Around 600 billion annually. And if it continues about, 7 trillion of Tax Revenue will be lost over the next decade. There is testimony from a number of Tax Policy experts. Good morning, good Afternoon And Welcome to everyone. Thank you for joining us today. Were holding this hearing virtually in compliance with the regulations for remote committee proceedings pursuant to House Resolution eight. Before we turn to todays important topic, i want to remind members of a few procedures to help you navigate this platform. First, consistent with the regulations, the committee will keep microphones muted to limit background noise. Members are responsible for unmuting themselves when they seek recognition or are recognized for 5 minutes. Second, witnesses must have their cameras on when they are present for the hearing. If you need to step away from the proceedings, please turn off your Camera And Audio rather than logging out. In the event that i have technical difficulties or need to step away, Oversight Subcommittee Chairman pasqual will take over as chair until i return. Finally, since this is a joint hearing of the select revenue measures and Oversight Subcommittees, without objection, the chairs and ranking members of both subcommittees will be permitted to offer an opening statement. Further, without objection, members will be recognized for questioning in the order of seniority on their respective subcommittees alternating between the two. Members have been provided with this order in advance of the hearing. Finally, after members of each subcommittee have completed their questioning, ill recognize members from off the subcommittees who have waved onto this hearing in order of full committee seniority. Without objection, consistent with all other subcommittee hearings, the rules of the subcommittee on ways and means under rules of the house apply in Todays Hearing. With that, ill now turn to the topic of Todays Hearing. Todays hearing with the select Revenue Measure Subcommittee is holding jointly with mr. Pass Karel Pascrells Oversight Subcommittee, focuses on the growing gap between taxes owed to the government and taxes actually paid. This is commonly referred to as the Tax Gap. The Tax Gap is an important indicator for how well our Tax System functions, and reducing it is a central part of the Irss Mission to fairly administer and enforce our Tax Laws. However, over the past decade the irs has been starved of resources to go after a significant contributor to the Tax Gap, wealthy taxpayers, who can use sophisticated methods to evade taxes and whose income is not subject to reporting requirements. Instead, facing Budget Cut after Budget Cut, the irs has relied heavily on current Information Reporting to audit working americans who have more straightforward returns. Without the funds to train Enforcement Staff or upgrade its technology, the agency has been fighting a losing battle against wellarmed taxpayers who can create complicated partnerships, structures or send their assets overseas. I hope this joint hearing is an opportunity to examine the Administrations Proposals on how to provide the irs with the resources it needs to properly enforce our Tax Laws and best serve our taxpayers. Put simply, the irs doesnt have the tools it needs to effectively meet todays challenges. This Information Technology System is the oldest in the federal government. It has fewer auditors than at any time since World War ii. As a result the Audit Rates for taxpayers making over 1 million in income have fallen by 80 . The agency has lost many experienced Revenue Agents who handle time consuming, complex issues. Finally, Irs Staff have had to do more with less. Fortunately, the biden administration understands that a fair and effective Tax System requires the irs to have adequate resources. Thats why it proposes sustained investments to improve enforcement efforts, including an appropriate number of skilled agents who can pursue wealthy taxpayers that evade taxes using complex schemes. The administration also knows they are an important component of shrinking the Tax Gap is comprehensive Income Reporting that can shine a light on the opaque income streams of these taxpayers. None of this can be done efficiently without overhauling and modernizing the irss outdated Information Technology System. Finally, increased resources and enforcement does not mean that we should stop asking how we can make our system better. There must be a sustained focus on reducing disparities in the treatment of different taxpayers and providing better Taxpayer Service so that americans who do comply with the law can feel assured that the Tax System is fair and efficient. Its not just our subcommittees and the biden administration that think its time to tackle this issue. Yesterday, five former treasury secretaries who served under both democratic and republican administrations agreed we need to act. In a jointly authored oped published in the new york times titled we ran the treasury department, this is how to fix tax evasion, they write, and i quote, we know firsthand the challenges dedicated Irs Employees face each day as they work to administer Tax Laws while hamstrung by inadequate funding and support. On this issue, all should agree, including members of congress of both parties, giving the irs the tools it needs to improve compliance will raise significant revenue and create a fair, more efficient system of Tax Administration. Without objection, this Oped Piece is inserted in the record. Americans feel more confident paying their taxes if they know that everyone else is paying what they owe and that the Tax Laws are fairly enforced. I look forward to hearing from our witnesses and working with the administration and colleagues to improve irs efficiency, ensure there is no additional burden on honest taxpayers and make the Tax System more equitable. Thank you. With that, i will recognize ranking member mr. Smith of nebraska for the purposes of an open statement. Thank you, mr. Chairman for the time. I appreciate that we are taking this time to further investigate the Administrations Tax Enforcement proposal and the potential impact on our economy. We agree it is fundamentally unfair to the vast majority of americans who pay their taxes accurately and on time if some people dont. Our system of voluntary compliance works because americans believe their friends and neighbors are also following the rules. Our system should recognize that by not further burdening those who put substantial time and resources into following the law, we should work in a bipartisan fashion to find ways we can better track down those who cheat the system without undermining bipartisan successes in bringing accountability to the irs, like the taxpayers first act. That said, i come into this hearing with concern about president Bidens Proposal on a number of fronts. Im very skeptical of the irss projected return on investment. The administration is promising to bring nearly three quarters of a trillion dollars over the next decade with its proposal. That relies on the assumption that 80 million in new funding would raise more than five times that. However, the congressional Budget Office has predicted a 2. 5 time Return Rate which would net 200 billion for those dollars. Second i have serious concerns about a mandatory Funding Stream for the irs. We have a strong Track Record in congress of establishing and sticking to pathways for more predictable funding for agencies, whether its prefunding the department of veterans affairs or corporation for public broadcasting or working to double Nih Funding over time. I would be glad to work to find a way to give irs and other agencies more longterm certainty so they can plan for their staffing needs. At the same time, that certainty should come through regular appropriations so we can continue to have proper oversight of the agency when issues arise, whether it is printers without Toner Or Rogue employees leaking taxpayeR Data to the irs. Those are resources that can go through Enforcement Or Customer service. My biggest concern, however, is that this proposal falls in line with other problems with the president s tax agenda, all of which i would characterize as, quote, Fairness Run amok. They have chosen to pursue a punitive capital Gains Rate in the name of fairness instead of one that maximizes revenue or economic activity. The g7 minimum corporate Tax Proposal engineered by Secretary Yellen only serve as cover for the administrations desire to hike our corporate Tax Rate in the name of supposed fairness instead of recognizing that corporate Tax Reform made the United States a more desirable place to create jobs while also stopping corporate aversion. Now today we are reviewing president Bidens Proposal to install 90,000 new government bureaucrats to harass american businesses because he finds unfairness in the fact that our Tax Code provides various options for how to organize and pay taxes as a small business just as most modern economies do. While it is easy to understand the president might think the only reason to set up an scorporation is to avoid medicare taxes, that is not the primary reason while small businesses organize themselves in that way. There are areas we can work together in a constructive way to modernize enforcement of our Tax Code. For example, by setting specific, clear, consistent rules and procedures for the taxation of crypto currency. In a man peR Doesnt discourage innovation. That should be our focus. Thank you again, mr. Chairman. Im looking forward to the administration explaining their proposal and to hearing varying perspectives on it. I yield back. Thank you. Thank you, mr. Smith. I now recognize the chairman of the Oversight Subcommittee mr. Pascrell for the purposes of an opening statement. Thank you, chair thompson. Thank you for holding the joint Hearing Today on the pervasive Tax Gap. The Tax Gap or the measurement of the difference between what taxpayers owe and what they actually pay has become pretty significant, i think youd say. This gap matters immensely as we come to terms with a Tax Code that fosters one system for the wealthy and another system for average americans. The disclosure this week that some of the wealthiest americans pay barely any tax was shocking, but not surprising. The revelation should give us greater urgency to address fairness. Thats what im looking for. I know what youre looking for. I dont know what other people are looking for when they talk about harassment or when they talk about people this is a voluntary system. We know its a voluntary system. And we certainly cant look back to 2017 and say that was the beginning of Tax Reform. That would be comical. Im looking forward to the testimony of our witnesses, starting with representatives from the biden administration. President biden has put forward an aggressive agenda to improve compliance. The president s plan to rebuild the irs will enable the irs to engage in more effective enforcement, particularly for wealthy scofflaws. I want to hear more details from Assistant Secretary Mazer and Commissioner Odonnell, two great servants of this country. Were also fortunate to have witnesses who are experts in the academic and private sectors to help us evaluate what congress should do and can do to produce real results and narrow the Tax Gap. Any changes we consider, however, must do so in a way that is fair and preserves fledgling Taxpayer Confidence in our voluntary compliance system. To me and i can only speak for myself, mr. Chairman. To me, Tax Fairness does not mean bludgeoning the wealthy. Thats not where im coming from and i want you to know that. One way to improve Taxpayer Confidence is effective taxpayer assistance. So many people need help rather than go and pay somebody to help them, we should provide information on this very important task of increasing the revenue for this nation so it can spend wisely. Taxpayers need guidance in preparing their returns and paying their taxes. The irs should do more to help as a matter of fairness. Its like having a million lawyers that can be at your beck and call and obviously others have no lawyers they can turn to when dealing with the irs. Decades of underfunding and the pandemic wreaked havoc on this function, but we must quickly rebuild it. A corollary of this is ensuring Tax Return preparers are qualified in the first place. Im eager to learn more about how the biden administrations Tax Return Preparer Regulation will advance our goal. Finally, i believe that Transparency And Accountability are the building blocks of what i would consider effective Tax Administration. This committee continues to wait for the administration to respond to our legal requests under Code Section 61. 03 for the former president s Tax Returns. The request was to many weird four years ago, but it is not weird. We have a right under 61. 03. Its very clear. We may have an illegal Leak Or Hack of private citizens Tax Return information. As oversight chair, ive asked the irs to fully investigate, as i did in the conversation yesterday. I expect a prompt and transparent response. I yield back and look forward to our witnesses testimony. Thank you. I recognize mr. Kelly for the purposes of an opening statement. Thanks, mr. Chairman. Good afternoon. I want to begin by addressing the news this week of a criminal leak of confidential Taxpayer Information to propublica. Pro publica claim it was provided a vast trove of tax internal Revenue Service data on the nations wealthiest people over 15 years. This is a shocking breach of Taxpayer Privacy and should cause all of us concern. And quite frankly, every american taxpayer. This is the second high profile, unauthorized disclosure of Taxpayer Information to the press in less than a year. This can happen to the wealthiest americans or even the president of the United States, it can happen to any american taxpayer. Id like to hear from both of our panel of Witnesses Today on what is being done to get to the bottom of this and make sure any Irs Employee that leaked the information is prosecuted. I dont know if you had a chance to read the oped in the Wall Street Journal the otheR Day, but it does shed a light on how this information that is supposedly so guarded and private, it leaked out. This is 15 years of information theyre willing to expose. This is incredible, but they dont know where they got it from. I guess it just showed up on the doorstep one morning and they opened it up and were just surprised. This Tax Gap that were going to talk about today in Tax Enforcement. Commissioner reddick recently cast some doubt on the irs Tax Gap estimate. This should be a concern to all, because we need to have an accurate Tax Gap estimate in order to make foreign policy choices. I look forward to hearing from our Witnesses Today about highway the irs is going to develop a more accurate and timely Tax Gap estimate. Im sure Todays Hearing will also address President Bidens Tax Enforcement plan. My understanding is that the administration is looking to put another 80 billion into the irs over ten years for enforcement. This is going to include the hiring of something like 87,000 new Irs Employees over the same time period. Every american should pay all the taxes they owe and the irs should conduct smart and efficient Tax Enforcement. But throwing 80 billion at the problem without a clear plan or cleaR Demonstration that the agency can use that money effectively is not the right approach. The administrations claim that it will be able to audit its way to 700 bllgds in new revenue over ten years doesnt sound realistic to me. I was proud to work with the late John Lewis on reforming the irs on the bipartisan taxpayer first act. That law was designed to focus the irs on actually serving american taxpayers in providing excellent Customer Service. By the way, while were all together, you and i both know that our staffs did an incredible job picking up the ball and helping our taxpayers all across ouR Districts, because the irs was working from home and was not able to do some of the things it needed to do. In fact, they couldnt answer all the phone calls. Our staff stepped it up. Each one of us are really blessed with a group of people who really do serve our american citizens. Most americans want to pay the taxes they owe, but have a tough time when questions arise and they cant get through to the irs for help. We need to make it easier which is why we required the irs to create a Customer Service strategy in the bipartisan taxpayer first act. President bidens plan seems to turn its back on that approach. Instead, the administration wants to build an army of Irs Agents that will seek to squeeze every dollar possible out of the american people. Again, every single penny we spend comes out of some hard working american taxpayers pocket. We have a tremendous obligation to them as they do to the country. The administration is asking for 80 billion for enforcement when there are over a million 2019 returns still unprocessed and millions more still held up in error resolution. I have constituents still waiting on refunds they should have received a year ago and there are millions across the country waiting on the irs. We have a Taxpayer Service crisis at the irs, and yet the administration can only talk about the enforcement. Not the service end, but the enforcement. Of course, we need to improve the Irs Enforcement as well. There are smart and targeted ways we can do that. I would like to think we can all work together as we did, as i did with mr. Lewis, one of the most incredible people ive ever come in contact with in my life, his whole purpose was in service not only to his district but to the country. The taxpayer first act was an incredible attempt to do exactly that and that was to provide great service to the american people and our hard working american taxpayers. A partisan Spending Spree was not the way to get the job done. In closing, i want to thank all our witnesses on both panels and all members for being present today. We can do this together. We can work on this together. We can get this situation cleaned up and get to a point where everyday americans go to the mailbox and get a letter and if they see in the corner that it was sent by the irs, they dont become scared, oh my god, whats happening now. So thats what we need to get to. With that, im willing to work with all of you on every one of those issues. Id love to hear from our two panels. Thank you. Thank you, mr. Kelly. Without objection, all members opening statements will be made part of the official record. Thank you to our witnesses for taking the time to appear before us today to discuss this very important issue. We will hear from two Panels Today with an opportunity for members to question each panel separately. For our first panel i would like to introduce two witnesses. Mark mazar is a Deputy Assistant Secretary for Tax Policy, office of Tax Policy at the u. S. Treasury department. He was most recently the robert c. Rosen director of the urban brookings Tax Policy center, a position he held starting in 2017. Doug odonnell is a Deputy Commissioner services and enforcement at the irs. Previous he was the commissioner of the large business and international division of the irs where he also served as the u. S. Authority. Each of your statements will be made part of the record in its entirety. I would ask that you summarize your testimony in 5 minutes or less. To help you with that time, please keep an eye on the clock that should already be pinned to your screen. If you go over your time, i will notify you with a tap of the gavel. With that, mr. Mazar, youre recognized for 5 minutes. You may proceed. Thank you for inviting me here today to discuss Tax Compliance and the administrations Tax Compliance agenda. We all know that improving Tax Compliance can help build a Tax System that raises the necessary revenue for the federal government in an equitable and efficient manner. As noted in the opening statement, the irs has estimated the amount of noncompliance at the federal Tax System foR Decades. This measure of noncompliance is called the Tax Gap. Its defined as the distance between the overall true Tax Liability and what is paid on time and voluntarily. For 2011 to 2013, the irs estimated the gross Tax Gap to average around 441 billion per year. When late payments are taken into account it is 331 billion for that time period. If we take those numbers and extrapolate them today, assuming that the Tax Gap grows with the economy, the estimated Tax Gap would be around 580 billion for 2019. Over the coming decade the gross Tax Gap is projected to total 7 trillion. Obviously thats a lot of money. In part the growing Tax Gap is a result of sustained period of underinvestment in the irs. The Irs Budget has reduced by about 20 in real terms over the last decade. Since the Irs Budget covers the gap. Staffing dropped and there was a deep decline in Audit Rates. At the moment there are insufficient resources to adequately meet enforcement and service. The administrations fy 22 budget and american families plan proposed a transformative investment in resources made available to the irs. The program has several key components. First,it would provide the irs with resources needed to address noncompliance. In addition to the annual discretionary funding a sustained multiYear Funding would provide nearly 80 billion in additional resources to the irs over the next decade. The multiyear nature of this funding provides certainty to make investments in high quality Enforcement Staff and modernized Information Technology but also to assemble talented research teams. Second, help identify noncompliance and improve Customer Service. The irs too often relies on antiquated systems and this will allow them to address technology challenges in what would be an upgrade to what we speck from modern financial institutions. The third component is to give the irs better access to sources of income. For a W2 Taxpayer the compliance rates of that income they report about 95 or 99 accurately. When theres no Reporting Compliance can drop to about 50 . You know strengthening is one of the most effective ways. Decrease the likelihood that fully compliant taxpayers would be subject to us. A fourth component would improve Tax Administration and including giving the irs the ability to regulate