-6

I am hoping that the Joint Committee staff will be able to fill the open staff positions with equally qualified candidates so that the level of service provided to the Congress will not be compromised.

Conclusion

Mr. Chairman, as the Congress considers historic legislation this year and next, we will continue to rely on the staff of the Joint Committee to provide us with their technical support. The appropriation request for fiscal year 1996 is intended merely to provide the necessary resources for the Joint Committee staff to respond promptly and adequately to the requests for assistance that it receives from the Members of Congress and to maintain its current level of services. Therefore, if the work required of the Joint Committee increases in any respect, additional funding may be required to enable the Joint Committee staff to satisfy this increased workload.

I recognize fully the budgetary constraints that make your work so difficult. At the same time, I hope you appreciate the current role that the Joint Committee staff plays in the analysis and development of tax legislation. I am deeply concerned that a failure to provide the Joint Committee with its requested appropriation will hinder seriously the ability of the Joint Committee staff to respond to the needs of the Members of Congress. Consequently, I respectfully urge the Members of your Subcommittee to respond favorably to the Joint Committee's request for funding for fiscal year 1996.

JCT REVIEW OF LARGE TAX REFUNDS

Mr. PACKARD. In your testimony, I notice that you outlined some of the duties of the Joint Committee in a one, two, three, four format. I guess my first question, as I reviewed that was whether there are not other agencies that do those same things for the committees of the Congress, things such as investigate the operations and effects to the Internal Revenue? Could not CRS or GAO or some of those agencies do the same kinds of investigation and reporting as what your committee does?

Mr. ARCHER. Well, I suppose you could say that could happen, but the difficulty is that our committee has the jurisdiction, the oversight and the authorization jurisdiction for the Treasury and the IRS, and I think it is very, very important that whatever arm does this investigation be accountable to us so that we can make whatever changes need to be made.

In addition, I forgot to say in my preliminary comments that this is not one of your standard committees because it is actually authorized statutorily under the law and has certain statutory duties. For example, the Joint Committee reviews requests for refunds that are in excess of $200,000.

Mr. KIES. One million dollars.

Mr. ARCHER. In excess of $1 million. That is required under the law, and it is in a sense not anything that I know about in any other committee structures in the House.

Mr. PACKARD. How many does that involve as far as reviews of tax returns?

Mr. KIES. Last year we reviewed over 600 refunds.

Mr. PACKARD. The Joint Committee did?

Mr. KIES. Yes, sir.

Mr. PACKARD. How do you do those? Do you assign those out to staff and then have them report to the committee Members?

Mr. KIES. We have four lawyers who are assigned to a refund office who are actually located at the Internal Revenue Service. They review all of the refund requests as they come in, prepare a report and then they submit it to me and it is reviewed again before they are finally approved.

Mr. PACKARD. And does the IRS do their own review of those same returns, or how is it coordinated?

Mr. KIES. They review the refund requests before we review them and ours is a final check in terms of accuracy.

Mr. PACKARD. So the IRS does accept the decision that you make?

Mr. KIES. Yes.

Mr. ARCHER. They are required to under the law.

Mr. PACKARD. Under the law. That is interesting. And I read where you at least reportedly are returning to the Treasury a significant amount of money as a result of those reviews. That is a function that I didn't know any committee in Congress did. It was an interesting revelation to me. Fortunately, I don't fall in that category.

JCT REVENUE ESTIMATING

Mr. ARCHER. One of the biggest demands for resources, Mr. Chairman, is the revenue estimating requirement and responsibility of the Joint Committee, and both Bernie and Mary Schmitt play major roles in that. Of course, they ultimately have to give us the official estimates by which we are scored in our deliberation on changes in the Tax Code. CBO gives us the broad-based assumption, the so-called macroeconomic baseline, which has to do with inflation, interest rates and economic growth and that sort of thing. And then the Joint Committee has to overlay on that the estimates for specific changes in the Tax Code. They do not undertake any revising of the baseline, which is totally CBO's prerogative.

Mr. PACKARD. Do you feel that the Joint Committee essentially services the taxing committees in both House and Senate?

Mr. ARCHER. I think it has been an excellent tool over the years. Mr. PACKARD. Are the revenue estimators used by other committees, Budget Committee?

Mr. ARCHER. Well, other Members of Congress are regularly submitting requests for estimates to them on specific proposals to change the Tax Code, and they handle those, and to the degree that they have enough personnel, are available to all Members of Congress. I almost hate to publicize that, because the limits of personnel are constraints.

Mr. PACKARD. What committee in the Senate is generally represented on the Joint Committee?

Mr. ARCHER. The Finance Committee.

Mr. PACKARD. The Finance Committee. Do you have any relationship with the Foreign Relations Committee?

Mr. ARCHER. No.

Mr. KIES. Actually, we help the Foreign Relations Committee with the approval of tax treaties and the Senate Foreign Relations Committee approves tax treaties. There are currently six treaties or amendments to treaties that are pending. They only go through the Senate side because they are under the treaty process.

In addition, just by way of example, last year during the health care debate, the resources of the Joint Committee were drawn on heavily by a number of committees other than the tax-writing committees because of the multiple jurisdiction on health care, and our staff played a fairly important role in analyzing various health care proposals and the revenue effects of them.

Mr. ARCHER. A lot of people didn't realize it, but in Clinton's health care proposal there were 42 changes in the Tax Code which had to be reviewed.

