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[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]

  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

                                 ______

                    U.S GOVERNMENT PRINTING OFFICE
70-435 DTP                 WASHINGTON : 2001
_______________________________________________________________________
 For sale by the Superintendent of Documents, U.S. Government Printing 
                                 Office
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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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[GRAPHIC] [TIFF OMITTED] T0435.010

    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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