preparers. They would raise around 700 billion of revenue over the course of a decade, but they would create a fairer Tax System and more efficient Tax System and improve Customer Service. They work together to create a more efficient Tax System. When the irs is adequately funded, they can use the information they collect more efficiently. When they collect more information, they can make their enforcement resources better utilized. We all believe that taxpayers should pay the amount of tax they legally owe under the laws that congress passes. Today theres a large gap between that belief and the Tax Compliance reality we observe. The Compliance Proposal takes important steps toward narrowing that gap and we look forward to working with congress to address this longstanding problem. That concludes my testimony. I look forward to your questions. Thank you, mr. Mazur. Mr. Odonnell, you may proceed. Thank you. Chairman thompson and pascrell, ranking members smith and kelly, thank you for the opportunity to appear before you today and for your support of our efforts on behalf of the american people. Last month i became the Deputy Commissioner for services and enforcement at the irs. Before stepping into this role, i spent several years as a commissioner of our large business and international with division. I appreciate this opportunity to discuss current and future irs efforts to reduce the Tax Gap, ensure the integrity of our system and improve Tax Administration for the 21st century. Reducing the Tax Gap requires a multiyear, consistent, significant investment in our modernization, service, Enforcement And Compliance effort. To help us deliver meaningful services to taxpayers, conduct critical enforcement initiatives and support longterm modernization efforts to help improve both service and compliance. We want to help taxpayers attempting to comply and appropriately pursue those who willfully refuse to fulfill their tax obligations or commit tax fraud. These enforcement efforts support compliant taxpayers. Operating with limited resources, our entire workforce is dedicated to doing the very best we can. This includes employees who develop forms, instructions and publications, Answer Taxpayer questions on the phone and in person, process returns and collect taxes owed and investigate tax fraud. We struggle to keep pace with change. The size of the economy, the number of taxpayers that we serve, the complexity of the law and the digital nature of new and emerging global economic interactions. Our ability to deliver on our mission has been limited by the Level And Inconsistency of funding we receive. To remain highly impactful going forward, the irs must expand. To do so, we need to on board many experienced specialized examiners and appropriate levels of supporting personnel throughout the organization in areas such as chief counsel, appeals and the taxpayer advocate. Further, all examiners, indeed all employees, must receive appropriate resources and training to enable them to perform at the highest levels. Additional resources will allow us to examine the Nature And Scope of these examinations. The irs has a difficult Balancing Act to reduce the Tax Gap. We use the information from the Tax Gap to help decide where to deploy our limited resources to minimize burden on those that are compliant and concentrate on helping those who make mistakes and reaching those who choose not to comply. The vast majority of taxpayers are paid wages that include withholding and their compliance levels typically exceed 98 . We should not and do not want to burden them with any additional interaction with the irs. There are others, though, who simply do not report income, implement tiered partnerships or similar complicated structures, utilize opaque sources of income or engage in offshore activities that increase the risk of noncompliance and adversely impact the fairness of our system. Our challenge is better understanding those structures, income sources and offshore activities that present the most risk, recognizing that the greatest risk is where there is little or no third Party Reporting and the taxpayeR Does not report the activity, whether intentionally or unintentionally. Thanks to the help of artificial intelligence, analytic strategies and emerging tools, were able to identify noncompliance in ways that were impossible just a few years ago. With that said, there is room to further modernize these efforts and the irs has requested funding to do that. In addition to that, making further progress on the Tax Gap also requires policy and legislative changes to reduce Tax Law complexity, increase Information Reporting, improve Irs Access to relevant data and increasing authority in certain areas such as regulating paid Tax Return preparers as the president recently proposed. The recent budget proposals from the administration will ensure the system is enforced fairly, taxpayers receive the Nature And Quality of services they deserve, our systems are modernized to make better use of the data they collect and no one feels secure cheating on their taxes. We need your help. This concludes my statement. I look forward to responding to your questions. Thank you. Thank you, mr. Odonnell. Without objection, each member will be recognized for 5 minutes to question our witnesses on Panel Number one. Please note that after all members have had an opportunity to request our first panel, we will turn to the second panel. We will not observe the Gibbons Rule in this remote setting and will instead go in order of seniority, switching between Majority And Minority members. Members are reminded to unmute yourself when you are recognized for your 5 minutes and ill begin by recognizing myself. Mr. Mazur, weve heard that the irs has a lot of information about certain categories of income, but that other categories of income are subject to limited third party Information Reporting. According to irs estimates of the Tax Gap, income and deductions subject to little or no Information Reporting are subject to incorrect reporting at a much higher rate than income thats verified by a third party. What do we know about the distribution of the gaps in reporting by Income Level . Are certainly categories of income that arent subject to reporting more likely to be earned by higher income taxpayers . Thank you for the question. The irs has done a lot of work looking at the relationship between Income Reporting and compliance. As i mentioned earlier, if your income is reported on a W2 Form and theres taxes withheld, your compliance rates are around 99 . If theres no Information Reporting, like for a sole proprietorship or rental Income Or Something like that, that income is reported with about a 50 accuracy rate. Theres this big gap between them. And you asked about the distribution. Well, most americans have the majority of their income from Wage And Salary income, so those folks are reporting at very high rates. But if your income comes from Partnership Income or a subchapter s corporation or a closelyheld business, they tend to be less compliant on average and those sources of income tend to be more associated with higher income taxpayers. So theres a distributional proponent as well. Its not despositive that every high Income Person has income of resources that are underreported, but the tendency is along those lines. Thank you. Mr. Odonnell, regarding the administrations Information Reporting proposal, how will Information Reporting from financial institutions, payments, settlement entities and Crypto Asset exchanges assist the irs with its enforcement efforts and what does the Agency Plan to do with the information it collects and what resources will it need in order to implement that regime . Thank you, chairman thompson. First off, any questions regarding the legislation will require us to actually have an enacted bill. But what i would say and it tracks what was reporting, that the better information we have regarding taxpayer activities, the more likely we are to be able to spot instances where taxpayers are fully compliant and that we do not need to take any further action with them and those that appear to have a risk of noncompliance. Weve done quite a bit of work with our systems to be able to improve our analysis in this space. What i would say, though, is thats important for me certainly to report that and reflecting on other Information Reporting regimes that weve gotten that im thinking about faca where there was a lot of additional information into the irs, but because we were not fully funded to be able to build out a system that took in the information and fully analyzed it and we did not have sufficient analysts in the agency to work with it, that we were not capable of taking full advantage of the information we received. So what id say is that as we work through this proposal and as its enacted, its going to be very important that we do have funding that allows us to build the system to ingest the information and analyze it and that weve got the appropriate analysts in the agency to take action with that information so that we can appropriately identify those who require no further attention and identify those that do require additional attention on our part. Thank you. Is it accurate that the irs has the oldest Technology System in the known world . Chairman, i am unable to comment on that. Im an accountant, but ive heard enough people report on it where i do think its likely that our systems do require a great deal of modernization. I personally have grappled with the inability to easily add new tools onto our system because of the age of it. That does impair us to rapidly respond to evolving opportunities to improve service to taxpayers. Mr. Mazur, do you have a comment on that . Id just like to follow up a little bit on the question about how that information will be used. Just to kind of give you like a quick little example, if you have a taxpayer with 25,000 of inflow and 25,000 of outflows from their accounts and their income is reported at 25,000, then theres no need to audit them. Instead if theres a million dollars of inflow and out flow and 25,000 of Income Reported, Thats Something you want to look at. Thats really what the Information Reporting is intended to get at, those situations of gross noncompliance that deserve some attention. Thank you. Is it true that the smithsonian has dibs on your technology if we provide money to update it . [ laughter ] so one of the things that was interesting about the Irs Technology is that a lot of the programming still occurs in an old language when i was an undergrad. I think it was an old language when all of us were undergrads. Mr. Smith. Youre recognized for five minutes. Thank you to both our witnesses for appearing today. There are a lot of unanswered questions about the administrations Tax Proposal across the board and this is a great opportunity to answer them. While your Focus Today has been on proposals to close the Tax Gap from the collection side, much of the president s Tax Plan seems to come from the viewpoint that Government Isnt sufficiently taxing farms and small businesses. The administrations recent budget released proposed repeal of stepped up basis and creating a second Death Tax on top of the existing Death Tax. I didnt just start hearing about this as a concern for the proposal when the president made it, but long before. Im now hearing serious concerns about ag producers and small Business Owners who spend a lot of time and money on their taxes and that the irs would be focusing a lot more time and resources coming after them, costing them even more. The second Death Tax that we are reading about will affect millions of families because the minimum threshold is so low. Im wondering how much additional Irs Resource will be needed to enforce that provision including audits of small businesses and farms and addressing the valuation of assets in some cases acquired many decades ago and can you please explain the provision that empowers the irs to place a lien on a Farm Or Ranch or Family Business when the head of a family dies. Can you explain that . Mr. Mazur or your colleague . Ill take a crack at that question. Then he can follow up on this. So on the question that you asked about the step up in Basis Proposal within the administrations budget. The basic idea here is to tax Wealth And Labor income at roughly the same rate. People that earn income from capital and wages have roughly 2 same tax burden. One of the loopholes in the current Tax System is taxpayers have an ability to accrue Capital Gains over a long period of time, never sell those assets or realize the gains and pass them onto their heirs without ever having paid taxes on that accrued increase. Thats an obvious inequity between people who are in different circumstances. What the proposal is attempting to do is to get at that. If a person sold an asset, they pay taxes on the Capital Gain they realize. In the case of a taxpayer who dies with a substantial amount of unrealized gain, those gains would be subject to tax. There are special rules in the provision as outlined in the treasury green book that deal with Family Businesses and family farms to ensure that taxpayers dont feel they need to sell the asset in order to settle the tax debt, that there would be provisions in place to either allow payment to occur over time or be delayed until that Business Or Farm is sold. Ill leave it to my colleague to talk about the liens on estate taxes. Mr. Odonnell. Thank you, ranking member smith. A quick point on that. First off, before we would ever move to a lien or levy, there are a series of notifications and opportunities for taxpayers to interact with the irs so that the taxpayer is afforded every opportunity to take an appropriate Step Or Arrangement to resolve the issue. I am very happy to spend time with your team to understand more clearly the question and make sure that we provide the type of information that would be useful to you and your constituents on that issue and would be happy to schedule time with your staff to work on that. I appreciate your offer there. My underlying concern is that the irs contains an immense amount of power. I was at the airport a while back and i noticed where there was an Irs Agent who was empowered to walk around the magnetometers at the airport because they have the power to do so. I am very concerned you know, even the Clinton Administration pulled back on the aggressiveness the irs triggering audits because it was agreed upon across the political spectrum that harassment was taking place. I think we need to be very careful, i remember the hearings, Lois Lerner exerting her power, she would probably describe that as fairness, too, in the manner that she did and how inappropriate it was and i appreciate my democratic colleagues at the time for acknowledging how inappropriate that application of power was on the part of ms. Lerner. So i hope we can work together to address the Tax Gap that i do believe exists, perhaps with different numbers, but, like i and from capital and thats at a basic level what is trying to do here. So the president proposes to increase the Tax Rate on Capital Gains and come from those with the most or the largest amount of Capital Gains to be equal to the same rate they would have on wage income. And similarly, as always just discussing with mr. Smith, the proposal to have a step up of a bases like that is a way to equalize the treatment of income from the capitalize capital assets and income from wages. And so that really is an underlying theme of the number of the budget proposals is to create that equation. And you wouldnt mid since the last 40 years the persuasion has moved in a positive direction to those who primarily have capital assets, judy expense, i believe, its my opinion, of those who get wages every week. Would you agree with that . Weve seen growing inequality of Income And Wealth over a large number of years and much of that is occurring at the very top of the income distribution, where in larger gains and the medium level. So thats [inaudible]. So let me ask my second question. I wonder if you can update me and the members on the status of the committees requested that the former president s Tax Returns. Im hoping the administration has seen the likes of our section six [inaudible] request you. And i have talked about this before. Where are we now . So mr. [inaudible] , this is something im not personally working on this issue but i understand that her committees damp and they justice attorneys are working through some of the details on this and its under active [inaudible]. Im not asking for personal information, simply asking you for [inaudible]. Commissioner odonnell, Deputy Commissioner, im concerned about the drop in order rates for large corporations and wealthy taxpayers and a much higher rate than eitc recipients and, i am angry over that. I hope you are to too. Can you explain why this has occurred, and how will the biden Compliance Proposal change that trend . [inaudible] first, i want to thank you for starting off with a compliment in opening. First, i think its important to correct the record out there. The rate of examinations of high Income Individuals for example the 10 million Dollar Level is 8. 1 . The rate of audit of Eitc Recipientss 1. 1 1. 12 . And frankly, the majority of examinations that we conduct of low Income Individuals are the result of them cleaning eitc. Here is an exceptionally high miss claim or Error Rate in that population. Is roughly 25 . So [inaudible] what is that, why is that . There are a number of reasons for it. Its primarily due to the complexity of the law, the fact that taxpayers do not properly report their income. Their theres basically three variables that drives the ability to claim the credits. Its the Income Level, its filing status, and its that the depended child resides with the claimant for more than six months. It is not unusual for us to see instances where a multiple individual or multiple individuals are claiming the dependent event the one person could ever complain complain i saw in the, Countdown Clock is not working, so if im exceeding my time, ill speed up you. Have five minutes. Thank you. There can only been one person who can claim the dependent but it is not unusual for more than one person to claim the depended antitrust not unusual for multiple people to claim a dependent, which puts us into an environment where there are improper payments made and under the [inaudible] improper payments recovery act, required annually, estimate that what that is. And our sample of taxpayers is at 1. 12 . Theres a very large population of individuals that to claim the credit. Not everyone who is eligible claims the credit and, we are working on educational outreach to make sure that those who know that they could, to climate, and that we improve the understanding of those who are claiming it of what they need to do to ensure that they are the one who is entitled and eligible and does receive the credit, and that they do not get called up in the proper audit process. [inaudible] odonnell, thank you very much for your testimony. Thank you Mister Chairman and. Thank you mister passport. Now recognize mr. Kelly, the ranking member, for five minutes. Thank you Mister Chairman. My question questions are going to be directed what do you, mister odonnell, because of this disclosure the otheR Day in propublica about some data that came out in the irs on was disclosed in violation of federal clause. The one thing [inaudible] it doesnt matter what party youre represented, it really comes down to do we have Faith And Confidence and trust in the system that we used to collect our taxes from all our citizens, right . And its called income taxes. It has nothing to do with your wealth, but it does have to do with your income that is generated in the taxing year. I worry about what steps you think can be taken to find out about how this information got out there. The fact that theres 15 years of this that have been disclosed im going to get back to protect us i just said. If our fellow citizens believe there is a double dose, tended if someone wants to weaponize the ice, and the irs [inaudible] maybe somehow working along those same lines and say i will disclose stuff that will hurt somebody at some level i, dont care what party it is. Efficacy market, there should be something were all concerned about. But when you lose that confident Faith And Trust in the system, then we go back to say some of these people arent paying their fair share, and i will tell you most of the people i talked to, theyre hardworking. Most of my constituents are all bluecollar people. Theyre all bluecollar people. And i dont care what stage of employment wherein but they are hardworking american taxpayers and they will say to be all the time, i dont mind paying my fair share, as long as somebody else is paying their fair share so were talking about this Tax Cap. But when we get to the situation where it looks like the irs has politicized and used information from the agency to big advantage of a political Issue Or Agenda then there is saying, whoa, whoa, whoa, wait a minute, wait a minute, thats not right, thats not supposed to happen. And yet, it has happened. And its happened far too often. My question to you is what do you think this information came from and what can the agency do . Ranking member kelly, first off, i want to say that we all share your Frustration And Outrage at this. Very, very concerned with their Probe Propublica reporting that they received Irs Information from an unknown source. The Irs Commissioner redding, he actually immediately referred this man to to russell george, who is the tax [inaudible] Tax Administration. When he first became of this, and it was right before he was going after hearing on Tuesday Morning with the senate finance committee, the [inaudible] immediately confirmed receipt off the referral. We are required, Irs Employees are required to report [inaudible] immediately anything any instances of potential unauthorized access to Taxpayer Information for a disclosure of Taxpayer Information. So its both, whether Somebody Axis it oR Do you disclosed. It [inaudible] to investigate these potential violations, and the commissioner requested that an investigation be initiated immediately. Treasury announced yesterday that they made investigative