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Clinton Signs IRS Overhaul Into Law

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Related Links
Chart: The New Law's Provisions

New Surplus Estimate Energizes Tax-Cut Talk (Washington Post, July 17)

IRS Overhaul Set to Pass (Washington Post, June 25)

Key Post Stories About IRS Reform

Budget Special Report



By Peter Baker
Washington Post Staff Writer
Thursday, July 23, 1998; Page A01

President Clinton signed into law yesterday the most significant overhaul of the Internal Revenue Service in decades, ushering in what he called a new era of customer service and enacting voter-friendly rules intended to curb the excesses of overzealous tax collectors.

Clinton, who once opposed the legislation only to reverse course after congressional hearings exposed the agency's abuses last fall, hailed the bipartisan measure for helping "to make the tax code fairer" and said it would at long last "give the American people an IRS they deserve."

"We've all worked hard to give the American people an IRS that reflects America's values and respects America's taxpayers," Clinton said at a White House ceremony surrounded by lawmakers from both parties.

The law sets out to transform the one government agency that Americans most love to hate. Among other things, it establishes nearly 70 new protections for taxpayers, including provisions that will shift the burden of proof to the IRS in court proceedings, ease penalties and interest payments, lessen the responsibility of "innocent spouses" caught up in tax troubles and make it harder for the government to seize property. The legislation also will create a nine-member oversight board dominated by private citizens.

Even as he embraced changes in tax collection, Clinton used the opportunity to warn congressional Republicans again not to use projected budget surpluses to pass deep tax cuts, repeating his vow to save extra funds for Social Security. "I do not intend to waver from my commitment to future generations and I hope the rest of us will do the same," he said.

In staging an elaborate ceremony in the East Room yesterday, Clinton hoped to claim a share of the credit for popular legislation just three months before midterm congressional elections. After the ceremony was over, Clinton agreed to sit back down at the desk where he had signed the bill to pose again for cameras because so many lawmakers wanted to be in the picture.

Reforming the IRS

The IRS reform bill addresses some of the most widely publicized complaints about the agency:

Shifting the burden of proof from the taxpayer to the agency in court cases. Taxpayers will still have to keep records and cooperate with the IRS, but in questions of fact, the IRS will have to prove the taxpayer wrong, rather than the other way around.

Protecting innocent spouses. Divorced or separated spouses can elect to be liable for taxes only on their portion of the couple's combined income, rather than on all of it as is the case now.

Easing penalties and interest payments. The bill will force the IRS to notify taxpayers within 18 months (within 12 months after 2003) after a return is filed if additional tax is owed. If the agency does not provide this notification, penalties and interest on the unpaid tax are suspended. Currently, the agency is so slow that taxpayers may have big penalty and interest bills before they ever learn that they have underpaid their taxes.

Better service. The bill contains numerous management initiatives, ranging from electronic filing to strengthening the Office of Taxpayer Advocate, that backers say will eventually mean better service for all taxpayers -- faster refunds, easier filing, quicker response to questions and problems.

"We would not be here today were it not for the president's leadership," said Treasury Secretary Robert E. Rubin, who had vigorously fought an IRS oversight board before the administration shifted gears.

Republicans were eager to remind anyone who would listen that Clinton was a late convert to the program, coming aboard only after seeing the public outrage after televised Senate Finance Committee hearings last fall.

While key Republicans attended, including Sens. William V. Roth Jr. (Del.) and Charles E. Grassley (Iowa) and Reps. Bill Archer (Tex.) and Rob Portman (Ohio), the party's leaders declined invitations, saying they had scheduling conflicts. Instead, House Speaker Newt Gingrich (R-Ga.) and Senate Majority Leader Trent Lott (R-Miss.) staged their own ceremony on Capitol Hill the day before to mark the transmission of the bill up Pennsylvania Avenue.

"President Clinton deserves credit for changing course and joining the Congress in this bipartisan achievement," Archer said after the White House event.

Sen. Bob Kerrey (D-Neb.), a chief sponsor of the legislation, said afterward that he had no problem with the White House taking credit, but added, "I don't think it's an accurate characterization. . . . The legislative branch did this almost entirely."

The jockeying for recognition may have been especially pronounced because the IRS bill has been one of the few major legislative achievements of 1998. Otherwise, the two most significant pieces of legislation to reach Clinton's desk this year were the $217 billion highway bill and the ratification of treaty amendments expanding NATO. With time running short, deep partisan disagreements may prevent many more major bills from being passed.

As of yesterday, Clinton had signed 52 bills into law, on pace for the lowest level of his presidency. He signed 157 new laws last year and 243 in 1996, the last election year. The least prolific legislative year of Clinton's tenure came in 1995, when Republicans first took power in Congress, went to war with the president over the budget and sent him just 91 bills that he approved.

In the meantime, Clinton has made generous use of his presidential power to enact as much of his agenda as he can, signing 43 executive orders and memorandums this year that do not require congressional approval. Just yesterday, in a separate ceremony, he released $2.2 million in grants for groups fighting juvenile crime, a response to the fact that Congress has refused to pass his juvenile crime bill.

The White House has blamed the gridlock on partisanship in Congress, which in addition to crime has buried Clinton proposals on everything from education to Medicare to tobacco.

"This particular year is distinctly sparse," said Lawrence Stein, the president's legislative affairs director. "It seems the guys in the other party aren't really interested in legislating. And it seems like what they want to do is actually stop legislation. They're not the do-nothing Congress. They're the kill-everything Congress."

But Lott recently complained that Democrats were deliberately trying to thwart legislation for campaign advantage and he accused Clinton of being a "bystander" detached from the business of legislating. In a television interview Sunday, he also suggested fewer bills were a good goal.

"We will not have produced as many bills number-wise, but the quality of what we have done, I think, will be more important," Lott said on "Fox News Sunday." "Unlike the Democrats, we don't think more and more and more laws and more bureaucrats is the answer. . . . We should spend more time on oversight and investigations and a lot less time trying to prime the pump to produce more laws."

Perhaps the largest gulf between the two sides concerns tax cuts. Clinton has endorsed targeted cuts for limited purposes such as child care and environmental cleanup but has insisted they be paid for by offsetting spending cuts or tax increases so as to save any budget surplus for Social Security.

Republicans, on the other hand, believe that with surplus projections seemingly mounting by the week, taxpayers should share in the economic prosperity.

Until recently, House Republicans have pushed a proposal to cut taxes by $101 billion over five years, financed with cuts in domestic programs. Yesterday House Budget Committee Chairman John R. Kasich (R-Ohio) circulated a new plan that would use $167 billion of the projected surplus for tax cuts and $338 billion to bolster Social Security over five years.

Clinton left no room for such a plan in his remarks. After 29 years of deficits, he said, "The American people expect us to have the good sense to rack up the surplus before we spend it and to save Social Security first."

Senate Democratic leader Thomas A. Daschle (S.D.) vowed to block any major GOP tax cut proposal based on the use of the surplus: "I won't even enter a room if that's the discussion."

Staff writer Eric Pianin contributed to this report.


© Copyright 1998 The Washington Post Company

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