U.S. GOVERNMENT PRINTING OFFICE

70–435 DTP WASHINGTON : 2001

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

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: (202) 512–1800 Fax: (202) 512–2250

Mail: Stop SSOP, Washington, DC 20402–0001

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COMMITTEE ON GOVERNMENT REFORM

DAN BURTON, Indiana, Chairman

BENJAMIN A. GILMAN, New York

CONSTANCE A. MORELLA, Maryland

CHRISTOPHER SHAYS, Connecticut

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

STEPHEN HORN, California

JOHN L. MICA, Florida

THOMAS M. DAVIS, Virginia

DAVID M. MCINTOSH, Indiana

MARK E. SOUDER, Indiana

JOE SCARBOROUGH, Florida

STEVEN C. LATOURETTE, Ohio

MARSHALL ‘‘MARK’’ SANFORD, South

Carolina

BOB BARR, Georgia

DAN MILLER, Florida

ASA HUTCHINSON, Arkansas

LEE TERRY, Nebraska

JUDY BIGGERT, Illinois

GREG WALDEN, Oregon

DOUG OSE, California

PAUL RYAN, Wisconsin

HELEN CHENOWETH-HAGE, Idaho

DAVID VITTER, Louisiana

HENRY A. WAXMAN, California

TOM LANTOS, California

ROBERT E. WISE, JR., West Virginia

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

PATSY T. MINK, Hawaii

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, Washington,

DC

CHAKA FATTAH, Pennsylvania

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

ROD R. BLAGOJEVICH, Illinois

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

JIM TURNER, Texas

THOMAS H. ALLEN, Maine

HAROLD E. FORD, JR., Tennessee

JANICE D. SCHAKOWSKY, Illinois

———

BERNARD SANDERS, Vermont

(Independent)

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

BOB BARR, Georgia

LEE TERRY, Nebraska

GREG WALDEN, Oregon

HELEN CHENOWETH-HAGE, Idaho

DAVID VITTER, Louisiana

DENNIS J. KUCINICH, Ohio

TOM LANTOS, California

PAUL E. KANJORSKI, Pennsylvania

BERNARD SANDERS, Vermont

HAROLD E. FORD, JR., Tennessee

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

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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

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REINVENTING PAPERWORK?: THE CLINTONGORE 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, ChenowethHage, 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

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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.

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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

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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 pubVerDate 11-MAY-2000 09:25 Jun 07, 2001 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 C:\DOCS\70435.TXT HGOVREF1 PsN: HGOVREF1
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lic 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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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

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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.

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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.

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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.

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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.

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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

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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, cofounder 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 sevenState 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

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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

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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

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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

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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.

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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

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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.

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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

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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

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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

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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

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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.

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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

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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 socalled 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 ownVerDate 11-MAY-2000 09:25 Jun 07, 2001 Jkt 000000 PO 00000 Frm 00115 Fmt 6633 Sfmt 6633 C:\DOCS\70435.TXT HGOVREF1 PsN: HGOVREF1
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ers 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.

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[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.

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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?

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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.

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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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