okay, you blew up in this thing, but, you know, be that was a real person, maybe that would not be good. but the fact is, you get a -- i think the other thing even more dangerous than xboxs is the reaction of participants to those things. if parent and little johnny is sitting on the floor and there's a supervision show and p somebody is brutally murdered and their parents go up and get their beer, they're going, oh, mom and dad weren't affected by that. again, it comes back to the possibility of adults constantly monitoring that when somebody, you know, is blown up on television and you've got a kid this big who doesn't really understand, you say, you know, this is pretend. and this is horrible, we don't like this happening in real life. ..

>> in light of the recent stories regarding the internal revenue service and the handling of tea party request for tax exempt status, booktv is highlighting his 2005 program featuring charles were saudi. in which his book is featured, "many unhappy returns", he gives his experiences heading up the

irs. this program is about an hour. >> good evening, welcome to tonight's meeting at the commonwealth of california. i will be your chair and moderator for today. we welcome our listeners on the radio and the viewers of c-span booktv. it is my pleasure to introduce our distinguished feature. i thought i would begin with a very brief system. the commissioner of the internal revenue service was created by an act of congress on july 1, 1852. the commissioner was appointed by the president and the senate. at that time, there was no set

figure. the irs format of 1998 amended the original act in such a five-year term of office. our guest tonight, former irs commissioner, charles rossotti, was commissioner at that time. i am happy to report that while serving under the administrations of both president clinton and george w. bush, he served out his complete license which expired in november 2002. when he became commissioner of the irs in 1997, the agency had the largest customer base and the lowest approval rating of any public institution in america. the agency was mired in scandal and caught in political turmoil. with management and technological problems.

many have viewed this is a hopelessly flawed system. while i have not painted a very pretty picture here, as the first business person to hold this position, charles rossotti has used his position to write about your the title of the book is "many unhappy returns" and he will tell us about it tonight. now come i would like to talk about charles rossotti. he transformed the irs through leadership in an atmosphere of intense security. he admits that some of the turnaround strategies were risky. but as a business person, he understood those risks and he understood the goal which was to transform the irs and overhaul the agency and reorganize the structure into a separate unit. he successfully imparted that method with over 100,000 employees. they in turn translated the same

message to the american taxpayers. today, many small-business owners, as well as over 100 dirty to individual taxpayers are the beneficiaries of those forms. in 1970, charles rossotti founded american management systems. after 27 years, he served in a variety of positions there, including president, ceo, and chairman of the board. it was one of the first technical service companies go public. charles rossotti on his a.b. in economics and was magna cum laude. he received his mba from harvard business school. including the distinct service medal from the department of defense and the department of the treasury. he also was named alumni of the year award from the school. he serves on many boards, including merrill lynch and

company and habeas corpus and sends a senior adviser of the carlyle group. please welcome the author of the book "many unhappy returns", mr. charles rossotti. >> thank you. thank you very much for that kind introduction. it is good to be back. the gentleman was kind enough to welcome me when things were not looking so good at the irs in 1999. so i do appreciate it. as you mentioned, i completed my time in november of 2002. but i still have trouble imagining that i actually ended up taking a job. because i was not planning to leave. and i certainly have not

signaled the government agency. and let alone their i was in november of 1990s davin as acting commissioner. it was not normal time for the iron ask him if there ever is a normal time for the irs. people who are really angry at that point, shortly after, there was a columnist who wrote about things. he found me a great subject for his column. right after i got there, he wrote this column in which he reported in a rather deadpan fashion that my body had been found under four times that were labeled your irs taxpayer rights and that was about what it was for at that point in time. it was true that in the '90s, people were really mad at the irs. but the trouble really didn't start until 90s. if you go back to a longer

timeframe, you find that in the 70s and early '80s, things were out of process. they respect how the government was doing their job. starting in the 80s, things started to go downhill. by the middle 90s, there were so many taxpayer complaints going into congress that by the time i made my courtesy visit for my confirmation hearing, most of the members of congress had a full-time staff person was doing nothing but fielding complaints. lamothe visible problems was that people were getting letters from the irs and then when they were calling, they would get a busy signal. about two years before i got there, i think the irs set an all-time world record and they give out 400 million signals in one year. people also had the impression that somehow the irs was picking on the little guy and letting

