Henry Paulson, Bush's nominee for the position of Treasury Secretary, differs from the President in that he does not believe tax cuts pay for themselves. While Bush (as well as a number of Congressional GOP leaders) have falsly claimed that tax cuts can pay for themselves, it seems that Paulson has some sense. He told the Senate Finance Committee recently, "As a general rule, I don’t believe that tax cuts pay for themselves."

More information at Think Progress.

The House approved (247-172) Rep. Paul Ryan’s (R-WI) Line Item Veto bill. The bill, also referred to as "line-item rescission", would give the president the power to force Congress to vote on specific line items on bills sent to him by Congress. President Clinton signed (and used) a more potent version of line-item veto, but it was declared unconstitutional by the Supreme Court.

House Republicans claim that this bill will help narrow the budget deficit by reining in some of the pork barrel spending which has exploded since Republicans have taken over the Executive and Legislative branches. But, the fact is giving the president this power will probably do little to stem the tide of red ink. In fact, this bill may actually increase the deficit.

It’s all about blame-shifting. If Congress shifts responsibility to the president to control spending, what incentive does it have to do so when it creates spending legislations?

Not surprising, but what is interesting is that the vote tally reveals that the House equates the Thomas compromise to full repeal. The House voted to pass legislation that significantly reduces the Estate Tax. The bill, introduced by Rep. Bill Thomas (R-CA) at the behest of Senate Majority Leader Bill Frist (R-TN), would amount to a 75% repeal of the Estate Tax. But, mirroring last year’s vote on full repeal, Thomas’ bill has proven to be no more popular than full repeal.

Earlier this year we blogged (here and here) about a new program authorized by Congress to allow the IRS to outsource its tax collection to private collection agencies. This program has caught the wary eye of a few folks in Congress, most of all Representative Steve Rothman (D-NJ).

Rothman recently successfully lead the charge against this policy, blocking the IRS from spending money on the program in the FY 2007 Treasury-Transportation bill recently approved by the House. Now all that is necessary to stop the program is successful passage in the final appropriations bill later this year.

Yet the IRS is storming ahead full steam. The Government Accountability Office recently confirmed they denied two bid protests against the IRS for contracts awarded under the program on June 14, and the IRS has immediately restarted work implementing those contracts. According to an IRS spokesman, the first accounts will likely be given over to the private collectors starting in September this year.

Because of Congress' lethargy in completing appropriations bills, it is highly likely by the time a final version of the provision stripping the collection outsourcing program's funding becomes law later this year, the IRS will have already awarded numerous accounts to the private agencies, wasting even more money.

Congress should act immediately to kill this program from moving forward and appropriately increase the IRS budget to allow government itself to collect its own taxes. It's more effective and efficient and is only one of many examples of a situation when government can do the job better.

The Senate Finance Committee held a hearing Tuesday at which the $345 billion tax gap was one of the main topics of discussion. At the hearing, IRS Commissioner Mark Everson voiced his concerns regarding corporations becoming increasingly adept at taking advantage of the complex tax code in order to pay fewer taxes. Ranking member Max Baucus (D-MT), who apparently has long been concerned about the tax gap, asked Everson to provide an estimate of the resources it would take to begin closing the gap.

Everson and other witnesses stated that the biggest contributor to the tax gap was underreporting. It was reported that large corporate underreporting accounts for about $25 billion of the gap, and underreporting by individuals accounts for $109 billion.

Posted by Becky Lewis, 02:44:23 PM



A Step In The Right Direction

The House inched closer toward fiscal sanity yesterday when it voted to ban the IRS’s costly practice of using private collection agencies to collect uncontested tax debts.

The measure is included in the Treasury-Transportation appropriation bill passed by the House yesterday (406 - 22). This method of debt collection is especially wasteful as collection agencies keep 21 to 24 percent of their collected funds. IRS Commissioner Mark Everson testified before Congress earlier this year that IRS employees can do the exact same job but at a cost of less than one percent of the debt collected. The provision, introduced by Rep. Steven Rothman (D.-N.J), would also prevent the IRS from spending $54 million on collection agencies after September.

This administration is hardly ever serious when it talks about fiscal responsibility. In response to the provision, Everson said "using private collection agencies would bring in extra money and help reduce the deficit." A true statement, yes, but terribly misleading and one of which no one can claim as a reasonable approach to fiscal management.

Rep. Rothman's Press Release

Posted by Craig Jennings, 10:41:36 AM

Wednesday, June 07, 2006