referrals to their office of Inspector General as well as to the fbi and the United States Attorneys Office for the district of columbia. We fully support any investigation undertaken and will urge the Investigation Authority to keep congress appropriately informed off their findings. Im unable to comment on whether there is an investigation underway or at all because its been referred to the Inspector General. But we too want to know what happened urgently, so if there was any information obtained from us, we understand how, and we can immediately and appropriately respond to whatever happened. We take very seriously the protection of information. Its part of our core culture. Every employees instructed in the importance of protecting information annually. Protecting every employee, fro, all the way down to the lowest grade of employee takes training regarding the prohibitions of unauthorized access to information as well as sanctions foR Disclosing Taxpayer Information. We have strong systems and measures in place to protect unauthorized access that are regularly reviewed by [inaudible]. I must reinforce, we take this matter very seriously, and will be pushing as hard as we can to ensure that we learn as soon as possible might actually did happen. Okay, i appreciate your answer. And mr. Pascrell and i are very much concerned when it comes to oversight for every single american, whether they are at the top of the ball at the bottom of the heat. And we need to have Faith And Confidence and trust in our system. I would just suggest that this is not the first time that this has happened. But i dont recall any significant penalties for the last time we saw [inaudible] that anything came forward from. That so i think thats what for the [inaudible] [inaudible] the gentlemens time has expired. We have mr. Docket for five minutes. Thank you very much and thanks to our witnesses. Clearly, the Tax Gap is real, and i think its important that we accepted the recommendations of our witnesses and get them includes with along with supporting the broader by Dune Effort to get not only revenue from closing the Tax Gap but to get equity because our Tax System relies mostly on voluntary compliance when it becomes evidence that many of the most prosperous people in the country are not fully compliant it, discourages compliances from those who are already recognizing the importance of having the revenues to support the greatest nation in the world. At the same time, i think its very important after use of hearing from republicans that we can find all of the [inaudible] by eliminating waste, fraud and abuse, a frequent campaign against, that we democrats not substituting cap Tax Cap as a substitute for necessary in the issues. Its a monster sport, its an important part, but really the biggest gap that we have is the gap between Rhetoric And Reality when it comes to all the records that are loopholes that are in our current Tax Code [inaudible] pulitzer prizewinning reported, wrote a book several years ago titled perfectly legal. It is the perfectly legal tax loopholes that the committee has failed to close that President Biden has made so central to the revenue proposals for his infrastructure you that deserve greater attention that the Tax Gap this morning referred about individuals. I agree fully with mr. Kelly in his comments that we need to be concerned about privacy and get to the bottom of this disclosure, but id like to see and equal commitment from i would like to see an equal republicans to the Equity Commitment from the aspect. Why republicans. Why it is right to is it right to have a tax have a Tax Code that code that facilitates multi facilitates multi billionaires billionaires paying little or nothing in Tax Rate, paying little or nothing in the Tax Rate while ordinary from hardworking ordinary hardworking americans, a police americans officer, you know, a teacher, are having to pay substantially where theyre having more. Its to pay just not right. We substantially more. Need to look at the its not right, we substance, have to look at not just at the the substance, process here. Not just the process. Let me ask here let me ask the the Deputy Deputy who is testifying here who is today. Testifying here today, to comment on to the comment on the corporate Tax Tax Cut that gap that exists, and exists, and how much how much revenue as well as on individuals. Thank you, congressman. Ill thank you start with congressman, i will start with this this, and there is a significant amount of additional taxes owed by large corporations. The Tax Gap is not adequately does not agatha quickly measure some of the global activities that occur, and so offshore transactions are not necessarily picked up. And what i say is that in my experience, my last job in large business and international, we observed many that there were a number of corporate taxpayers who took advantage of many opportunities to plant into various countries around the World And Structure their affairs in the way they minimize their taxes, perfectly legal. But there were a number who did [inaudible] envelope, and they typically its involved in transactions where theyre dealing with their control controlled foreign corporations, and theres transactions going between the two of them, and there able to price am in a manner which they use the arms length standard. Theres a lot of subjectivity to it, but we find that there are some that do portion on followup, and have in the past, and in the tax cuts and Jobs Act of 2017, [inaudible] to park profits in little or no tax jurisdictions and we saw quite a bit of that. And so there is a lot of activity that is to plan into transactions that to minimize the global effective Tax Rate of these large entities. Ckly is that its not unusual, either, for some of the global high wealth individuals who themselves look like a multinational holding company to operate in not dissimilar, it looks like a multinational. The challenges they do not follow a consolidated Tax Return and it is much more difficult to identify on a large multinational. Thank you all both. How did the President Plan give you a more thorough job of enforcing the laws . Gentlemans time has expired. Thank. You mister rice, you are recognized for five minutes. Mr. Rice, are you there . Im here, im sorry. The eye was muted. I apologize. Its all. Ride my career before i was in congress, i was attacked floor at the cpa. I remember the mid 90s when the irs had grown to abuse the Collection System to the point where taxpayers and representatives were outraged. There were hearings in congress and grieved taxpayers were broaden, because a lot of them, the irs was disclosing personal information about the taxpayers. It violated the rights. That was under the Clinton Administration. The pindle had swore it appears the biden administration wants to sway the pendulum far back in the otheR Direction. So where i do believe everyone should pay with a legally oh, i am extremely concerned about the privacy aspects here that the administration is looking to expand the iris and their reach into peoples personal information. Particularly with respect to the vast work of the irs is region Peoples Bank accounts and Information Reporting on the specifics of their Bank Accounts. In light of these disclosures that have happened in this week where thousands of individuals, some of the irs has apparently leaked to publication. Let me ask, you given the steady sharing of personal information from the irs, do you think that voluntary compliance would help . Something the Administrations Proposal thank you for the question. The Administrations Proposal to increase the Information Reporting by financial institutions would help voluntary compliance. We do so let me ask you. This the irs cannot keep information private, they leak. It we are going to give irs more information about taxpayers. You are cutting off. Maybe turn we didnt go off . Can you hear me now . What can you hear me . Yes. Can you hear me . Yes i can hear you. We can hear you. Can you hear me . We hear you mike. Im here. Go ahead, we can hear you. No okay. Mr. Major, do you think these leaks that the irs has had will help with voluntary compliance . We need to get to the bottom of, the disclosure, of the the propublica articles. And as the administration pointed out, theres a series of investigations going on. At this, point we are probably not in a place where we can presuppose where it came. From where the information came. From that, said obviously, the importance of keeping information private is paramount. Taxpayers have a right to believe that their information will be kept private. Given that we have been wholly and successful in doing, so do you think the irs should be given even more information than they can illegally disclose . I think the disclosure of information, whether it occurred from the irs or some other source, is problematic. What were talking about here is something some Information Reporting from financial institutions and information that they already have on their customers, to the irs, that would do two things. It would help the irs im running out of time. I have few more questions. Is this question of shifting the irs is funding from discretionary to over which progress has over sites, over to one where the congress doesnt oversee. At the irs has a precedent of overstepping their power. The it is patently, a graciously bad. I think the importance of its not necessarily the case that there is seeding oversight. Congress would have the ability to continue to have oversight, frankly. The committees, the subcommittee on oversight would be expected to continue its efforts to oversee the irs operations, regardless of the source of funding. You would expect the irs to have routine reports on how they are doing on. This as a way to help improve our oversight as well. Thank. You the gentlemans time is expired. Mr. Suozzi, you are recognized to inquire. Thank you so much Mister Chairman. This is an important topic. I hope that we can find bipartisan agreement. This is just an issue of fairness, and justice, a great way to bring in revenues into our nation for people that owe their taxes. Mr. Mazur, thank you so much for your service, thanks for being here today. Mister mazur, the Irs Commissioner who currently serves was appointed by President Trump, wasnt . He that is correct. Its a fiveyear term for Iris Commissioner. And Irs Commissioner has said in other testimonies that the Tech Step is as high as three trillion dollars. You testified earlier that the analysis you have is as high as 600 billion dollars. He thinks its as high as a trillion dollars. I believe in testimony he has given hearings before us that for every dollar we invest, you can get at least five dollars back in additional revenues, is that . Correct the return on a vests 45 to one for every dollar. Spent so Commissioner Rettig who was appointed by President Trump said that the return is five times to every. Dollar he said this. Yes you have been there for 34, years is that correct . U. S. Congressman, that is correct. Did you know that in 1988, when you first joined the irs, there were 70 only 17 revenue agency. And other law 8000 law. I know our stuffing is way down and it makes it difficult for us to operate in the. Summit when you started in 1980, eight there were 8400 revenue officers, and now theyre only 3200 revenue officers. Yes sir. So we have had a dramatic decrease in Enforcement Ability at the irs certainly during your career, and we have a lot of statistics on the past ten. Years for example, Corporations Audits have gone down from 18 to 12 . High income earners make have gone down 12 to three and a half percent. And its only from 2018. They said that its gone as low as 2. 5 . As a, result a corporations worth more than a billion dollars, audits are down 51 and million Dollars Income earners are down 61 . So i would say that in the president budget, which i totally support, this is a great way for us to bring in revenue so we can build back better and make our country stronger, just by getting people to pay their fair share of taxes. I see that there is a 1. 2 billion Dollar Increase in Law Spending 1. 5 sacks theres a big chunk of money to be spent over ten years. Do you believe that we can bring back five dollars for every dollar of enforcement that we spent . We congressman, i believe that if we rebuild the irs with necessary enforcement resources and the Information Reporting that it is being discussed, that we, the Return Investment that was long discussed by mazur, is definitely within the range of. Possible so with you as a career professional, you believe that we need to make this investment so we can do our job to try and recapture the money you agree with, that dont . You yes sir. We are all down on the major contributors to the tech. Up i am concerned about the fact that mr. Mazur testified that he thinks that there is a seven trillion dollar Tax Gap over the next ten years and that we are only estimating because we are using these conservative numbers. Were only gonna bring in 700 billion dollars. Only 10 of that seven trillion dollars in Tax Cap. Only 10 . Which is very conservative, modest. Number i want to know, if we can get money more money than what is proposed by the president , do you think that we can get more money back in Tax Revenues . Those estimates are prepared by the Departments Office of text analysis. I think mr. Mazur is in a better position to. Respond do you think that we can get more money we give you more money . If you look at the proposal, its a right Size Proposal and its really intended to allow the irs to absorb these resources in a reasonable way over the coming decade. One thing to keep in mind is the matter of revenue that is meant to be raised in the second decade after the end of the budget. Window twice the revenue in the budget. Window these estimates grow a lot overtime. They really have long term applications. Im very excited for you to get this money so that you can start hiring people so the commissioner can bulk up on Revenue Agents, revenue officers, who have been decimated over the past ten years, and over the past 34 years. Were gonna support everything we can to try to help you achieve your. Mission thank you so much for your service. Thank you gentlemen. Time expired. Miss bullets key, you are. Recognized thank you. Chairman mr. , don all i am concerned there is complaint added outcomes. Some Architect And Engineering firms that are concerned about the tax activity. What given Bidens Proposal to give more money to the irs, we want to know that the audits, such as small businesses, general knowledge used an irons denials are used, quote, unquote services. Dont qualify for the Business Compounding of the R D credits for the protest. Which based on historical large business international division approve the credit as part of an audit while some of the claims under audit in small Business Self employed division are being denied. Mr. , donald are you familiar with this issue where the longstanding applicability to the research activities to our engineering firms . And i dont understand that recommendations have been submitted to the irs to clear up this. Issue are you going to work with the committee and small Businesses Division to make sure that Irs Audits are fair and resources are being allocated wisely . Thank you for the question. I will answer your question upfront to say that we are committed to working with the small Business Self employed division. That is my new role. I have quite a bit of experience with the research and experimentation credit, my formal law was international. It is a factually intensive issue. There is a lot of subjectivity in whats taxpayers are doing. We made great strides in the recent past to centralize efforts to better understand what type of Compliance Risk is presented by certain types of businesses and activities. And we have concentrated our activities, both with small businesses, and large business, to improve our availability of resources to support those audits, to actually be engaged in the audit in the extent necessary, and to ensure that the work that we are doing comports with the expectations of our experts in that to the extent that we need we do not need the firmer exam and drop the. Issue but we do need to pursue it further we. Will the most important point i want to make is that at the outset, we have gotten better at identifying the types of activity that give rise to noncompliance and improving our selection methods around that so that we are not burdening taxpayers who are compliant and we are spending the time where the noncompliances. I appreciate. That mr. , donald the irs e. T. You is complex. It has many systems requiring a high level of scale. Ability Security And Resilience here are paramount. Especially in the age of cyberattacks. Many of the challenges we face can be depressed through the use of next generation i. T. Solutions like cloud computing. Maximizing i. T. Opera biloxi, security and resiliency, what is the irs doing to leverage the emerging technology to modernize the i. T. Infrastructure . There is i cannot answer the question specifically. But i know that we have been working very hard to improve our cybersecurity and to update our platforms. Our infrastructure is quite old, it does need updating. Would i would be willing to do, very happy to do, actually, is to have our i. T. Division work with your people to improve. And how much progress we can make towards the cloud. Support both the services we provide to Tax Payers, but to improve our ability to identify noncompliance. To identify unjust information, to analyze, it and make the best decisions on how to run our business. That would be. Great and one more question. The irs is not specific or updating. A stud in the august report, the irs reported three systems authorizations 34 systems for. Retirement the irs does not have a complete accurate system. How does the irs migrate to the cloud in the effort of Cybersecurity Protection . Congresswoman, i would have the stuff from i. T. To work with you and talk about what our plans. Our multiYear Funding on a timely basis can help us achieve what you are describing. Thank you sir. I yield back. Miss to, you are recognized. Deputies distant when mazur, we spoke earlier this, year i voiced my concerns about the Tax Gap and about the need for action. Chairman pascrell and i have been working together to make sure that there is one increasing the irs is discretionary funding for normal operations. But that mandatory funding is really critical. I fully support president Bidens Proposal for multi year mandatory funding to restore the Irss Capacity to where it should be. Ensuring that all taxpayers are paying their fair share. However, as your testimony notes, the irs has serious systems upgrade needs that have been deferred for years. One Commissioner Rhetoric has also talked about the significant was outdated technology. Would you provide us with your overview on how the administration envisions mandatory funds to be allocated across iris functions, particularly in the first few years . And how would upgrading that, System And Stuffing levels, help contribute efforts to close the Tax Gap . Thank you very much for the question, what chairwoman to, and thank you for your support of addressing the tax. Gap it is incredibly important to do. When we look at the long term challenges that the irs faces they are both human capital and fiscal capital. Its important to attract, train, and retain talented enforcement personnel, whether theyre Revenue Agents or officers, criminal investigation officers, or whatever. A big part of the mandatory funding, i prefer to look at a multi year, funding is dedicated to do that. Arto build up the systems that allow you to bring on board thousands of new hires over a number of years and get them to perform at very high levels. In addition, you want to pair up those kinds of people that you hire with the best Information Technology that you can. Some of it will involve upgrading the current systems that are antiquated. Quite a lot of it will involve learning about new technologies and techniques that can take your information and put it into more usable forms for the personnel. So we are looking at look relatively, the majority of the funding in a multi Year Push is for personal. We are looking at several billions of dollars for itv investments. To accommodate the extra Information Reporting that is also requested by the administration. Thank you. Deputy Commissioner Odonnell. Last, year jane the committees budget hearing, i asked him about treasuries Funding Request for expanding callback functions that the irs in the coming years. Allowing the irs call taxpayers to call taxpayers back instead of saying staying on hold for an extended period of time would be a common sense improvement that most taxpayers would applaud. I believe it as great potential of improving services for taxpayers who dont have english proficiency. In 2019, the irs was only able to answer 29 of the hundred million of calls that it. Received which means that it has Stuff Capacity problems with its callback. Features so can you tell me how the irs plans to use multi year mandatory funding to increase Staff Capacity in improve technology for better Taxpayer Service and specifically relating to the call back functions . Are there any plans on how to use these systems to improve systems for on english proficient taxpayers . You thank you congresswoman chu. First, off we have been increasing the use of the call back feature. There has been significant effort underway to contract out service to help us provide service to taxpayers where there is limited proficiency. Theres a lot of interest within the agencies to make sure that the many new residents in the United States of america, whether theyre citizens or going to become citizens, they want to pay the appropriate of mount of tax. They want to be a part of the system. And we are working to do what we can to help them achieve. That multi Year Funding to improve our systems and to allow us to have sufficient personnel in the agency to assist taxpayers will go a long way towards improving access to service. But access to services is primarily an annual Budgeting Event where we are authorized a specific level of service. In the fy 22 budget