the big guys get away with it. all these things are symptoms. another thing that happened was in the early '90s, there was a big technology innovation program that was launched. by 1995, that program was canceled and viewed as a bus that waste of $400 billion. that tipped off a presidential commission. they spent a year and said the agency needed to be overhauled from top to bottom. by the summer of 1997, which is just like a man, the ratings of the agency, according to the surveys of public opinion polls, had reached an all-time low. that was before one of the most erratic event, which was a series of hearings that some of you may recall. it was televised in 1997 with taxpayers telling stories about how dirs was ruining their lives.

we wrote all kinds of stories. and "newsweek" had an entire cover story and that included it. the whole agency, they said, they called it a rogue agency that was out of control. even president clinton weighed in towards the low point of the whole thing. he gave a radio address on saturday. and he devoted the whole thing to problems with the irs concluded by saying that he was outraged by the stories of citizens harassed and humiliated by what seem to be an uncountable, downright interesting agency. then i went on to explain what was going on with the irs. the pictures in the book were of that event. at that point is pretty clear that it was a symptom of problems at the irs. the dilemma was a lot of these observers understood there were

a lot of problems. but they didn't think they would have been any big agencies. one was the most entrenched of democracies and federal government. even more important than that, they did collect 95% of what was need for the pro-government. many were upset about upsetting the revenue stream. that is about the time that i stepped into this dilemma. having had no prior experience in the tax business, when it came out that i was going to take this job and put most of my friends here, people said things like, you're going to do what he meant it was a little hard to explain what i was doing. when i took the job because the treasury secretary at the time was a person i respect a great deal. he made the case that while this was a crisis, and a difficult situation, it could be an

opportunity to improve the way that this organization works, which was an important institution for our country. i'd rock that argument to the forefront and it turned out to be right. it is unfortunate but also to the institutions often times don't change very much what the crisis at hand and force things to change. so i included the secretary's argument. on the other hand, i still remember was going through my mind as i was shaking hands with him to sign on for this job. and it was a line from a tv show that barbara and i used to watch back in the 70s called mission impossible. at the beginning of the show, after the agent accepted the mission, there was a voice came on and the voice said if you are captured or killed, the secretary will disavow any knowledge of your existence. i was shaking hands with the secretary. fortunately he did not.

about eight months after he took office, the administration and the congress agreed upon a reform bill for the irs. it had everything to do with taxes and the irs seem to be pretty competent at. you have a lot of divisions in it. some of which did give some direction to the agency. i think importantly, it gave some authorities to the management of the agency to make some changes. and that was the time that i ticked off about four more years of the rest of my term and making changes of the agency. most of the things that needed to be done in word on would not surprise anyone in the business that was going to go through change. they were the things that common sense would tell you or business sense would tell you that you have to do. it was not a matter of thinking, but getting them done in the context of this complicated

bureaucracy of $2 trillion per year it had to be collected. it included things like resetting the goals of the agency so that we could focus on serving the taxpayers as well as collecting the tax. reorganizing the agency so that it was a fragmented structure so that it was organized around groups of taxpayers and achieving accountability of management. of course, updating the technology and beginning to update the technology, which was extremely out of date. finally, very importantly, updating the strategy of the organization because one of the reasons the taxpayers have this feeling of picking on the little guy, it is not because people made any such decision, but just the opposite. they had not updated the strategy and the way the techniques work for many years.

the world had changed, income had changed, income distributions had changed, the irs was still doing things the way that they did them in the early '80s. if you look at it by the time i left, certainly not all the problems are fixable. there is a lot more work to be done. but by many measures, the agency is performing better and taxpayers respond. in the fall of 2001, there was a story in the front page of usa today which i was able to chuckle about. we had stories almost every day about this. but this one was because it was reporter customer satisfaction survey that was done by survey organization that surveyed how people felt about different organizations both in the private and public sector. the customers of the irs were

satisfied with the service that they received. from this, i did not conclude that people enjoy paying taxes more than eating hamburgers, but rather that it leaves the irs is doing a somewhat better job of meeting the reasonable expectations of people, which is really what service the goal of that. i think one could say that this is a case where the american democracy perhaps worked the way you would like to work. there was a big public uproar, not all of the complaints were right, but there is a sufficient uproar with some changes made. the irs made some changes perhaps not perfectly, but certainly in the direction of people wanted and needed to be done. that is the good news part of the story. it is one the reasons that i wrote the book. unfortunately the story does not have a happy ending.

