democrats in the Senate insisted on back in 2002. That is what we are sticking to. If that were not the case, if we were allowing people to go to the individual market, we would not have a problem here, would we?
The problem is that up to 21 States have not changed their State plans adequately to allow people who have been displaced because of trade to be able to access health care. So we are saying during a bridge while those State gets up to speed and make their programs compliant, we ought to allow them to have access to health care. The State options, again, was not something that we particularly felt was the best policy, but it was something that was insisted upon. Now let us make it work. That is all we are saying.
Mr. Speaker, I reserve the balance of my time.
Mr. Speaker, I yield 3\1/2\ minutes to the gentleman from Illinois (Mr. Weller), my colleague on the Committee on Ways and Means.
(Mr. WELLER asked and was given permission to revise and extend his remarks.)
Mr. Speaker, I yield 3 minutes to the gentleman from Florida (Mr. Foley), my colleague on the Committee on Ways and Means.
Mr. Speaker, I yield myself the balance of my time.
Mr. Speaker, I think we have seen why this effort today is more politics than it is practical. We are now talking about Iraq. We have loaded this bill up with Iraq, and somehow that is going to get through the Senate. The reality is we have about 160 pages of new provisions here that have not been through the Committee on Ways and Means process, have not been reported out of the Senate Finance Committee; and they are, therefore, going to drag down all of the other good legislation in the underlying bill. We are talking about the substitute for good legislation.
The gentleman from Washington has talked about the child credit. Here is the reality. If we really want the child credit to get resolved, to be sure we were giving fair and balanced relief to families with kids, Members would not tack it onto this, raising every issue from inversions to Iraq. Members would instead want to make that a streamlined process, as we did here in the House recently where we said we ought to be able to provide people who do not have Federal income tax liability with a little help, more help than we are already giving them because all those families already get help, thanks to Republicans, because in 2001 we passed tax legislation that for the first time ever, unlike what the Democrats did for the previous 40-plus years when they controlled this place, we provided tax credits that were refundable to people who do not pay Federal income taxes.
The Democrats are saying now we ought to increase that refundability, which is scheduled to happen anyway in 2005, and instead what we ought to do, we ought not provide relief to people who do pay income taxes. That is absurd. We ought to do both. We are willing to increase it to 15 percent, but for the Democrats to say but if you pay income taxes, you do not get the $1,000 credit, that makes no sense at all. That is what they want to do.
Anyhow, that issue should not be on this bill because this bill has now become so complicated with this Democrat substitute that it would, if the Democrat substitute passed, not be able to make it through the Senate. The underlying legislation here is the result of years of work by people who are concerned about ordinary taxpayers and how to make our tax system work better. That is what it is. It is great legislation.
The provision the gentleman criticized earlier is from the bipartisan, bicameral joint tax committee. There are anti-abuse provisions in it. He misreads the provision or he thinks it is not good law because he thinks taxpayers ought to be saddled with more liability than they should be.
Let me talk about some of the great provisions that are in here that would not happen if this substitute goes through because we are not going to get this bill through if the substitute is part of it. We would not have an end to this first time penalty. Right now, even the most conscientious taxpayers who put a $1.40 stamp on their tax return envelope rather than $1.50, those people now end up having a penalty against them for minor errors, and we would not be able to fix that if the substitute goes through.
Second, there would be no relief on the estimated tax penalty. We would still have people who are charged interest and have to pay tax, additional interest and penalties just for how they quarterly file their taxes. There would be no simplified filing for family businesses. There would be no prohibition and increased penalties for unauthorized browsing. How could Members be against that? Do Members think the IRS employees ought to be able to browse?
And with regard to the so-called 10 deadly sins, we help the IRS and its employees to improve morale by reforming that and doing what the IRS commissioners strongly believe we ought to do, give them some flexibility.
Mr. Speaker, the bottom line is we ought not to take these good provisions down because of a health care credit. All it does is provide 12,000 families with the ability to access health care, that and the good IRS provisions ought to go. The substitute ought to be voted down. I urge my colleagues to vote no on the substitute and yes on the underlying bill.