we requested a 75 level of service in a normal environment. This year has been anything but normal. Our level of service to the gentlemans time has expired. If you have more information, you cant get that to us and will make sure to make a copy. A bit yes. Or mr. Swagger, you are recognized. Thank you mister. Chairman and mr. Odonnell theres quite an echo. Ill change that. Thats quite an echo. You can i think youre muted. I think im back. Now you are recognized. Mister chairman data . Mr. Odonnell. He just made a, point this last year that weve the amount of complaints that weve had in the past year has been a very difficult. Youre everyone is interested in this. If you actually look through your briefing materials for this hearing, i think i found five, maybe six, different estimates of the Tax Gap. We i would love to have a couple of the members who work with the irs send us your actual formula, maybe democrats staff, this is not and i got you, its truly to understand what the curve looks like. Because as you would guess, the first dollar collected is a lot easier than the last dollar. Second, a few years ago, sitting on waste means oversight, the previous Irs Commissioner, we had hearing after hearing, and discussion afteR Discussion, with stuff in regards to the i. T. Resources. Getting the irs its own service, moving to an encrypt to encrypted cloud. Modernizing. It will the floor sinking in west virginia. We its time to do if fairly radical approach of we build a new system and just turn it on. But get the irs off of managing its own servers. I would argue, building encrypted data services and getting them out in private sectors. Third, mr. Mcdonald, week there has been some smart people who have written about this, instead of using the data and algorithms that are in the iris, purchasing commercially available data to actually find when there is discontinuity and what is reported and what is also on public rep kurds. As a way to decide audit functions, particularly for high net wear thin divisional. s with the cost of that would be dramatically less expensive over hiring tens of thousands of people and their pension, and salary costs. It would produce greater revenues with much more accuracy. Have you ever had conversations of the Elegance And Value of using the stunning amount of outside data that is available that could trigger your audit flags . We congressman checker. Thank you for your points and questions. We the notion of selecting taxpayers for examinations or whatever appropriate Enforcement Action is one that is an ongoing exercise and agency. We are constantly looking to improve our capability. We have limited resources, we do not want to spend more time than we need with people who have complied, its a waste of our time. And a waste of their time. Yes . Our Deputy Commissioner, i know its the tyranny of the clock. Im sorry that in a lot of caffeine. My argument is moving away from the constant internal battle of, is your technology good enough . Is youR Design, well call it your algorithm, your triggers and starting to actually use a Crowd Source Data Collection model. In some ways, removing the human fragility that makes many of us very uncomfortable of possibles of individual targeting that it becomes actually lots of data that you cant afford to collect but you can afford to subscribe to. We sir, i would be happy to work with anyone who has clever ideas, clever approaches, new ways of thinking of how to identify noncompliance. We will have to speak with them to understand what it is that they can. Do i personally have tried to improve our capability. Again, it is with our, resources are people. I actually look to take ideas from other countries, from we anyone who has a better approach to identifying. What would definitely be supportive of moving in that direction. What any ideas that you have to go about it Mister Chairman this becomes the moment of question. Its the democrats goal to dramatically plus up the size of the bureaucracy or is it to substantially collect dollars . If its dollars that are owed, i believe many of us on the republican side have creative datacentric passes that get you there without inflating the sides of bureaucracy and i would make the argument of the formula spent of dollars spent and collected would be much more robust on the datacentric approach than the bureaucratic approach. With that i yield back. Miss sanchez, you are recognized. Thank you for holding this important hearing. As we debate major investments that we need to making our infrastructure we always seem to arrive at a familiar place. I think all of us can agree that we need to rebuild our Transportation And Energy systems that are communities will be depending on over the next century. And probably most of us can even agree that we need to do more for communities of color and rural areas that always seem to be left behind. When it comes time to talk about how do we pay for it, we suddenly get mired in an academic debate about revenues. Most of us are not accountants or attacks lawyers so Eyes Glaze over when we talk about the Tax Gap. It is way too easy to just demonize the irs and blamed them for everything, so we just end up right back to square one. We never get to the plain and simple issue of fairness that is squarely in front of us. And somehow we convince ourselves into thinking we cant afford big investments in this country anymore well i maintain that we cant afford to keep repeating this pattern, because the communities i represent cannot afford it. The communities that i represent, i would say medium Household Income of under 80,000 dollars those communities, they do pay their fair share of taxes. And they have an Underreporting Rate of under 3 . Meanwhile, a recent study suggests that the top 1 of wet paying taxes on 20 of their income. So i think it is smart for the administration to lay out the solutions to these issues of fairness that played our system. Thankfully, fairness is pretty simple, about as simple as the problem were facing in terms of the Tax Gap. First of all we can invest in a Computer System for the irs that is newer than the 1960s Tax Processing system that it currently uses. We can also allow the irs to hire auditors who have the expertise to crack down on sophisticated Tax Cheating schemes, and when all of our offices here from constituents who face long wait times on the phone and cannot get a live person at the irs, we might also try to invest an increased staffing. Those are just three really simple things we can do to help close this problem. That i want to drill down a little bit more on the inequities in our enforcement, because that is really where the tax kept issue lives. So miss its far easy to conduct an audit for an average Tax File or in my district and it is for the wealthiest 1 . Can you please expand on the consequences of not having thorough audits at the top income thresholds . Him sorry. Do you want me to answer at this point or wait until the second panel . My apologies, you are on our second panel. Im sorry if i caught you offguard. If you would not mind responding to that, i think it is very important to be able to do audits at all levels of income. It is much more complicated to do audits at the high and because of the complexity. What concerns me at the lower and is the high number of audits that end up with individuals not responding and i think that is something that we have to dive more into as to why individuals at the lower end are not when they can request foR Documentation, whether thats because they are not compliant or whether it is because they are scared of the irs. They cannot get the documentation. They dont speak english. These are things that we have to probe on both sides of the income distribution. Thank you. Deputy Commissioner Odonnell, can you allow braid on the different skill sets that are needed to audit the Tax Returns of small businesses compared with multinational corporations . Yes, congresswoman, what we need at the more sophisticated level, the large corporate, high wealth individuals, are individuals who have experience in deep experience and narrow areas of the Tax Law where there is substantial planning going on. The law is complicated and it requires those who have a lot of experience having worked through and help either examine these types of transactions or plan them, those are the types of the sophisticated examiners we require. Its much less expertise as required to deal with a Tax Payer who has one issue where all the information is on the Tax Return, which we would typically find with an individual with wages oR Deductions. So we do need more sophisticated yes, sir. We need more sophistication on the highend. Thank you. I yield back. Time has expired. I want to remind all members to direct your questions to those on the first panel. We will get to the second panel when we conclude our questioning. Mr. Wenstrup, you are recognized. Thank you, Mister Chairman. Thank you to everyone for being part of this session today. Im one that would like to see all of our agencies be a little bit more parental and cooperative and carrying to the american people then punitive. But punitive when it is an appropriate. Hopefully we can head in that direction. Im not going to continue the discussion about propublica, thats obviously a problem. I do want to address it, and i will get into that. You know, mr. Suozzi brought something up today, and i thought it was an important question on how to ask it. You are talking about increasing numbers of employees with the irs and will that increase the net revenue, not just revenue that net revenue, obviously. Thats important and i think thats what he was driving out. At the same time when we talk about increasing taxes, we have to make sure that that does not decrease employment, and decrease our net revenue. That is something we have to consider as we move forward with what we are doing with taxes. But going back to pro public a, leaks like these, especially without accountability, they shake our constituent confidence in the irs. Their confidence in our Tax System, in general, and the ability to secure private information is they give us year after year is obviously on the line. I want our citizens to be able to trust our agencies, that we trust our irs, but seemingly we are a long way from that. All of this is coming at a time when the administration is seeking nearly 80 billion dollars in taxpayeR Dollars with more than 70 billion of that which would go to mandatory spending to grow the irs. At the same time seeking access to even more private data. Its a tough sell, ive got to tell you right now. Let me shift gears a little bit. This Tax Compliance proposal imposes complex and some costly reporting and Data Collection requirements on our financial institutions. I am also concerned that this makes many banks facing Irs Enforcement, that puts their reputations and their relationships with their customers that risk. I want to ask this question, probably two questions here i want to ask, i would like to ask mr. Mazur if i can, but what is the irs doing to ensure smaller community and the independent banks are not smothered with compliance burdens and perhaps some portly costs, and what is a plan for securing this entirely new data set . My second question is, can you guarantee no one making under 400,000 dollars will be impacted negatively by this Tax Proposal . Ill give both questions to you if you could, thank you. Thank you, mister wenstrup. Its important first to realize on the data that is being requested, this information that they have about the customers, if you look at your personal Bank Account, you will see that theres monthly tallying up what were asking in this request, this proposal, is that information tallied up for each account on an annual basis. And for the smaller and community banks, there could be some costs, this is something where would be an administration very willing to work with affected institutions, to figure out what is the best way to go about doing this. At most, it should be a onetime, cost because it is a routine set of information that is collected, but you would not want to be overly burdensome. Second question you asked about, Taxpayers Income under 400,000 dollars, and a change in their taxes. The proposal, of the Compliance Proposal looks at increasing the amount of resources to the irs to ensure that the people pay taxes that are old under the laws that congress has already passed. The administration, would like to see, a two greats go back to where they were in recent years, so to reverse some of the decline. If i can, my third question was can you guarantee no one making under 400,000 dollars, would be negatively impacted by the Tax Proposal . By the Compliance Proposal . By the Tax Proposal in general. The Tax Proposal in general, we work very hard to ensure that the taxpayers with income under 400,000 dollars would not face a higher Tax Rate, would not face increased Tax Rate on their Capital Gains income and all of those things, so that is detail very much in the green book, which outlined a lot of the proposals. I yield back. Consistent with Committee Practice will now move to a two to one questioning ratio, and i will recognize Mister Snyder for five minutes. Thank you, Mister Chairman. I want to thank you all for hosting this important meeting. And for joining us here today in this first panel. As weve long known the iris just in my state in illinois alone, since 2010 weve seen 73 of the Irs Workforce eliminated. The number of personnel, more than 2200, to just over 600 in a single decade. Overall we have lost well over 40,000 Irs Employees in the past three decades and agencies underlying digital infrastructure relies on a Programming Language that hasnt been taught in years. All these data points eliminate the most frustrating aspects of the Tax Gap. Its Cause And Solution are both clear as day. When the irs lacks the resources and needs to do its job, more people get away with skirting the rules on the taxes they owe. Experts like those agree that increased Funding Pace for, itself through the increase revenue. Money that people already over to the u. S. Government, and will make a difference as we go forward. Mister mazur, we can turn to you. Earlier it was suggested or was questioned whether the for investing for the administrations plan for investing in compliance would be five times or two times, two and a half times my first question, basic one is a 250 are wide typically thought of as a reasonable, if not an outstanding investment . So, yes. We have a two and a half that would be a great investment. But with the irs has found is historically the return on investment in enforcement resources as 45 to one. So if only a two and a half times it would be worth wild expanding enforcement to achieve greater fairness, improved efficiencies and bitter service models for all taxpayers, and perhaps stating the obvious, if we didnt get to two and a half, but we got 45 times, that would be a good thing for all americans. So, mr. Odonnell, if i can turn to you, we talked about the outdated systems of the irs its been noted that the irs have fewer Auditors Today than any times with the Audit Rate likely those with the most competent returns has dropped by more than two thirds. In fact, in 2018, only 140 of 4. 2 million partnerships, and 397 of 4. 8 million a script finals returned were audited. In this case is it fair to say the Returns Today are more complicated than they were just after World War ii . Congressman schneider, thank you for the question. I would say that not only are they more complicated, but there are more likely to operate globally, which adds complexity to the environment and there is a lot more of them that are being filed as youve just pointed out. So is significantly reduced workforce, and significantly increased number of returns and complexity has put us that a real disadvantage in ensuring the american public that theres fairness in the system and integrating in the system. Timely multi or Funding Conduct definitely help us turn the tide and rebuild the agency. So logically and im sorry this is obvious but i think its important to state the obvious here, but to handle these more complicated global returns, is it true that it requires skills and expertise far greater than what was necessary 75 years ago . Yes, sir, and that is part of our hiring plan. Is weve been looking for those individuals if we get the budget support. Those individuals who have much more experience on the outside, or in other parts of the government that understand these transactions. Mid career professionals who are looking for a change, the comment and initially help us to be able to run faster or sooner, will look to bringing in more recent college graduates once we get a bit more expertise, but our initial focus is going to be to bring in the sophisticated examiners that you have described. So we have got more returns and are more complex. They take longer to evaluate. We need more people and we need more systems. My point being, is that if we are going to create that irs that is more fair, more efficient, and more service oriented, if were going to do a better job at ensuring everyone in this country, is reese irrespective of the income where they live, pays their taxes that they owe, i guess both our weaknesses now and more systems and better people. Let me rephrase that, more people, better systems. Yes we do and will help improve service and taxpayers in the system. Absolutely. The gentlemans time is expired. Mr. Albany, you are recognized for five minutes to inquire. Thank you Mister Chairman. And to both of our. Chairman thank you to both of our witnesses for your time and your work. I am formeR Director of the Washington State Department of revenue. So as someone who has had to leave a revenue agency, i understand firsthand the importance of having adequate and consistent stable funding. And updated technology to make sure that we have an efficient and effective revenue agency. So i have consistently advocated for increased funding for the irs, specifically for business modernization, and a workforce to support that. We are seeing an alarming increase in cyberattacks at both public and private entities. These attacks threaten the security of millions of americans personal financial information. The irs is not immune to such vulnerabilities. Congress has been asking the irs to do an increasing number of tasks lately from stepping up new programs to extending existing ones, as well as to modernize. It is only appropriate for us to provide deep appropriate resources to put the agency in the best position to succeed. Mr. Mazur, can you speak to what is needed to sufficiently modernize and secure the irs is businesses stems to combat the nearly 1. 4 billion security threats the irs faces regularly . The proposal includes the discretionary component that funds ongoing work to deal with cyberattacks and security. But also a multi Year Funding includes a sufficient a substantial amount of resources for i. T. Funding that will allow the irs to upgraded system and to harden them and make them more resilient. To potential attacks. With just a quick comment, you talked about this earlier about systems that still require cobalt programming. This is a big Workforce Issue because students coming out of School Today are not on cobalt. So we will have to back train folks for them to work on the systems. The irs has to hire these people to work on the systems, which means we have to train them on ancient languages, essentially. Also, if the Core Iris systems were to fail, why would that mean for our government operations . We all passed that over to my colleague. But it would be catastrophic. We would be unable to fund the if the systems failed for some substantial period of time. Congresswoman, i would agree with with the assistant secretary. Major it would be catastrophic. What i would say is, and i spoke with the leaders of our i. T. Division before this hearing to get a sense of what they need and where they, are there are significant funding for calls within the i. T. Arena. And you support that we can get from the congress, multi year, timely, focused on improving our system, our infrastructure, modernizing it, would greatly improve our ability to provide service to the american public. To improve our ability to make enforcement decisions. And basically to improve the Integrity And Fairness of our overall texas. Tim is something the United States deserves and i very much hope that we can have your support on going forward with. That just a followup on. That call you know systems going down could be catastrophic in terms of the impact that it would have. Can you comment on the fact that we are asking the irs to modernize as well as keep things running Day Today . This isnt a place where you can focus on just modernization but you also have to continue to do daily work and build new systems. Can you comment on the impact that that has from Workforce And Budget standpoint . Yes. What it does typical of what we run into the agency, where were having to make decisions on where our limited resources would. Go i mentioned, earlier the challenges that we had, when we start receiving additional information, we typically are able to only develop minimally viable products, but they dont get us to the point of being able to fully utilize information that is coming in, or to fully support our entire organization. There are many challenges that we face every day. Trying to make these difficult decisions. Thank you very much. I yield back, mr. Chairman. Thank you gentlelady. Mr. Hearn, you are recognized for five minutes to inquire. Mr. Earn. Mister smucker are you there . Yes i am here chairman. We will go to mr. Smucker, and then come back to mr. And you are recognized to. Inquire thank you Mister Chairman. A question for mr. Odonnell. Weve already talked about the propublica leak. I find it astonishing that they were able to post thousands of Tax Returns and i think, as you mentioned, you share, this a devastating impact on Taxpayers Consulate Confidence that the irs is capable of keeping that personal information confidential. I think its absolutely terrible. I know you said that you obviously cannot confirm that there is an investigation. But i assume that there will be an investigation underway. This is illegal