notwithstanding that part of it that was positive. that is another reason why wrote the book. i believe that it was now time for the public to do the same thing but it did in the mid-90s, which is to get that again, only this time it is not about the irs but about the whole tax system because the irs is only part of the text system. while to get me to progress, over a longer treatment of time come in the tax system has been going in the opposite direction and in fact, has been deteriorating rather seriously. there are a lot of objectionable things, but in my book i focus on one of them that i think is really the most unfair, and it really is the most dangerous aspect of where we are going. that is the way it works to inflict an extra tax on all honest taxpayers. how did that come about? what has been happening is very conflicting trends. on one hand the tax code has

been since 1986. it has been getting bigger and bigger and more and more complex. the economy has also been getting bigger and more complex and more globalized. at the same time, the resources and the authorities of the irs to administer the code have been getting smaller. the effect of that -- the net effect of that is there is an enormous amount of tax that is not being collected. it is just new figures. those new figures showed us just over $3 billion per year. what that means is that every taxpayer, every honest taxpayer, the majority is paying at least 15 and probably more like 20% extra to make up for the free riders. if you want to take the tax code and focus on that for a few minutes, it is really hard to describe how out of control the tax code is. i once wanted to make a point

about the tax code by asking experts at the irs if they could just give me a number of how many pages were being added. and after a couple of weeks, i call the folks again and i said, where are my numbers might have to testify at the hearing. they came in and advised me. they could not agree how many pages were in the tax code. so it set up another argument. that makes my point better. not only how big it is, but how fast is changing. during my five years in office, congress passed tax bills. by the time you translate that into what the average taxpayer's income and there were over 100 new ones every year. there are two effects. one of them is that an enormous amount of time and money spent by honest taxpayers include tax forms. if you wanted to qualify, you had 2 million people working all

year round, doing nothing but going out tax forms it works out to about $120 billion a year just beating the tax code system. the worst part is that it provides a wonderful opportunity for promoters and for some taxpayers to manipulate the way they are taking advantage of these complex divisions to obtain what they should. that is one part of the problem. the other part of the problem has to do with the resources that are provided to the irs. you might think the economy is getting bigger. there is an enormous amount at stake. there would be some resources available to at least try to inflict compliance with this code. when i talk to my business friends, they would ask me oftentimes what was the hardest part of the job and i would always say something surprising.

i said it was not always the technology of the problem. not even trying to get a moderately acceptable budget to administer the tax code. anything, how can i be so hard all i can say is when the federal budget is involved, as this ms. logic doesn't have a lot to do with it. during a 10 year timeframe, all of these increases were happening with the number of taxes going up and up. the absolute drop by 15%. in other words, not just percentages that actually dropped. the result is that is by the time i left office, the irs was so diminished and capacity that was not able to follow up even a fraction of the case where knows that people are seriously not paying their taxes area i'm talking about people who are not filing returns at all, hiding money in offshore accounts,

lying about their income. i also compared it to being a cop in the middle of an intersection where they are based on all four corners and the robber is robbing all for banks. and you have to decide which one you want to stop. that is literally where the irs is today and some people say, well, what the irs shrink to nothing, that's fine with me. well, if you stop and think about it, it isn't the irs or the honest taxpayer has to make up the gap. we've heard of the death tax, marriage template content penalty. if you're honest, you pay more, at least 15 or 20% more. by continuing that status quo, that leaves an enormous amount of money on the table. but that isn't even necessarily the worst. what it is doing is undermining the attitudes of people have been unfortunately in this