Mr. PACKARD. Do you have some questions, Mr. Taylor?

COMMITTEE CONSOLIDATION

Mr. TAYLOR. I do. A lot of people did realize it, too.

Congressman Archer, I have a great respect for your knowledge and ability and just the fact that you fill out your own tax return makes me a fan. But two years ago we tried to, or I tried to, in this committee, to see what we could do about consolidating a number of the committees, and we looked at Joint Economic, not Joint Tax.

We saw that there was a little bit of what you do in everybody. I mean there is some of that expertise, not as, I am sure, as qualified, but as you mentioned, CBÓ can give a variety of tax information, GAO, CRS, of course, Treasury and OMB do these sorts of things. The Budget Committee is thrashing around in it, as well as your own staff in the Ways and Means and Finance Committee, and that is about eight groups that deal in this. And that is why it looked like there ought to be some room for consolidation.

I recognize you are the prime committee that needs the expertise. Whether you go at it by abolishing the Joint Tax Committee and putting on your two committees the staff personnel or we reduce the staff all the way up and down the other lines where it comes from, there needs to be some. I mean I gave my parable to your predecessor and I don't think he well, my parable is I have three sons, you know, and they all want a horse, and I can't feed three teenagers and three horses. The horses eat less, but I can't have them all. So we got one horse and they all participate with it and call him their own and it is just a lot cheaper.

And when I look at about eight organizations dealing with taxation, it looks like there could be one horse there that could kind of serve. Now, I recognize you ought to have the command of it, but whether you command it from afar or inside your shop or however you put it together, I leave to your discretion, but there is just an awful lot of tax horses out there, and if they are qualified, that is expensive talent. It is not just you.

i made the recommendation about consolidating legal counsel that we have spread about so that-sort of like ladies in waiting, to be called upon some day when they are needed and it is very expensive talent. We can say eliminate 10 elevator operators or 10 garage attendants and we haven't touched one tax counsel or two as far as price is concerned, and that is why it is important for us to look in this area, and that is why I was hoping maybe there could be some way we could consolidate.

I would like for you to think about it and perhaps we can talk about it. I have heard your explanation today and I agree with you, von need that kind of expertise.

let me move into one other area. I am just as surprised as Chairman Packard. We are sort of a branch of the IRS now here in Congress. Why did we-why do we do tax returns? Is it political rectness or something that makes us-we are all doing tax returns now?

Mr. KIES. No, we are not auditing tax returns. We review-we provide final approval on large refunds, and it is not-we don't get into auditing the returns.

I think historically the reason that was implemented, and I could check on this, is because there was a concern with particularly large refunds that the Congress have some oversight given the amount of money that is involved. Some of the refund claims are upwards of half a billion dollars, and I think there was a concern that there be a final check given that kind of—————

Mr. TAYLOR. In other words, we don't trust the IRS with real money? If it is $1 million we think maybe they are incompetent. Mr. KIES. I don't think it is a question of believing they are incompetent, I think it is a question of, given the fact that they are

spending taxpayer money, the final review of this was deemed to be something that was a good safety check. I think that is the principle.

Mr. TAYLOR. It just sounds like a lot of political correctness sort of thing. I mean I am good for 999, but you go over that to $1 million and I don't trust you. I don't know why Congress needs to be in the—and it is an audit any way you look at it.

I mean you don't go out necessarily and tell them to show the books, but you are reviewing just as any agent would in the beginning of an audit process, and I just wonder why we are in that. It isn't in the Constitution, so it is statutory. Would it be something you would be rid of or might want to be rid of?

Mr. ARCHER. Well, what have been the results of your review of these over the last several years?

Mr. KIES. Well, in the past year as a consequence of our review, refunds were cut by $16 million, over $16 million. So I mean there

are

Mr. TAYLOR. Is that after IRS did it?

Mr. ARCHER. Yes.

Mr. TAYLOR. Well, then, why don't we just take it all and go to 999 and on down. We might find lots of money.

Mr. KIES. I think the decision was made to it used to be 200,000 and it moved up to $1 million because the number of refunds involved would have imposed a substantial additional burden in terms of the amount of people that would have been necessary to review them.

Mr. PACKARD. If the gentleman will yield, if this committee determined, perhaps in concert with the Joint Committee, that this was a function that ought to be returned to the agency that normally would deal with it, namely the IRS, the Code could be changed. It is a statutory Tax Code.

Mr. ARCHER. Exactly.

Mr. PACKARD. And that could be changed.

Mr. ARCHER. But Charlie, let me just jump in, if I may, and say that constitutionally, the founders of this country were very, very concerned about the power to tax, and that it be closely held within not just the Senate, but within the House of Representatives, and we all know that the Senate cannot initiate any tax legislation. And so the Congress felt many, many years ago, long before I ever came here, that it was very, very important that the Congress keep as much of that power as was reasonably justified.

And reasonably justified meant that when you got below a certain number on the return that it was the law of diminishing returns to have the Congress try to peruse that and to review it. But then when it got above a certain threshold that the power of the people should have a chance to look at it and not-I mean you may trust the IRS more than I do, I don't know. But doing my own return, I must tell you that there are big problems. But the fact that the review has found that there was $16 million that was unjustified, more than justifies the cost of the committee review.

If we were to try to go below that number, then we would be in here requesting considerably more people and you would get into the question of whether that was the law of diminishing returns or not.