to release any information like this from the irs. I want to mention that it is it looks political at this time where this information is being used even today to advance the democrats narrative that the wealthy individuals dont pay enough of their taxes, so it certainly looks like it is not only illegal but it is also political and time to coincide with the political debate that we are having now. With Themy Question to you is, s a felony to release this kind of information and if it were after an investigation that determined an Iris Employee or a group of employees released this information, what would the penalties before that . Thank you congressman smucker. I would say that, first off, i would be very clear that we dont know what happened. Ive operated an environment where i have had to work through i am not criminal, i am civil. We work through the information, try to understand what happened. In this instance, i would presume they will be criminal investigators involved as well as cyber experts that will be able to go and look and systems to understand what couldve happened. I dont know. But separate from this incident, if there were a wolf full disclosure of information that individuals would be subject to felony prosecution, that could include do you know, i know this is not particular about this investigation, i fully understand that. We want to get to the bottom of this. This is about with the law is. I dont know. Well with the penalty before that, is there an additional penalty if it is done for political purposes, and is there any penalty for propublica for releasing, or for publishing, the private information . Those are the three questions that i ask. The first one, i will take the last one first. I dont know what the rules are in respect to propublica. There it is the code, as far as i am, aware and i am fairly aware of the law in the space, does not make a difference, oR Does not differentiate, the activity that motivated, or the motivations of the individual that may have been involved and any disclosure. If that were to happen. There is present time and define. I dont know at the top of my head with those. Our but it certainly does involve them thank you. I dont want to get to another aspect. Im just looking at the clock. Here i dont know if im out of time. Yet i dont hear the chairman. One of the things that we are hearing over the last few days is that this is being used to show that the wealthy paid some percentage of taxes and i think it is that percentage, i believe is inaccurate, because it is based on on realized gains. Do you think i am i correct on, that first . Do you believe that percentage that is being talk about is accurate . I do not i think it is best for me to not applying on anything regarding any Taxpayer Matter or otherwise. Do you think that wealth should be taxed before it is earned . As a matter of Tax Policy, sir, i would peru prefer to avoid commenting on. That it would certainly be a massive change in Tax Policy that would have significant impact on our economy if we start to talk about talks taxing and realized gains. I think it is important as we look at these rates and hear the narrative that is being used as a result of this illegal disclosure, that we keep that fact in mind as well. Thank you. Gentlemans time has expired. Miss plaskett. Are you on the zoom . Yes. You are recognized to inquire for five minutes. S. Thank you so much Mister Chairman, and thank you for convening this hearing, this morning. I had several questions regarding Iris Funding and closing the Tax Gap. One of the questions i have to mr. , mazur 560 billion more than the irs estimate. Whats covered a period from 20 2011, to 2013. His statement is triggered many debate over the actual size of the gap. Do you think the commissioner is correct in his estimate, and if so, why do you think the gap grew by almost 600 billion and seven years . Thank you for the question about the tax. Gap on one of my previous stops, when i worked for the irs, was actually overseeing the estimates of the Tax Gap. At the irs. And the folks who worked on this in the research came up with an estimate for 2011 of 441 billion dollars. That would grow overtime. My testimony, there is a statement that talks about if it grew with the size of the economy, it would be around 580 billion dollars for 2019. Commissioner rhetoric has been saying that the estimates are on the low end because they dont take into account particular types of it and fans mince in the economy, and the potential Tax Avoidance behavior. The irs is in the process of updating those estimates and we will see where they come out. No matter how you look at it, 580 billion dollars is very large gap for 2019. We project over the coming decade it will be seven trillion dollars. So it is large and it is growing and something that needs to be addressed. So you wouldnt see specifically that the estimate that was so you wouldnt say given specifically the estimate by that was given by the high Commissioner Rhetoric commissioner was the was the correct amount. Correct amount, but you but youre saying that it are saying that it is a large amount is a large. Amount and it is and its growing an accelerated rate. Growing in an accelerated. Right there has been considerable discussions past year about the best way to close that Tax Gap. Do you have a proposed, or promote we, specific policy measures that would have the biggest impact and shrinking that gap . A couple of. Things the Administrations Proposal there is no funding for i. T. Systems and improve information they would raise 700 billion dollars over the coming decade. But really, it requires all of those components. So you cannot just do one, there really are complementary and what the additional enforcement agents to be welltrained, to have available the best tools to do the work, that means improved Information Reporting and improved i. T. Systems. With that enhancement, particularly in enforcement area, could it be used to fully fund highlevel policy priorities like the Child Tax Credit system for our children, or even infrastructure, which is so dear to members of this committee . If you look at the president s plans, improved compliance revenues are used to support a number of the proposals. But theyre countered with improved improvements the way we tax corporations and tax individuals. So really its up to you all in congress to do the mixing and matching together, but we think if we look at the president s budget proposals, theres a coherent plan to do all of those things. We rely on you experts to give us some guidance on which ones we should have as a priority. Mr. Odonnell, before my time expires i wanted to ask you, we were talking about enforcement, the taxpayers of services. Discussions on reducing the Tax Gap has focused on enforcement. Wet has lost in this discussion is the role of adequate tax for services and keeping the Tax Gap from writing rising. How much emphasis do you think should be replaced on upgrading that current taxpayers services as an element of strategy to shrink the gap . Congresswoman blackburn, thank you, i think it a significant amount of emphasis needs to be placed on providing service to taxpayers. Earlier i received a question regarding earning Income Tax Credit and thats an area where i think a significant amount of outreach to help eligible taxpayers know they are eligible and claim the credit appropriately, would go a long way in eliminating problems in that space. Thank you so much and i yield back, mister chair. Thank you. Miss moore, you are recognized to inquire for five minutes. Thank you, mister chair. I want to thank both of our witnesses for their patients. Let me just step right in. With you, mr. Mazur, i was stunned a little bit, looking at all these numbers of the Tax Gap, you know, a trillion dollars 700 billion, i think you noted, 600 billion. That may be only 32 billion of this was associated with underreporting or non filing of corporations. And that the rest really is attributed to maybe non file ares or to individual and come taxes. And so im going to ask you for a little bit of a profile of these tax dodgers. Would you say they are primarily people whose businesses are structured as a a pass through . Well, one of the things we take from the data at the irs, we put together on the tax, gap is that income that is reported by third parties tends to be reported to the irs with a high degree of accuracy. In income, that is not reported by third parties tends to be reported on a much loweR Degree of accuracy. So really, with the proposal tries to do is make the set of income where theres Information Reporting larger relative to where there is no information or reporting. That really would encourage taxpayers to voluntarily comply, essentially own up to those sources of income and not take steps to try and hide it from us. Do we think that, i mean, do you think it would be useful to have third parties like banks for merchants involved in helping disclose noncompliance do you think we ought to look at really sort of reevaluating who is able to structure as a pass through . So i think the Administrations Proposal really tries to enlist financial institutions in reporting on inflows and outflows to financial accounts is a way to give the irs a bit of a lens into formally hard to see sorts of income, for opaque sources of income. And really thats the way to build on the current Information Reporting system to improve that. For a variety of business reasons, people may want to have passed through structures in place, and it probably isnt the role of the Tax Code to try and impinge on those business decisions. As a Deputy Commissioner there are number situations where past due businesses may be tiered in a way to hinder the irs, and in seeing where income generated activities are taking place. In those cases you want to be able to put a lens into that and see what is going on. Thank you for. That let me ask mr. Odonnell the question then. Since 2010, large public companies have a tax filing report, Requirement Report attacks on uncertainties. That is tax positions that affect their tax, income Tax Liability. This is supposed to give the irs the focus on issues and taxpayers that pose the greatest risk of noncompliance. How has this worked out . Do you think reporting of information related to uncertain tax positions have helped to improve Return Selection and examination results that address under reporting by these large corporations . And if you effectively incorporated this information into the Examination Process . Congresswoman, thank you for the question. When i say is that the results from the uncertain Tax Position Reporting have been underwhelming. They have not given us the and site into Taxpayer Noncompliance that we were hoping for. There are many reasons for that. We have told our workforce to examine the taxpayers and space. Primarily gets down to a lack of clarity in terms of what exactly comprises the taxpayers financial reporting that is made up of the uncertain tax division. We have undertaken a look at the form and instructions, and are looking at ways to improve the reporting so that we could better utilize what is being submitted. Thank you, and thank you Mister Chairman. I yield back. Thank you, the gentlemans time has expired. Mr. Hern, you are recognized for five minutes to inquire. Thank you, Mister Chairman and to all of our panelists for being here today. As you all know today we are here to discuss the current Tax Gap and the difference between the taxes owed to the irs in the taxes actually paid by hard working taxpayers. [inaudible] you were cutting out a little bit. Go ahead. Can you hear me okay . I can hear you fine. Okay. So as i was saying, we took 600 billion in 2019, and is expected to reach seven trillion as mr. Mazur a minute ago. Individual income taxes account for the largest portion of this gap followed by unemployment, or employment taxes and state taxes, President Biden proposed to close this gap by pouring 80 billion dollars into the irs over the next decade to update technology, and crease i r as workforce by some 87,000 people and conduct more routine audit on taxpayers to ensure taxes are being paid. The administration touts implementing these strategies will bring in some 700 billion, which he once used to find some of these unpopular jammed items were seeing being proposed now, the lifestyles of france in europe, and california, there driving 80,000 dollar teslas. On this committee i think we can all agree that one of the key roles of the irs is to collect taxes that are roughly oh to the government from individuals and businesses without collecting these revenues, we will fall further into the massive deficits and debt that we are seeing currently. It is our responsibility to ensure the irs is capable of performing these constitutional requirements and i fully agree with the Biden Ministration that closing the Tax Gap is a top priority to adequately fund our government. When we disagree though is on how we will incompleteness task. Efficiency in the federal government should be a priority. The President Bidens reverse the executive orders that made it easier to hire and fire federal employees. We cannot continue to waste taxpayeR Dollars on a federal workforce that is incapable or unwilling unwilling to successfully perform their jobs. Furthermore, an increasing Compliance And Enforcement efforts should not impose or overly burdensome requirements on taxpayers. Especially with the knowledge that the treasure is not sufficiently protected, taxpayeR Data and other sensitive financial information to resolve this just, last year when the treasure experienced a major cyberattack and again just two days ago and pro propublica leaked the irs tax data. Data which is supposed to be confidential while some of the countrys wealthiest individuals President Bidens proposed Increase Reporting requirements, without any assurances that taxpayeR Data will be secure and protected. We should increase the knot of personal information taxpayers are forced to disclose without proper safeguards in the place to protect it. This is a potential Security Hazard for millions of hard working taxpayers both on individual and business sides. Not only is this a Security Concern but it is also it also places overly burdensome reporting requirements on small businesses, but we are still trying to recover from the harmful, economic impacts of covid19. As a former small Business Owner for over 35 years, as a cold front of the community bank, i understand first and the impact that overly burdensome reporting and complaints requirements imposed on both financial institution athletes and small businesses. President bidens current proposal to Increase Reporting require detailed information on all inflows and outflows for both personal and business Bank Accounts. President biden makes the false assumption that financial institutions can easily provide this information. This complex Reporting Machine with take years and raise serious privacy issues and cost literally millions of dollars to comply. As numbers of course, it is ouR Duty to ensure the government is it is not imposing unnecessary regulatory burdens on our citizens. While i agree we must take action to ensure taxpayers are paying their legal taxes due to the irs, we must do this in a way that is safe and avoids placing overburdened similarly geishas on taxpayers. Mister chairman, im going to yield back. My questions have been answered or asked and answered by the panelists, regarding how were going to ensure the sensitive information is not compromised in the future. I really think the answer is we dont really know that we just snow we will have more information that can be disclosed. This comes as i think for the american people as unsatisfactory. How yield back. Thank you. Gentlemen mr. , evans you are recognized for five minutes to inquire. Thank you, Mister Chairman. Yeah Irs Workforce and pennsylvania lost nearly a quarter of its employees over the past decade. I would like to ask this question to mr. Odonnell. With respect to job losses among Revenue Agents and revenue officers what attacks returns and perform collection activity, can you explain how jobless complicates the Agencies Effort to address the Tax Gap . Congressman evans, thank you for the question. I certainly can describe some examples. First off, as we lose employees, we lose the expertise that they have and an employee who has been here for 30, 35 years at least, they are some of our most capable employees and they are very quick to replace. Employees and they are very difficult to replace. In an environment where we have Attrition And Arent able to fill, they are not replaced. So we lose expertise and we dont replace them with someone who either has equal expertise or over time can be schooled up to that level. What that has done over time is it has diminished our capability to meet the risks in our environment of the greater complexity, many more returns being filed and w we have a few people looking into her examining taxpayers or securing returns that is an important role in our revenue officers that play with a significant drop and those resources. We are unable to pursue to the extent that we know we should. Or be able to. The non file are. s all the Revenue Agent sides, we heard the numbers we can describe them again, but our coverage of the very large multinational entities, our coverage of the multi tiered partnerships. Our coverage of the global high wealth is greatly diminished. Our people want to do a good job whether its providing service, whether its ensuring taxpayer you appropriate amount or whether its our internal folks supporting the rest of the agency. They want to do a good job. It is very difficult in an environment where we are making decisions on what we cant do because of our limited resources. Of our limited resources. Another question to you. Many of my constituents need help filing accurate and timely returns as they seek to claim the Child Tax Credit and the earned income tax. My office has handled cases with serious errors. Would you please explain how Increase Oversight of paid tax preparers as the Bidenharris Administration has proposed, would ensure that low to moderate income i heard you start the conversation with miss moore. Can you talk about that . Yes, sir. First, if i may, i do want to say, it is very important for us to be providing service to taxpayers to ensure they can comply. With respect to return preparers, especially in the earned Income Tax Credit space, 51 of the returns filed by eitc claimants are filed by paid preparers which may suggest theres some complexity there. The interesting observation that weve made is that those returns that are prepared by a paid preparer are more likely to have an error than an individual who prepares the return themselves. So anything we can do to improve our ability to ensure that the paid preparers have the Confidence And Capability to prepare an accurate return and avoid any further interaction with the internal Revenue Service is a major step forward. There is another ask in the proposal. And it is to give us the ability to penalize those individuals who refuse to provide their information that they have been a paid preparer. We call them ghost preparers. They are a significant problem in that not willing to sign it and they take money from a taxpayer, a low income taxpayer, perhaps, and they are not an accurate return. We need the capability to respond in the system. Thank you. I yield back mr. Chairman. I thank the gentleman. I recognize mr. Breyer to inquire. Thank you for witnesses booth, gentlemen. I just want to point out first, of all, the treasury in may, we text 3 of gdp. As we struggle to figure out how to get this economy moving faster, this is important to remember. Id like to take the issue with my friend mr. Rice, in south carolina, whoever much respect, about the concern for privacy, yes privacy is a point we have to do everything we can to preserve it. Social security experts will help that. But what is the balance between the unintended illegal leak of data on a handful of rich people, equally divided between democrat and republican, and the importance of keeping people from cheating . So important to protect these traders, who refused to pay their fair share of the price of freedom, to achieve all those honest takes [interpreter] cheat all those honest taxpayers out there. 