country, more than 80% of the people from today diligently tried to pay their taxes. but what have has happened is that everybody else has learned you can get away with this as well. so if you look at the results of people's attitudes, about 55% more people today than eight years ago who openly say that they will cheat on their taxes as much as they can get away with. the irs information certainly backs up that they are not just talking through their hats. at the end of my term, i began to speak up about the broader problem of the tax system. and i have continued to do that in my book. if you look back at what happened in the mid-90s, on

one hand it was a good story of the american public working. the public out angry about what was happening, the way that the irs was handling things. there was a lot of light shed on us. that is an interesting aspect with what i had to share. what i am concluding tonight is that now it is time for the taxpayers to rise up again. we have to fix this tax system. so that is my message for tonight. i would be happy to take any questions. >> thank you very much. [applause] my thanks to charles rossotti, the former commissioner of the

revenue service for his commentary today. we should begin right away and i'm just wondering if the interest tonight is a result of the fact that in just about two weeks, the filing deadline, april 15 my account was at my home the other night. and we enjoyed it. he did mention in the prepared remarks about the complexity and it is no secret to any of us of what is complex. but this person has said for years that the public has been told that tax implications are on the way. my personal experience, the experience of the person who wrote the question, my personal experience is that just the opposite occurs. what is really wrong here? well, what is wrong is that

under both republican and democratic administrations, both the white house and congress, every year they have been passing tax bills that may or may not have good motivations. more complexity is added. so there is a subsidy that it is stored something in the tax code, whether it is good things that people might support, ranging from adopting a child to making oil out of coal. hundreds of them are passed per year. just last october, congress passed another bill, the latest one called the americans jobs creation content creation. if you take the summary of that bill, which is on the website, summary is 652 pages.

that is just a summary of the description of it. there are hundreds of provisions. some of them are probably worthwhile. one of them is an example. one of them is effectively a specialty deduction. if your business to make it a lower tax reduction. and about that. how do you describe something that has been manufactured over something that has not? there is something in there called the starbucks footnote, which is basically they didn't want to say that someone is making coffee at a starbucks. so there is a whole series of rules that are going to come out. whether making a doughnut or cup of coffee, literally it is if you make a lunch of doughnuts

and ship them to a store, and if you make them one at a time that is not manufacturing. i'm not making this up. there are just things like that that come in every year. some of them may be well-intentioned and some of them may be a response to lobbyist or that the rest bonds is something completely out of control and that's what this is i would be very surprised if he weren't anticipating the question on this tax. the commonwealth club has had a frequent speaker here and presidential candidate. he has been a frequent advocate but still advocates a flat tax. we have several questions that fit within this category. is this desirable at all in some form. and can it be a straightforward and equitable as steve forbes and others claim it can be?

>> i think almost everyone who has studied the tax system, you know, as economists or practitioners, they think that the basic right idea is to have a system which has a lot of fewer exceptions and you can have lower rates. no matter what it is, it boils down to the fact. that means we have fewer exceptions. in that raid, i think there is an agreement about is that that is the general direction to go. a lot of variations as to how that can work. the only time there was a tax simplification it was serious in the last 50 years was in 1986 when president reagan and some of the democrats in congress actually did something like that. it didn't go as far as the total

system, but it taxed people in the tax system became broader. it has gone completely in the opposite direction. the solution does lie in the direction. i think most people agree that making a broader with fewer exceptions, whether it is one rate or a couple of rates. >> this next question, i almost hesitate to ask because it is so broad. you can define in a way that doesn't cover the entire aspect of it. but it has to do with the position of the internal revenue service on international taxation. i know that there are issues between the state.

there issues of taxation and who gets what with the interstate commerce. but how about american companies who do business overseas? how should that be tax? you feel that the irs and the american taxpayer gets a fair share? >> i do have to point out that it is not the irs tax code. but it is a very important question in one of the areas where things are most out of control. it's a complicated area. but effectively, the u.s. system for businesses that operate, we tax income and then it has exceptions for the borough of taxes that are earned abroad. that area has gotten more complex and more subject to

manipulation. it has also changed, product economy to intellectual and financial services. if you are moving a bushel of something across the border, it's pretty simple. the winning was something like a high intellectual content like pharmaceuticals, software, any of these kinds of things, it is much easier to manipulate where the income is earned and to thereby effect the lower amount of taxes that you pay. people also get into enormous arguments within a given company. shifting from one subsidiary to another. and that depends on how much is any one country, all of those

areas are really in dire need of reform. >> thank you for that very excellent answer. i would like to remind you that you are listening to the commonwealth of california's radio program. our speaker is charles rossotti who is discussing how to reform the irs. it would seem to me, and i'm going to put my own title on this question. the irs should be funded in order to do its audits. it is an investment of creating revenue for the united states. if you are as shorthanded as you say, why can you make that argument to congress that by investing money and increasing staff of the irs doing on it, then it will be a payback manyfold for the country. >> all i can say that i tried.

it isn't only to congress. you first have to get through the executive branch budget. actually, this is something that was not obvious to most people. but the congress actually passed more than 99% but was requested in the executive branch. they cut it a little bit, but not a lot. the real problem was getting into the executive branch budget in the first place. all i can say that i did my best and was unsuccessful in making that argument. i once went to a town hall meeting with a friend from congress and he was a supporter of what we were trying to do. he asked me to go out and give advice about what was going on.

surprisingly, a person in the audience sort of made that point and said, he claimed that he knew of people in his community who were paying their taxes and he thought it was really bad because he was paying his taxes. he asked why they didn't provide more money. we can go out and collect these taxes. congress said, how can i do that in a because i haven't been able to get enough money to even higher park rangers to maintain parks. so how can i put that to irs agents? there's a certain logic to that until you analyze what is going on. the park rangers are not bringing in the money for the irs. that political logic unfortunately has gone on for the last 10 years. so until somebody steps up and really provides leadership to

change that, i'm afraid it is not going to change. >> it is not just for auditors and agents but also, there is a lot that can be done with technology and we did make a lot of progress and there is much more that can be done. there is very little money available at times. >> here's a good follow-up. how much revenue per hour does an irs auditor have to make in order to break even? >> well, if you want to look at it on an average basis, the irs brings in actual enforcement revenue and the budget is about 10 billion. that, however, is not really a good way to look at it. because if you just look at it that way, you would be a lot more efficient to send notices of her grandmother for $100 in

interest that she didn't pay. she will probably send in 100 bucks area so that is really cheap. but we would not investigate people that are hiding money offshore, you know, in a tax haven. because that takes a lot more time and it doesn't necessarily bring in as much direct evidence. but what it does do is when you put some folks in jail, it does provide the chance for other people to do the same thing. having said that, you do bring in a lot more money even on the direct enforcement level. many have asked about this question. but we have always stayed with the system. here's the reason why. there has been a lot of questions on audits.

what is the number one item that triggered an irs audit? well, i don't know if i really ought to answer that. but this is a little bit mysterious. i think it doesn't need to be. basically, what the irs tried to do, what it tries to do is a statistical scoring system to look at what is the probability that something is wrong. it could be too many deductions or something that indicates that there may be some missing information. that is not the only way it can be done. there are also other data sources that can be used to triangulate if someone is

reporting. >> would you expect? >> be happy. if you have never audited and are now going to be audited. the first thing is to recognize that an audit is not any way implied that somebody has done something wrong. it is a check of your return to determine whether or not it is accurate. the purpose of an audit is limited. the agent will have some issues, as they call them, to look into about whether that return was recorded correctly and we will try to run through those issues. usually it involves getting documentation with your

position. it is important to recognize that it does not imply what is selected for audit, but it is just a way of checking on whether it was accurate or not. >> under the clinton years, the country built up quite a large surplus. several trillion. under president bush's term, that trend has been reversed. is there more pressure on the internal revenue service to collect unpaid tax obligations when the country is running a deficit, such as we are now? >> i think there is a little bit more sensitivity. but frankly, i wish that there were more things about it that we can talk about. including about the tax code and the irs.