70 of the Tax Gap is from the top 1 . I dont think most americans would trust the irs. When you figure 99 of the wages are reported to the irs, i dont know anybody who is worried about it except somebody who may worth a couple billion dollars. I dont want this to be the red herring from doing us from doing the right thing as we move forward. Assistant secretary mazur, one of the important things that the administration has the supplementary funding, will this actually help reduce the audience of the tax complying individuals . If you respect the law, are you less at risk than before . That is the intent of it. As i said before, if taxpayer has on their financial reporting 25,000 dollars of inflows and outflows in their accounts and their Income Report is 25,000 dollars, thats a report the irs doesnt have to look at. Theres no reason to audit them. If we can refuse the amount of audits on complying taxpayers on having this information available. Conversely, if we increase of the scrutiny on taxpayers who are grossly not complying, where there are major outflows and inflows in the accounts and small taxable one of the things that we came up with was 99 of taxes and wages and salaries are reported, only 45 rental income passes reporting generally happens with economic income. Well how do you respond to the concerns brought up by some of my republican friends about the reporting versus the privacy concerns . I think this is very similar to the Information Reporting that you already get from your bank about interest income. We dont think of that as invasion of privacy, it would be a similar kind of. Thing where your financial institution would, and addition to your reporting, whatever interest to receive, we report youre inflows and outflows to the accounts. That would not be an invasion of privacy for the individuals. It might be helpful for the individuals to know whats the inflows and outflows to their accounts are, over the course of the year. You have been doing this along, time do you have any sense that the american average american taxpayer that is compliant, that works hard, and pays their taxes on time, is somehow worried the propublica is gonna come after them . I think the first of all the release of the data to propublica was illegal and wrong and should be an investigated obviously. There should be consequences for the people involved. For most americans, they get paid wages and salaries. Their information is reported routinely to the irs under the w. To form. They are compliant, as you note. Where theyre less visible source of income, taxpayers report smaller amounts. And for the most opaque sources, maybe for pet 50 is a good guess as to what they actually reported. As thank you very much. Gentlemans time is expired. Mr. Davis, you are recognized for five minutes to inquire. Thank you Mister Chairman and thank you chairman pascrell. Very informative. Very, very, very informative hearing. And also, i want to thank our witnesses for their experiences and insights. Like other systems in our country, the seemingly race mutual tax policies and audit practices have a substantial disproportionate impact on taxpayers of color. I, and my colleagues at the congressional black caucus are deeply troubled by the prior Administrations Denial of legal stimulus checks to incarcerate individuals to incarcerated individuals. Especially given the disproportionate harm to african americans and their families. Similarly, i am deeply troubled that the prior administration failed to pursue 300 high income taxpayers who cost the agency about ten billion dollars in unpaid taxes over three years. Disproportionately audit the working poor receiving the earned Income Tax Credit who lived in counties that are largely black, latinx, and native american. We have heard from response in terms of the mr. Mazur and mr. Odonnell, what steps is this administration taking to examine its practices, to ensure it is not, and will, not unintentionally disadvantage taxpayers of color . Mr. Davis, thanks for the question. Obviously, the biden administration shares your view that the Tax Code should be enforced in a race neutral. Way obviously, there are parts of the Tax Code that have been enacted by congress that have disproportionate effects on different segments of the population. Some of those can mitigate existing racial differences, i think some of them can exacerbate. Them one of the things the administration is doing is setting up and equitable data working group from the white house which is charged with trying to develop data sets to understand these questions and really know, are we doing things that enhanced racial equity with our policy choices or not. Until we have that data, we have many anecdotes, we can talk about, but having that data would really allow for a highly level Sophistication Discussion about the impacts. Our allow them to be taken into account. Thank you for that. Let me just ask mr. Odonnell is if he has anything to. Congressman davis, a couple of quick points. On the matter of prisoners receiving the economic impact payments, i did understand that there was an issue, there was a Court Case that decided in favor of prisoners receiving the payments. Thats put forward in the second and third round of the economic impact davis that we ensure that the population was appropriately paid. We have corrected that and look forward to doing that into the future. We will comply with the law, with the intent of congress. Thank you both, and again, Mister Chairman, thank you for the very informative hearing, i yield back. Thank you misteR Davis. I recognize mr. Horse bergh for five minutes. Thank you chairman, thompson very much. Thank you for trying to improve the fairness of our Tax Administration at the internal Revenue Service. Two of my constituents feel like the cards are stacked against. The hardworking people, here in avoweds fourth congressional district go to work each and every day to provide for their families and to make their communities a better place. They pay their fair share of taxes and are simply trying to live the american dream. At the same time, there are millionaires and billionaires, and major corporations, who reprofits from their labor. It should only be seen that they expect these millionaires and billionaires and big corporations to pay their taxes, just like any other american, and contribute to our country. But study after study has shown that this is not true. The Tax Gap is a persistent growing problem with the wealthiest american households baiting taxes, or hiding their money and secret offshore Bank Accounts in order to avoid paying their tax obligations. In, fact americans with the highest incomes account for a disproportionately larger share of under whats reported taxes. At the same time, lower income communities, especially black, and brown communities, are targeted more by the irs. This is not fair. It must end. Two days, ago Propublica Released a story about how the 25 richest people in america paid a little to no federal income taxes for years. Not one of these 25 richest americans live in my congressional district. Instead, it is comprised of middle class americans who pay their taxes fairly. I am proud of the hard work my constituents do each and every day. It is simply unjust and unfair that the odds are stacked against them, which is why we must make reforms to the internal Revenue Service to ensure proper Tax Compliance in a fair and equitable manner. Mr. Mazur and mr. Odonnell, whats steps could be taken to assist lowIncome Individuals in Yale Filing which proved to be more efficient form of filing taxes, and when looking at an overall looking overall at the outdated tax Collection System, is the Irs Factoring in the unique needs of low income and black and brown communities in their Outreach And Support . Thanks for the question. Still, the goal of the Tax Administration system is to have Everyone File a completely accurate return. Either they pay the tax they owe, or get the tax benefits they are entitled. To the irs has a prefile system with a free File Alliance to allow lower Income Individuals, or moderate income, individuals to file their returns electronically for free using software developed by the leading software developers. That is an important way for people to be able to file electronically. Which means that the returns tend to be more accurate because there are authentic areas and things like that. And they get processed faster. Irs processes electronic returns in a matter of Days Ball Paper bitterness take much longer. I leave it to my colleague, odonnell, to talk about the Irs Outreach plans to those communities. That is in his operation. Thank you mark. Thank you congressman. First of, all i will say that in addition to what is going on, the free File Alliance, there are also sites that are available, as well as texas cleared for the elderly where we work with roots and communities across the United States to provide service to individuals who are in need. I do think its important to just say a few words about audit coverage. While we do audit a large number of Ivey C claims, the rate of the 8. 1 , when you compare that to 1. 1, 2 , for the i. T. Sea claims, there certainly is a higher level, or highly likelihood, that a higher Income Individual can be examined. That, said it has been part of the discussion from the beginning, our coverage on the large multinationals, on the high wealth, is much lower than we think is appropriate for it gives us the confidence in the system. Thank you, gentlemans time has expired. Mr. Mazur and mr. Odonnell. Thank you for your testimony. That will conclude our first panel. Thank you both very much. We will now turn to our second panel. The interviews are three witnesses. Janet holtzblatt, is this senior broker at the she has served at the government for three decades including as the Unit Chief protects policy studies and Tax Analyst Division for the congressional Budget Office. And Deputy Director of the individual taxation and the office of Tax Office at the u. S. Department of treasury. Steven dean, is professor of law at Brooklyn Law school. He has served as a Vice Dean of Brooklyn Law. School and while visiting professor of law at nyu law, was in undergraduate of the and nina dedicated to advancing taxpayer rights [noise] shes a former Irs Tax Invasion advocate. We [noise] please proceed with your testimony. You have five minutes. Thank you for having me here today to talk about the Tax Gap. And proving the administration for the Tax Administration for the 24 century. The views expressed today are my own and should not be attributed to the urban brookings Tax Policy center. Their words, or their. Funders in this short testimony, i would like to make main three main points. First, boosting the Irs Enforcement budget after a decade of deep cuts would generate more revenue than it would cost. To, it is not enough to increase the number of audits. Improvements and examinations are also necessary. And three before the irs can hire and train you staff, and invest in the 21st century technology, the agency must be assured of sustained funding. The witnesses on the previous panel described a deep cuts and the Irs Budget in the past decade. I will focus on the impact of those cutbacks on revenues. Just as funding for the irs has dropped of over 20 since 2010, is so has been the enforcement of revenues. Those revenues have declined by 25 Inflation Adjusted Dollars during the past. Decade its possible that it declined and resources could cause enforcement revenues to increase relative to the regular cost of. Audits that would occur if a resource constrained irs became more selective, focusing on the examinations with a higher return highest Return Onyx fest meant that might otherwise be the case. Jerry mcguire and i have explored this in a city of Tax Audits in 2010 and 2017. We found on average that the amount of recovery taxes, just, texas was four times the cost for all types of audits in 2010. But the return on Investment Or Correspondence audits was about three times larger than for Inperson Audits. That is not a surprising result. Unlike in Person Audits, a Correspondence Audits are limited to a few items on the tax. Return and as the name suggests, are conducted through the. Male much lower paid Irs Employees are assigned to work those cases to. Somewhat more surprising bizarre finding for audits conducted in 2017. The return on investment for the Inperson Audits declined. Although it did increase for Correspondence Audits. One reason for the difference was in terms of staffing. There was a shift to even lower paid staff working Correspondence Audits and a shift to even high pay or Inperson Audits. My analysis was focused on the Cost Proportion of the return on investment. Dits. Our otheR Data from the irs revealed trends and assessments that might have contributed to the Fall And Year for Inperson Audit since 2010. Its important to, no audits dont always end up with a Tax Bill for taxpayers. For example, the Revenue Agents did not recommend any additional assessments and 11 of individual audits closed in 2019. That was a drop of three percentage points. In 2000. Ten in contrast, the average new changed rate for large corporations, that was for 10 million or more assets, rose from 28 , and 2000, ten to 38 in 2019. That leaves some important questions that might be better addressed by more research on these audits. Without observation, because of port targeting war. OR Did they successfully framed their legal avoidance, rather than illegal evasion. Can Investment And Stuff and technology alone over compose challenges, or changes to the tax but also necessary to close up opportunities for aggressive avoidance . Addition to the, funding the president s also proposing multi Year Budgeting by removing part of the Irss Budget from the annual probations process, and making that portion mandatory. Its a smart move, the irs needs to be able to make long term commitments and stopping in capital investments. To ensure a steady return of investment. Overtime but without guide rails, future administrations and congresses might vow to Temptation And Ship funding from basic to bodies to the mandatory portion of the budget. Regardless of those concerns, i think one thing is certain, at this juncture, increasing the irs is Enforcement Budget after a decade of deep cuts well, yield revenues an excess of cost. Those will show up where it matters the, most an increase of payroll revenues, a smalleR Deficit than would otherwise be the case, and perhaps an increase in public confidence and the Integrity And Fairness of the Tax System. I thank you for the opportunity to testify today. Thank you very much. You are recognized for five minutes. Hank. You members of the committee, thank you for inviting me to share these views on how to have better fairness and Tax Enforcement. In my testimony today, i will explain why the Race Bryant produces bad taxing policy. Ignoring race doesnt solve problems, it creates. Them weve already heard from propublica that the ten most poor counties in the United States are black and. Port if you just last, night we had an oped written by four five treasury secretaries describing those counties as royal counties of the deeps that. Not without mentioning that they are black and. Latinx some gillian is a painter. To most of the world, he is known as a path breaking abstract artist one of the great innovators. But for students, the introductory class, he was simply a man who was arrested on a Business Trip after acting badly on vacation on the medication his doctor prescribed. The testimonies make no it does detail mental Health Treatment he received, when and where he was, born that he where he received his masters of ardent painting, and where theyre he exhibited these paintings, throughout galleries in europe. To encourage him to grapple with the legal issues of the case. No one mentioned his. Race i learned that he was black by accident. From then, on i encourage my students to consider how race could influence these issues. I also invite them to look at how we his Race Couldve led to his Arrest And Prosecution or this was the adding insult or injury. His legal expenses were not, quote, ordinary, and were not deductible. Unlike expenses for, quote, causing an accident which resulted injuries to a child. Quote, an unsuccessful criminal descends assault with intent to rape. All of which have survived similar challenges. The Tax Laws insisted ignoring raced. It doesnt go away. Its simply creates land mines that any one that could hurt taxpayers. Those land mines can derail important efforts as they did in 2000. The organization for economic involvement revoked in quite spectacularly lost the over racial profiling whether the intent to to impose sanctions on liberia. How damaging can these varied land Mines B . Remember that eric garner, whose last words, i cannot breathe, fueled george floyd. In the context of policing, body cameras will not solve the problem of race. We will data. Experts have honed the craft of losing tax data in constant on my, podcast one economist describes as work as using Irs Information to Sea Watch College provides the most opportunity. The best data that we have in this country on the strength outcomes, stern backgrounds, and even where you go to, college is collected as part of the Tax System. And. Quote we will need more information, although more transparency will certainly be helpful. We simply need you, as we have already started the Tax Law should not be creating more eric garners and galleons. We have to make sure that it does not. Thank you. Miss all season. You are recognized for five minutes. Mr. Chairman thompson and pascrell, ranking members smith and kelly, members of the subcommittee, thank you for inviting me to appear today to discuss 21st administration of Tax Revision and Tax Gap. As the irs undergoes transformational change to address the tax. Got as the irs of placed resources and skills to the upper Income Levels, we have to ensure that lower and middle income taxpayers are not given short shrift. Toward that, and i recommend the irs embrace its dual role as Boast Revenue Collector and social Benefits Administrator by creating a Family And Work or benefits unit. And adopting strategies measures, and, staffing appropriate for its benefits. Failure to improve taxpayers surface, particularly to vulnerable populations who risk increasing the tax got by not meeting the needs of taxpayers who and good faith are trying to comply with the law. There are few things we should remember as we try to narrow the tax cut. First, we shall never close it. We will only narrow. It second, the drive to enforce the Tax Laws cannot come at the expense of Taxpayer Service. Approximately 2 of the 3. 6 trillion dollars the irs collects each year comes from the direct Enforcement Actions. The remaining 98 comes from the indirect effect of a mix of Peoples Fear of the irs and theiR Desire to be compliant with Tax Laws. When these taxpayers have problems, they call the irs. Yet the irs routinely answers less than 50 of calls and this, year at, times answered only 2 of the calls to its main irs 10 40 number. The irs does not have a 360degree View of taxpayer accounts, because there is no database in which all Taxpayers Formation is stored or linked. So assistants cannot provide resolutions. This lack of a full picture of the taxpayers live, has severe consequences not only for taxpayer systems but also for audits, election collection prioritization, and protection of taxpayer rights. Taxpayer service which is so important to achieve the level of compliance we have today must be funded to maintain that level. Third, the Tax Gap does not equal tax equation evasion. Failing to file your taxes does not mean that it creates an environment in which i restuff can feel justified in undermining, if not outright ignoring, taxpayer rights and protections. Tax noncompliance is a continual problem of behavior with many consequences. We should not treat a taxpayer who is simply made a mistake in the same way as a taxpayer who is actively evading tax. We should not equate legal Tax Avoidance with the tax evasion. Doing so office gates the needs for fundamental tax. Reform fourth, Intelligence Use intelligent use of data can improve texan menstruation enormously if it is fit for the purpose intended and used and algorithms and other techniques that mimic human reasoning, and if it does not displaced human decisionmaking and discretion. Today, the irs data is mired in the 19 eighties. Theres heavy emphasis on Rule Based Systems that rarely include feedback loops. Many irs systems have false positive rates in abatement. Rates the irs also doesnt use data proactively to alleviate Burden And Harm to taxpayers. On the other, Hand Research shows the irs automated forces systemic assessment of penalties increases Taxpayer Burden and future noncompliance. And we should be very wary of Irs Audit approaches that appear to have higher return on investment like correspondence exams. Research shows these audits have high default rates and inconsistent to deterrent effects, and our view doesnt fare as by those subject to. Them Taxpayer Protection should be expanded in this area. Finally, proposals to expend Information Reporting are very promising but they should be accompanied by Taxpayer Protections. Bank accounts information alone is not prima Facie Evidence of reporting. So if congress authorizes financial account reporting, it should prohibit the Irss Use of this data in near Information And Document matching. Congress should also extend the burden of Proof Protection under section 60 to one oh d in matching activities. In my written testimony, i have made many other recommendations, including proposing a new procedure the taxpayer rights and packed assessment to ensure the irs and corporate tax and minimizes administrative burden. Thank you for the opportunity to appear. Today thank you mrs. Olson. Without objection, each member will be recognized for five minutes to question our witnesses. As previously, stated with the remote setting, we will go in order alternating between each subcommittee and between the minority members. Members will unmute themselves when they are recognized for five minutes. Also, if you are not speaking, please mute. We are getting a little feedback right now. I will begin by recognizing myself. We Miss Holtzblatt kick, you for joining us today. We have heard today that it will take several years for the irs to fully implemented the Administrations Enforcement proposals because of the outset new Revenue Agents will need to be trained to analyze complex returns and develop the required skills to audit sophisticated taxpayers. During this time, how can you ensure that the irs will not use additional funding Correspondence Audits, which are easier to disproportionately focused on the poor . I cannot before you answer. Let me just say it again. If you are not speaking, please mute. Because we are getting a little feedback from someone. Thank you. Thank you for your question. Personally, i cannot speak for the irs, im not sure what they will do with. That i present the belief that they have made a commitment, very much sir in their language that they are going to be targeting to hire income people and big businesses. Although, there is some language and the treasury reports that say that they will also for people under 400, 000, they would not audit them at a rate that was greater than the cases in recent. Years that is open but, the issue is, Correspondence Audits are not substitutes for inperson audience. In Person Audits need to hire people and train people. I like with the Deputy Commissioner had said that they are going to try to get professionals and because those individuals require a lot less training. And so. Fourth its really up to the Administration And Congress to keep that commitment that they are making right now. My concerns are real. It is something that we should be mindful of . I think you need to be mindful in all cases. Thank you very much. I will now recognize mr. Smith for five minutes. Thank you Mister Chairman. Thank you to our panelists. We have had a great exchange of information so far here and i think we are going to continue in that direction. A lot has already been said about unauthorized release of personal information from taxpayers, Tax Returns. I am disturbed mostly by the parallel message, politically, that has been in the public square, front and center, for a while. It is certainly following the same pattern as the unauthorized release of Taxpayer Information. It has been said that perhaps it is a State Actor wishing to sow discord. I guess i would ask everyone involved if that is the case to not assist in that. That is particularly dangerous. There is also, i was fascinated by your testimony, i think its particularly useful and timely. Can you repeat the percentages of revenues that are obtained by i can remember your terminology, weather was active, collection or passive collections, that seems to be significantly different. Can you repeat that . Yes. About, actually its about one in 2007, 1. 