>> i think there must be some cpas in the audience. it appears to me that this may be came from one of them. is it practical for me to say, for example, if you earn over $150,000 per year, just to pick a random number, is it practical to do your own taxes? or with that kind of income, with one miss deductions and write up opportunities that are available by not hiring a tax professional? >> about 60% of the people prepare these things to help them with their returns. if you look at which people tend to use them more, most people that have a business income, in other words, they use a business, it gets more complicated almost 80 to 90 if not more people who have business income.

if on the other hand someone has wages for dividends or interest that are reported on such a form, many of those people do their own taxes. but i have to say that there are many credits and savings and other kinds of potential breaks in the code that you have to be pretty diligent to go through all of those things to make sure that you have the ones that you are entitled to. tax software has made that a little bit more interesting. they do some of the better programs after a series of questions. we walk you through the various types of deductions, that makes it a little bit easier. but it is complicated for people. especially if they have several different incomes.

>> i believe that the internal revenue service refers to complex tax shelters. the event yet that is the term that generally used. >> how much of the internal revenue service shortfall, i think that that is a difference between what is selected. >> it's a difference the difference is someone paid everything that they should pay. sometimes it is referred to as the tax gap. >> how much is the shortfall now? >> including the various interpretations about what is allowable and not allowable for the various tax shelters with high network individualist. >> i do not know what that means. but i will say is one of the total values.

$300 billion per year. that is a conservative number. that is the difference between what should be paid and what is paid. the kind of tax shelter which are primarily used by large corporations and very wealthy individuals. that is a major percentage of that. this includes one of the largest single element. >> okay. tax estimates, federal tax estimates. there is a state tax estimate at times. you think that this came than will ever go the way of the multicar? >> i doubt it. unfortunately i doubt it. because people are not having

enough money withheld from that in order to keep up on current asis. many require us to make quarterly payments. it is a bit of a burden. that is probably not one of those things that will go away. see that changing the subject for a second. militia groups. those that think that they don't have to pay taxes. taxes are illegal. how proactive was the irs in dealing with militia groups, those that don't pay their taxes and they don't feel that the government has a right to collect them? >> i think they are in regards to tax protesters and what they are. people that have a variety of theories, all of which are opiates, completely bogus and have been overruled many times. some of them are pretty funny. they come up with all kinds of

theories. the 16th amendment, things that were never properly ratified. i could go on and on. but they are a serious problem. the irs does have resources targeted against those people. but again, it is a resource thing. this is not a handful of people. these are large numbers of people. and it is quite resource intensive to go out and investigate people in those categories. i think the irs has done a better job than they used to at putting resources to that problem. but it comes right back to the

issues that there are not enough issues go around. there a are a lot of people that pursue that kind of act committee that are still doing it. >> it is time for another reminder to our radio audience. you are listening to the commonwealth of california radio program. our speaker is the former commissioner of internal revenue service. he's discussing how to reform the irs. i think that i can describe the next questioner to what the political background. but president clinton retaliated by having the irs and while the clinton opponents to be audited by the agency.

there have been allegations of that time made over the years. many times. they continue under different administrations during my time in office. there are some very stringent safeguards against those kinds of activities. one of them is that there is an investigative agency that has a thousand people with the treasury inspector general. it is part of the treasury department and the only mention of that organization is to investigate the irs. so you have 100,000 people investigating him in cases of allegation. they are very rigorous in the investigation. if there is any allegations, by

a taxpayer, employee, any number of the public, they are followed up on thoroughly. i can tell you that there is no substance to any of that. in fact, one of the best things even before i got there, long before i got there was a result of problems going back to the 50s. it is that over time there have been more and more safe guards. one the one problem that we do not have been that country is a politically directed on it. >> there is a follow-up about politically directed audits. it may be judicial as well. how about the audit of the national review, fox news host bill o'reilly. >> i can tell you that the process of selecting this is extremely rigorous as a process.

any attempt by anyone outside the he can influence that process. they would be subject to so many investigation and would be reported so quickly that your head would spin. as a matter fact, they quoted a specific provision that basically required any employee of the irs to talk about have there has been any information from anyone outside of the irs and executive branch along the lines of directing the audit, they have to report it in about four different places, including the inspector general and a number of other places. so i have spent five years there and i have never been there before. whenever there are allegations, i would use those reports very carefully with the inspector general and others. others without exception,

sometimes it's an organization where the person is audited, it might have a political profile and people will make the allegations. >> we have had several questions and i have put them all together in a very brief response here on outsourcing. we use outsourcing as a way to save money? we have enormous opportunities. most of what the irs does is deal with taxpayers taxes and that is something that is widely viewed that needs to be done is a governmental function. there are a number of things that access technology that is

outsourced. including what is competitive sourcing and what is competed to have that done. that is a tool that can be used at any time. >> at the conclusion in 2002, how much more, if any management control did you have compared to 1997 when you first took the job? >> i think in terms of legal authority and what is on the books, the irs commissioner has a significant amount of authority to run the agency. a significant amount of authority operating from the constraints. what i think is more important is because many of the changes

that we were able to make and that we will facilitate, the internal structure of the agents he and the way it was organized -- it made it much more practical to actually exercise the priority and to do things like change the enforcement strategy. to give you an example in the way the agency is set up, which is a legacy the changes back to the 50s, it is essentially like having 43 different irs's. there are other types of units that have people in charge. so the headquarters would be interpreted in any way that they were wanting to. even on things like technology, everyone was buying their own kind of technology. so was like having each example

that has ever been produced over the previous 40 years. >> mr. charles rossotti, one of the highest visibility visibility issues is about the reform of social security. can you comment on what role irs would play in regard to taxes withheld from employees paychecks to help fund things? what is your opinion on our? >> i actually don't know. the irs does collect the social security tax.

there would be a change for collecting or paying taxes and it would be the irs, i presume, that would have the job of administering nat. there are no details on that. >> there have been several questions also on offshore shelving. one of the news items that i'm familiar with is the repatriation aspect by corporations from the cayman islands are some of them considered criminal? if so, what makes them criminal versus legal shelters? that is a very good question. some of what was in there was

part of the tax code. we don't actually have to pay that kind of tax. and in a lot of cases, we are actually bringing that back. so the repatriation is not a tax fund. >> is finding ways to manipulate the income of an individual or business to make it appear that that income is earned in a place that is a tax shelter that became a tax haven. so that it appears the taxes not paid. that can be a tax shelter. the third one that you mentioned with respect to criminal issues has to do with what is entirely different.

there is a case where the irs brought a criminal case against those who are entrepreneurs and they were accused of hiding $450 million of capital gains does by hiding it in the shelters, just putting it there and not paying tax on it. that is honestly a criminal offense. i would like to point out that we have the $450 million of income, which was hidden. so that was an unusual taste. what he was doing was not unusual. there were hundreds of thousands of people doing the same thing. plus hiding money on places. >> there is a question about a book. i think "the new york times" is reportedly familiar.

what is your opinion and reaction to this book entitled perfectly legal? >> what mr. johnson has done is covered taxes and the irs and he has laid out, you know, in the thorough fashion, a litany and in his title, he has talked about things that are arguably legal under the tax code and this talks about how manipulable the tax code currently is. which is having to do with one of the points i made due to the laxity of this code. you want to have an exhaustive list of how these things can be done. >> sir, are you concerned about the results of corporate research credit and how they are often exported as part of offshore and? >> well, i don't know. i think i will stop that one. i'm not sure that i know the

answer to that. after five years at the internal revenue service, would you like to tackle another government agency? >> that is an easy one. no, i do not. that is something that i did once in a lifetime. >> this is kind of discouraging. because many of the changes that have been implemented under your watch have been reversed. please explain your feelings about taxation without representation is tyranny. >> i just don't agree and i think that my successor has done an excellent job of building upon what we have taken. he has reorganized some of the new technology and he's doing a very vigorous job of trying to talk about what we have started, which is dealing with the real abusers of the system. as opposed to giving out traffic

tickets. i agree with that entirely. i do not agree with that implication of that question. >> unfortunately we have reached the point in a program where there is time for only one last question and i am going to go back to a category of questioning that we did at the beginning. what is the most common cheating the people do on their taxes? well, i think that i have answered that once before and i don't think that i want to give a specific answer. generically there are people who take deductions and they are not entitled to certain things. there are people that use losses to offset gains. >> some of these losses are shelters or things that have been established by the accountant and attorney's that