6 of the 3. 5 six trillion dollars that the irs collected, it was attributable to direct Enforcement Action. Which would be pull action actions audits, things like that. The rest, i rounded it to 98 . Its attributable to a mix of the indirect effect of having a audit presents and Taxpayer Service. The taxpayers want to comply with the laws. My point, was if you erode Taxpayer Service and just beat the enforcement drum, you are risking increasing compliance noncompliance. From the already complained taxpayers. Thats fascinating. The proposition that just hiring more auditors is the answer i find particularly troubling. Especially when we know we have experience from the 90s of the irs being overly aggressive and virtually harassing the taxpayers. Complying taxpayers, mind you. Well i hope that we can responsibly address this Tax Gap in a thoughtful manner that does not result in law abiding taxpaying, hardworking americans getting harassed. What i kind of sense, from some of the discussion, both here today and outside this discussion, that, well, you know, the harassment of taxpaying americans who are compliant, that is just one little byproduct of some Collateral Damage in this mission to generate billions and billions of dollars more than are currently being collected. I would hope that would miss olson, i would be curious to know what you think we can do on the Customer Service and where you said, why, the irs only answers about half of the phone calls received . Is that accurate . What depending on bloodlines you look at, this filing season, it was as low as 2 , with 5 of the calls that came. In some of that is a result of the covid and the difficulty and the remote working. And also an increase in polls that Tax Payers want to communicate with the irs what is going on with their accounts. They are willing to Dos Service up to a point that this is the irs and that things can happen to you if you cannot communicate directly. The only answer to that is more stuffing on the Taxpayer Service. Side it is just a mathematical equation of how many employees do you, have and how many calls do you get in. And called back technology is definitely important. But dealing with the irs is not like getting an Airline Ticket or buying a package on amazon. It has serious consequences and people want to talk to an Irs Employee to know that they are heard and their issues are being addressed. I would hope that in a bipartisan manner agree that starting with the Customer Service would be a great and most affective police to begin to help taxpayers achieve compliance, and especially i believe theres a willingness to do that because that is what compliance is about. Thank you to our witnesses and thank you Mister Chairman i yield back. You are recognized for five minutes. Thank you Mister Chairman. I would like to ask my first question to doctor and senior fellow. In your testimony, you discussed adverse effects of fewer orders on voluntary compliance. How do you think that the disclosure of the purported Tax Returns on some wealthy americans, showing in some cases no taxes paid could affect levels of voluntary compliance . Miss . Sorry. We dont really know. It doesnt help in terms of morale and Taxpayer Confidence, and the fairness of the system. Hopefully people remain honest about their own liabilities in light of the news about how other people are able to avoid taxes. When you look at the numbers, regardless of who is providing them, you know exactly what im talking about, when you look at those numbers and youre receiving numbers about people who are trying to get away with something, for the most part it may be something they do unconsciously, who knows. To me, the numbers regardless of who they are coming from our stark, in that there is a big gap, we talk about a gap, there is a big gap, from what is owed and what is eventually paid. Much of this money is moved into from income into assets. There is a big difference between the two and how the two are taxed, and how they are [inaudible] that we pass. It is absolutely accommodation from the congress. We have something riding the Tax Law, and editing it and reforming it. It would seem to me that the levels of voluntary compliance, how we strengthen that is not simply to uphold the law in the fact that some people are not paying any taxes at all, how can you justify that . I dont understand it. There are some people that are on two distracting issues on the point of the gang that it takes us away from the point of who is paying their fair taxes. Do you agree . There is something to be said about that. There is a gray area between illegal evasion, what we call evasion and aggressive avoidance. There are ways in which congress could act, and they could act to on blur, make it more black and white in terms of what the law is. So that those who have the resources are not in this position of being able to take a position that is very aggressive and argue with the irs that this is in fact legal. We havent had real Tax Reforms since 1985, when bradley and Congressman Camper both parties are guilty, and at the bottom of these in consistencies. Lets face it and less address it, there are no goodbyes and bad guys in the situation, and i think we need to do something about it rather than talk about it. ProfessoR Dean, you suggested that the irs does not need additional data to help us improve the fairness of our Tax Enforcement, but instead we need to utilize the data that we have more creatively. What do you mean by that . Give me an example . The question that i was focused on in my testimony is how to ensure that enforcement is being done [inaudible] one of the question that arises in the context is whether the irs should be asking taxing payers at risk. 10 40 doesnt ask your race, although many forms do. What i was suggesting is that an order for the irs to determine whether or not the forces are done enough air matter, they do not necessarily need to collect Taxpayer Race Information from taxpayers. Theyre saying on a rich strove of information and they have talented people working in the area and they could make sure that theyre doing things fairly without starting to collect more information on taxpayers. So i didnt mean to suggest that we could do more with more information, i think they could just do more with the information that they have. Thank you professoR Dean i had one of the question to ask mrs. Olson, for my time is up so Mister Chairman, thank you. Thank you. Consistent with our Committee Practices, were gonna be using a two to one questioning ratio. At this time, i will recognize mr. Suozzi to inquire. Thank you Mister Chairman. Im not gonna ask any questions this time. Im gonna make a brief comment. No one is suggesting that the answer to this is to simply hire more enforcement agents, as was suggested by mr. Smith. Hire more enforcement agents are a big part of it, but we need to have more Customer Service people. We need to upgrade the Information Technology System. We need to make better use of the data. There is no question that the irs has been gutted over the past decade, and more than that, the previous hearing we had i talked about the number of employees that we had our half of what we had before. We need a comprehensive approach to not only serve taxpayers better, give the more information, but also to be more equitable and to do better enforcement as well. They have gone down, so precipitously over the past 12 years. There is a great i remember how upset republicans became when there was talk about eliminating, or i abolish ice. That came out, and i supported that, because i dont think we should abolish it we should reform it, make it better. Its just as nonsensical when people say lets abolish the irs, its absurd. We need to do a better job recognizing that the irs it has an important job to do to benefit all the people of america, by collecting taxes in a fair way for the people that owe their taxes. Thats gonna require all these different things of upgraded Information Technology, upgraded levels of staff, better public facing programs to do their jobs. We cant just be against government, against the irs, theres a role for government in collecting Tax Revenues one of them. We need to do a better job. This should be the last issue that should become a partisan fight. Everybody should be in favor of making the irs as robust as possible, as fair as possible. And we want to go back to people abusing, as was pointed out, taxpayers . No, nobody wants that. Lets collect our fair share of taxes of to people that owe their taxes. When youre only auditing the 2. 5 of the people that make over million dollars a year, and you decrease the auditing of corporations that have over a billion dollars of Network And Market value, i think its 51 or 65, cant remember the number, something is wrong. Lets work together, lets make this the robust agency that it should be, and lets try to collect our fair share of taxes from people on an equitable basis using the modern tools and technology that we have available to us. I yield back, mr. Chairman. Thank you mr. Suozzi. All recognize mr. Rice for five minutes. Can you hear me okay . Yes. The bill of rights in the constitution exist to protect the rights of citizens, and to constrain government from interfering with their freedom. The irs is an incredibly powerful federal barack or c. Its one of the few that can seize your assets with no hearing. With no notice, they can seize your assets. The irs is all too often been abused, abuse the rights of citizen, its been used as a political tool in recent history to attack citizens of a particular political persuasion and citizens have every Right And Responsibility to be extremely skeptical of expanding the powers and reducing the oversight over the irs. I think the idea that we would allow the irs automatic access to Bank Account records of citizens is absurd. I think the idea that we would reduce the ability of congress to have oversight over the irs, on making their funding mandatory is ridiculous. I will never support either one of those ideas. We, in a bipartisan fashion, in recent history have sat in hearings and questioned the virus on abuses, it routinely happens, almost every single year. The idea that we would expand that power and make it more difficult to have oversight over them is absurd. I absolutely agree that we should do it we can to close the Tax Gap, i agree its ridiculous that the irs is working on computers that run cobalt that go back to the eighties. I would assert that that has far less to do with funding and more to do with incompetence at the irs. They are unable to accomplish would pretty much every other federal bureaucracy has accomplished in modernizing their equipment, without this massive increase in their funding. When i sat on the oversight committee, five years ago, they said that they were running 300 different systems and that they had 200 points of failure, and only one guy knew how to program a computer, when that guy retired they were just out of luck. It is incompetent and absurd. Im very curious to see how much progress they have been making and if they can justify it, spending additional money to bring our technology to the 21st century, a i promise you that it will close the Tax Gap significantly, and be i would be first in line to support that. But its not that we havent provided funding for additional technology in the past, its because when we give that money and they spend it, they say well, we learned how not to spend that money. No, i completely agree, we need to bring the technology up to date, and we will need much people, it will help close the Tax Gap. The idea that we would give them enhanced ability with Peoples Bank accounts is absurd. The idea that we would reduce our oversight by making their funding mandatory is ridiculous. And with respect to any other ideas to close the Tax Gap, i am all year years. I yield back. I thank the gentleman. Doctor chu youre recognized for five minutes. Ms. Holes plaid, in your testimony you know to that not only have Audit Rates decrease for a larger corporations over 20 billion dollars, but the occurrence of those corporations walking away without any additional tax collected has also increased, that is alarming, what does that dynamic look like in real dollars or as a share of gdp . I dont have those figures with me. We do have information thats reported in the iris in terms of how much was refunded to the corporations. I cant say what they ended up not paying, but i can forward that information to you after this hearing. That would be great im a member of the small Business Comedian im concerned that while the largest corporations are using their vast resources to gain the Tax System, small businesses dont have those resources yet or trying to compete for business against those larger groups. Have you done a similar analysis of the Audit Rates of small businesses . How do these large corporations avoiding their taxes necessarily impacts small Businesses Ability to compete in the market . Thats an interesting question. It gets down to year after tax profits and your ability to for example get the resources to compete and to hire the lawyers who can help you get that. Again, i dont have at my fingertips the rates for the smaller businesses but i will forward that to you as well. Its clear that [inaudible] positive returns on investments. In your testimony you spoke about the Quality And Quantity of audits, it needs to be improved and i dont believe we can do that without the multi Year Funding request requested by biden. Given your previous experience on the budget committee, do you have any additional thoughts for this committee about what safeguard we should put in place to ensure that mandatory funding does not supplant the annual discretionary funding . Ive been struggling with that. I know that there is a similar kind of per grant in the Medicare Medicaid Program for health fraud, where theres a portion that is mandatory. Im not steep in knowledge of how that works, but that could be a model in terms of how they do that correctly, and how they do it incorrectly. I would turn to the budget experts at omb, cbo on the budget committees for more advice on how to do this correctly in terms of constructing the safeguards. I know that you need to get safeguards in order to avoid the kinds of games that all of us play with our money. Absolutely. Thank you, i yield back. Thank you mrs. True. Mr. Snyder, you are recognized for five minutes. Thank you Mister Chairman, and again i want to think you for this hearing and our second panel for staying with us in what has been a long journey. One of the central principles that i believe has to be a part of our taxes them is fairness, and weve heard about the Propublica Release last week. The report that the fair concerns came from, Theres Information in the data that is important to touch on. We saw that in 2018 there were 25 individuals worth 1. 1 trillion dollars, for comparison it would take 14 43 million, 14. 33 million american wage owners to put away equal to that number. The federal Tax Bill for the top 25 was 1. 9 billion dollars, whereas for the 14. 3 million, their bill to wages, their bill for taxes on wages they earned was 143 billion. Lets be clear what that means. It means that those 25 individuals collectively with the same wealth and annual earnings as 14. 3 million raping 100th of the amount of taxes. That raises a question of what is fair. A broad question for sure. Thats what happens when we dont have a sufficiently funded irans, the Tax Gap grows, the rich get away with making deductions, offshore assets, shudder, it creates a sense of unfairness. In the Context Today of this Tax Gap, were not talking about raising taxes, or simply talking about making the investments in the resources, and the skill of the train people, they need this to do their jobs, to make sure that everyone pays taxes that they owe. My question for the group is how will addressing the Tax Gap Affect Equity . What degree will we have of ensuring fairness, and making sure that the people do share their taxes . Ill Update Everyone on the panel. I think its very important for the taxpayers of the United States to know that the irs is taking the appropriate steps to ensure that people are paying the taxes that are negro lead to. To mean, compliance, voluntary compliance is really the name of the game, because enforcement is so expensive, so you want people to feel like the agency is using its power legitimately, not coercive lee and disproportionately, even as its also providing services to people and builds trust in that way. I recommend you think carefully about the balance between using legitimate Power And Building trust with all the taxpayers. I think, i share the concerns about mandatory funding, that the irs is under a lot of pressure and there are many demands on it, and so there needs to be great safeguards to make sure that it does what it is supposed to. I think that you need to watch very carefully, by oversight hearings, that it is delivering what youre expecting all of it on time. Often it gets awry and off schedule. I witnessed that for 18 year, when i was a taxpayer advocate. In the last minute mr. Dean or mrs. Holtzblatt . I think in terms of equity theyre also needs to be leveling the playing field in terms of Audits And Understanding why, for example, you get these kinds of rates and favorable decisions in terms of the taxpayers versus other taxpayers. We see for example, as ive said, that about 44 out of ten corporations come out of an audit either with no change or with refunds, in contrast with the i. T. Sea, about 10 end up with that kind of result. But its also because many of them never respond to the Irs Audit. That gets to an issue that she has raised on many occasions which is, providing lower income people with assistance in going through this process, making it easier for them to be able to respond to the irs requests. To the extent to which you maintain audits across the board, theres also a need to maintain equitable treatment of taxpayers, providing them all that theyre all able to respond to the irs, a way they can get them the result that they would want. Thank you. The gentlemans time is expired. So you are recognized for five minutes. Thank you, Mister Chairman. Miss olson, i asked a member of the former panel some questions in regards to the Propublica Information that was just released, of course im very concerned about that. Im very concerned about it. Are you concerned about it as well . Absolutely. Were trying to figure out how that could happen, because as the former Commissioner Odonnell said, every Irs Employee has annual training on on authorize access, there are a great deal of safeguards in being able to access information and unauthorized access is track, not just by the irs but by the treasurys Inspector General. To see patterns of unauthorized access. It is very disturbing, if it is a possible Irs Employer or contractor. Maybe its someone in the counting from that had access to that information. We really dont know when we have to wait and see. But it is profoundly disturbing. Some of the questions i had, and its not its related to this, but i know we will find a lot out after we learn more about this investigation. But its not clear to me, entirely one of the penalties are if this is indeed an Iris Employee. Can you speak to that at all . It is a crime. And its also that they will lose their job, which is the least of it. But access is or can be a criminal offense. And i am sure that we will see that rollout if they identify the person. Maybe you can answer this question a little better than the previous person i asked, certainly it appears like there could be political reasons foR Doing this, it fits with my friends on the other sides idol, which arent paying enough taxes. They are strongly using it to make that case, would there be additional penalties if this was done for political purposes . Actually, my understanding is under the statute that the actual political Motive Isnt with the issue is always with criminal actions as always did you intend to do this thing . Disclose or access private Taxpayer Information that you do not have the authority to access . As long as the intent is there you have the element of Mens Rhea for that crime. Whether there is a more political motivation or not, at least for that particular event, it wouldnt be an issue. Maybe, you know, thats my understanding of it. Can you tell me whether, propublica could legally publish that information regardless of how they received it . I am not an expert on first amendment and those kinds of requirements, i am not an expert on that, my focus has been on irans employees and what they are authorized to do. Sorry. The other point, i dont know whether you can speak to this or not, but the narrative that the wealthy are not paying enough in taxes, i pulled up a chart and Mister Chairman i want to have this submitted in the record, but at the moment i can tell when it is coming from, so lets get that for now. But, this breaks down by queen tiles, by Income Queen tiles, the low is 20 , and so on. What percentage of the total federal taxes they are paying, the top 20 in 2017 paid 87 of the total federal taxes that were received, compared to this chart goes back to 1979, in 1979 that rate was 65 . So weve seen the wealthy paying more in taxes as the percentage of the total since 1979. In fact, the lowest for 80 paid zero taxes, in fact they get money back. So the bottom quintile pays a negative 8 . I dont know mrs. Olson, do you accept this narrative that the wealthy are not paying their fair share . Personally, i dont like the discussions of the word fair share. People should pay the taxes that are due and oh under the law. I do believe that the irs needs more resources and skills, more skills certainly, and better technology to be able in this very global and modern age to make sure that folks engaging in complex transactions are paying what they should. But in looking at the propublica article, there wasnt any indication that people were doing anything that was illegal. It was all legal, and it was Tax Avoidance rather than tax evasion. Thank you, the gentlemans time is expired. You are recognized for five minutes. Thank you, Mister Chairman, and thank you to all the members of our panel for giving us your time and insight over the last decade the iris has made Budget Cuts of 2010, they decrease their budget by 23 , with a 22 reduction forced. These cuts to avoid taxes and a failure to update antiquated technology, makes the iris vulnerable to inefficiencies, but also to cyber attacks. Its not only enough to have resources, we have to make sure that the irs had the same fundings, that will modernize technology, improve taxpayers experience, and fairness, and make sure that we have a strong and stable workforce. Miss holtzblatt, i wanted to ask you, we talked about workforce, i wanted you to talk about where did the increase in personnel has it happened and how that has helped in audit activities . A good chunk of the reduction of personnel has occurred in enforcement collections. Perhaps, most concern is that the reduction of the revenue and the revenue officers those are the individuals who handle the most complicated Tax Audits. Theyre the ones that do the audits to collect. I think a part of what weve seen that is that there was not hiring [inaudible] between 2011 in 2018. The iraqis has a population, like the rest of the world that is getting older and you had large numbers of people retiring, and they could not be replaced. So the irs has had a grange range, and that has contributed. The slowdown in audits, because youre losing the skilled people, and to an extent you have skilled workforce there, theyre the ones that are going to be responsible for training you hires and so forth. I think it is a major contributing force, theres heavily labor intensive agency, and when you are losing your most skilled and experienced workers, you are going to have an impact on not only the number of audits, but the quality in the length that they take. The point im focusing on its critically important, we were talking about it in the first panel, the i. T. Side, of students coming out today with ip skills arent really able to program in cobalt, and having to train them in old technologies to help work on iris systems, i obviously the folks who have the Skills Today on the audits, etc can conduct the training, but its important for us to think about the impact of out of date system, what that has on our billet to make sure that we have a strong workforce in order to do a good job. Certainly. The thing about hiring younger, more recent graduates is that not only they have to pick up the cobalt in transition, but they already have the skills. Its not gonna be that difficult generally to go back and learn an old language, because new languages are built on them. They could also bring new blood and new Knowledge And Help bring the agency forward, one would hope. Thank you very much. I appreciated. I yield back, mr. Chairman. Thank you. You are recognized for five minutes. Thank you very much, Mister Chairman. I want to thank you for having these two panels. Offering perspective on a number of issues related to closing the Tax Gap. The question one of the questions that i have, is a question and i asked the first panel, that i think would be also interesting to have the second Panel Answer as well, and that is related to reducing the Tax Gap, which focuses on Iris Enforcement capabilities but from what has been lost in the discussion is the role of adequate services, i know that you talked quite a bit about that in your opening statement. I recall how important your work has been and your assistance to my constituents. But i wanted to know if others in the panel might have some opinions on that as well . Assistance to my constituents. And some others2 the i can certainly go first and let others care services vital and its not just in the form of picking up the phone, but its and really Briefing King how you present information to Tax Payers, the amount of transparency to explain, thanks the kind of on the Ground Existence you give to people. I really believe that, as were talking about fresh employees, the old way of the irs of thinking of Taxpayer Service does not apply in this environment. On the other hand, digital is important but, again, being able to talk to taxpayers is vitally important because of the power the irs has over their lives. Thank you. Anyone else . I would just say one thing for people the kinds of benefits being attributed through the Tax Amendment recently, the history of, it the Income Tax Credit as a it just incredibly complicated system which has applications for enforcement. Just to mention there is all via that is a [inaudible] that is a way of supporting taxpayers and doing. This it just suggests how much neither is for basic important service for hardworking americans and for a lot of volunteers. My students in the past have done this and i think its wonderful. But i think its a horrible that we are relying on my students to satisfy the basic needs of hardworking. Parents if i can make a point on that. Up until 2014, Irs Employees, taxpayers could walk into a Taxpayer Site and get the returns prepared by Irs Employees. They were the most accurate returns of any of the returns. Prepared the irs cut that thinking they could save some money. Which i always thought was very troubling. And the other side of that was because there are so many taxpayers wanting that assistance, they would call Revenue Agents and officers out from behind, from theiR Desks, to actually help taxpayers. This was good to help taxpayers who are trying to comply since every day, they probably some people who wouldnt. Thank. You the last questions i have and then i will yield, back and thank you again Mister Chairman for this hearing, is related to what we talk about enforcement resources, some have called for a multiYear Funding program that would not be subject to any annual appropriations. Whether any of the members pad on the panels thoughts about supporting or not supporting multiYear Funding and, additionally, should there be a mandatory funding to provide stable funding on an ongoing basis to ensure that Irs Stream of funds, for such mandatory funding that is similar purposes like preventing Fraud And Medicare and medicaid, and then now yield back . I spoke about this somewhere in my testimony. I think its critical that multi Year Budgeting be provided to the irs. I know that when i worked at treasury and met with people through the irs, decisions on how to hire and where to invest money were really dependent on their confidence that the money would be sustained over time. You cant invent Student Capital unless you know you have the money. You cannot hire people unless you know you can pay them the following year. On the other hand, it is, perhaps, i can understand Peoples Caution in terms of providing this money on an automatic basis. That i think requires more oversight. This requires the irs to provide more information even now and ruth respect to their plans and how they were used in mandatory money. To their needs to be some sort of accountability and there needs to be associated with more, information coming from the irs in order to allow congress to evaluate how that money is being used and if it is on track to meet the goals. Thank you very much. Thank you mister. Chairman thank you. Miss more, you are recognized for five minutes. You may have to unmute. There you go. Mister chairman, am i recognized . You are recognized. Was determined. And thank you so much for this distinguished second panel. I am so happy to see you missiles in and i am so happy that when you give your testimony you lead into the fact that the irs isnt the only agency that collects revenues and does Tax Enforcement but it is also a way to deliver important taxpayers services, like the epa that we provided to people during the pandemic. Like the Child Tax Credit. Its our main highway in Delivery System for those things. I appreciate your role as a taxpayer advocating going on to continue this work. That being said weve talked before a situation that many, primarily, women found themselves in during the pandemic where their abusers took the the ip checks, even though the women, primarily, had custody of the children, and we have tried working with the irs, and they perceive that they didnt have the authority to provide replacement checks. I was wondering if you could walk us through i have legislation, by the way, that would provide the authority for the irs, and i was wondering if you could walk us through how this is possible and what we can do, and why this ought to be a priority, thank you. Thank you for your leadership on this issue. Your legislation identifies a Funding Source to be able to make replacement payments, but the irs has the skills right now, in, house to be able to make determinations of whether someone is a survivor of domestic violence and whether the children resided with them during periods so that all things being equals, if there is a Funding Source, a payment could be made. Working with domestic Violence Advocacy groups, weve identified a whole series of documentation that state agencies and local agencies and courts have accepted as evidence toward there has been a domestic violence situation. That the irs can definitely adopt. So this is something that they can. Do something i would also say thiso my proposal that the irs create a separate unit for Family And Work or benefits so thats a whole unit is the division of the irs understands that this is the population and the issues that it might be facing, and that they are responsible from beginning to end of that taxpayers experience, including compliance. But also these kinds of issues. So you have people who are in a can do mentality. Looking for resolution and innovative ways to address the needs of the Family And Worker population. Thank you so much. This is really, really important to me. Do you think that this is a big ask of the irs . You might have already answered it. I was just thinking with this portal that we created with all of the information the irs has, with my legislation and the authority, are we asking the irs to do something that is outside of their will house and they really can do . Congress created a provision called the joint reliability which is what we call the innocent Spouse Statute and under that, the irs regularly makes is faced with domestic Violence And Abuse situations. They have a unit that is familiar with those issues. I personally have framed them on those issues. So this is building on the strength of that unit and the knowledge that unit has and expanding it and putting it in applying it towards issues of the vips. Theres a unit the house will. Skills listen, i thank you so much for being engaged. We are going to work with you. The creation of your you knew unit, i think its a fabulous. Idea Mister Chairman, im gonna give back my 27 seconds. Thank you. Is there objection to allowing him to go next . Mr. Barman, i recognize you for five minutes. I will buy a coffee on monday. Thank you Mister Chairman. I really appreciated. I would like to respond to mr. Smokers, comparisons of the percentage of taxes paid by the wealthiest between 1965 in today, that has been accompanied by an extraordinary concentration of wealth by the same people. That we now have wealth anytime in the last hundred years. A fair comparison with the one percentage of their wealth has been paid by the respective people. I hope you will look at. That and fairness is measured in many ways. But the biggest thing is, whats the quality of our life after those taxes are paid . And im so place to have missiles in here, a long time pause taxpayer advocate, formally of the city of richmond, virginia. Its good to see you. This last year, much of our constituents has been with the taxpayer advocates. They have been terrific. They have returned check after check. Thank you very much. Thank you for the things you laid out in your long testimony. Did you know that 98 of phone calls or not answer by Life Person thats as someone who likes to be in management, that is a disaster for management my wife told me she was going to leave me if the business ever started answering the phone with an electronic Voice Mail instead of a human being. Its crazy how successful you can give you maintain that personal touch. So thank you for emphasizing that. We cannot let the Tax Payer closing the Tech Speak Gap come in the place of taxpayer experience. You talk about the vague math errors and living through this many many times with the irs where he says, you file it wrong, there is a mistake, but they dont tell you with the mistake is . And you have no i see a how to react to it . Your recommendation that we amend Iris C 60 3 13 be one, etc it seems brilliant. Is there anyone leading on this right now in the House Or Senate . Is there something that we can do . I dont know if any i just know that this is a chronic problem people getting notices and why its being adjusted, which of course, leads to a phone call. The very thing that you couldve avoided if you had a clear notice. And i have to say that the reason why we know some of these issues we have these issues is because of the archaic technology. So even if you wanted to do something, it would take so long to fix. At which is crazy in an agency like that. Madam taxpayer, we will track down with the researchers, please do it now and if not we will help with that. Just in the last year, still managing my childrens taxpayer, youve been when theyre in their forties. That issue comes up. There is a mistake, we dont know whats the mistake is and we dont know how to fix it. Mr. Chairman thank you for the time, i yield back. Thank you mr. Bayern. Mr. Evans you are recognized for five minutes to inquire. Mister chairman, im asking this question specifically to mr. Dean, professoR Dean how would you expand refundable credits of ctc, and crtc addressing racial inequities in our taxes and the inbounds of the family comments . Thank you so much for your question. I think a lot of with the biden administration has already done, it was incredibly valuable, has switched from the urgent Tax Credit in all its complexities and all the opportunities for enforcement, to create problems, and replacing it with the tax child credit, its an incredible step forward. I applaud the biden administration to make that permanent. I do think that the effort for our advanced payments is a really challenging step theyre taking it does seem that theyre doing a pretty good job of it so far. Although we havent seen results yet. The direction theyre heading in is a great one. I think that your support would be excellent. I do think that there are steps to be taken, again i dont need to tell you the story about the heavy audited and returns for i think that thats the advantage of the switch from the Ei Cixi to the cdc. Theyre just fewer collapse, between vulnerable taxpayers to fall into. I do think that in more general terms, i understand that more tax white payers claim eitc would help. Its not a black Tax Program its a program for all americans that are working in need support. The moves that the biden administration are making or helpful. I think they do need to do some inward looking to examine how theyre faring out to their enforcement. But i think that they are doing a great job. Theyre working very hard, and they have the perspective that they need, and the information they need to do it fairly. Thank you so much for the question. If i might add something. I have a slightly different perspective. I think that the definition of a child in the internal revenues based in 1950s leave it to beavers family. Its that theres a lot to be done in the code to reflect the life circumstances and the families structures that you see in all families today, particularly those of the lower Income Level. The other thing is i think Doctor Holtzblatt has raised this, the auditings correspondents exams and it is a technique that people dont learn what they did wrong. Unless you actually managed to get through a live human being, its a machine that does the audit for every step of the way, there is no human interaction unless you can force yourself into that. That is very troubling. We did studies that show that people after theyve been audited had no idea what they did wrong, and its important because one third of the Eitc Population channels in and out the cheater. So you dont have an opportunity to learn from your current Years Mistake and then fix it for the next year. And i think the Family Structure issues going to be a problem for the credit, [inaudible] in the current here that youre getting the payment for, but their money is being paid out to somebody else, thats a feature that you learn about as we do the six months test. I want to add corresponding audits were encroached in the 1990s. The thought was that they would be less burdensome to taxpayers, because it was focus on a few issues and they would have to be conducted in office. There is probably need, i wouldnt say probably, there is need to look back on how to improve the process. But improving the process, it should be in line to continue to maintain a scope of less burden on those individuals than having to face the intensive in Person Audits that other people might have to face. Thank you Mister Chairman. Thank you mr. Evans, mr. Davies you are recognized for five minutes to inquire. Thank you, thank you again, Mister Chairman. For just an ounce standing afternoon of serious discussions. I want to thank you for inviting the dean especially to focus on the racial disparities of tax policies, you know were having more and more discussions about race and the role that it plays and its impact on Policy Decision making and i command you and chairman anderson. When we tax Labor Income at a higher rate than capita income, theres a racial gap in who benefits and who loses. When the internal revenue directs barriers for [inaudible] to receive their legal stimulus checks, there is a racial gap in who wins, who benefits and who loses. When the top 1 are responsible for 70 of tax underpayment, yet to the five counties with the highest Audit Rates are predominantly black, latinx and native american, theres a racial gap again in who wins and who loses. I was thinking about someone who said that the way to write wrongs is to shine a light upon them. To address the inequalities in the Tax Code and enforcement, i believe strongly that we need to collect as much demographic tax data as we can, to shine a light. Miss olson, i dont really have a question but i do want to thank you so much. You are an absolute hero of mine, and i want to thank you for the tremendous work that you did in helping us to ensure that incarcerated individuals would receive a degree of fairness as we deal with the whole coronavirus issue, as we deal with the economic impacts of the pandemic. I want to thank you for that. I mean, thats a group that oftentimes overlooks, and a crew that is relegated to a certain kind of punishment because of their status and we know that disproportionately their Population Group is affected. MisteR Dean, i want to thank you for your focus on the issue of the inequalities and racial disparity, and for highlighting the work that governor kristen, conducting the black caucus. Could you furtheR Discuss the racial patterns in tax policies, and enforcement and how we might be able to move in such a way that the policies that we arrive at takes into consideration a more clearer picture of what has been some of the historical precedents in our country. If you could do that i would appreciate it. Thank you so much congressman for your question. We want to discuss these issues. They really the good news and the bad news is that im not asking about that, im asking for what both republicans and democrats can easily agree on, as you noted, that was written in my testimony of a surprising really does speak to how easy this is. Im just asking for simple decency and asking for us to look at await decks policies are designed and the way they are enforced. And just to make sure that they treat hardworking americans with dignity. Its something we all treasure. And its quite simple. I think its important to say, more information we can, but its also we have to do do better with what we already. Have thank you so much. Thank you both and, again, chairman, i think you the two of you got together and you just hit a double Home Run so we thank you for the afternoon and i yield back. Thank, you the gentlemans time is expired. I want to thank all of our witnesses for the great job that you did. You all shared some very important information with the subcommittees which will allow us to move forward. I also want to thank the members, thank you for hanging in there. You had great questions. And this is truly something that we can work together on in a bipartisan way to address both fairness and a better outcome with the irs. Members, you will have two weeks to submit any written questions to be answered later in writing. Those questions, along with your answers, will be made part of the formal hearing record. Again, thank you all mr. Pascrell, always a pleasure to partner up with. You with, that the subcommittee stands adjourned. Be, safe and we will see you in person next week. Up next, a look into College Affordability and access to higher education. Backers of post secondary schooling and experts good afternoon. I call to order the subcommittee on oversight. Thank you everyone for joining us today. I hate doing this and personally. Lamely. But the fact of the matter is, we are best when we are all together in person. No one knows that better than dr. Rose. My longtime