anyone there. the knowledge will be gone and we will have a significant challenge. .. >> whether they don't have access to the web or complicated questions that need to be answered, can get through on the phone or get service at a walk-in center. but i do think if we go just flat for the next five years with inflationary sources and no additional responsibilities --

and it's been a while since we didn't have any -- the irs is going to become increasingly dysfunctional in terms of its basic mission. and my concern is not what do we collect with our own efforts, my concern is at some point the voluntary tax compliance system begins to erode. and that's not an on/off switch. and you can't wake up one day and say, wow, i didn't know that was going to happen, here's some more money. so part of the reason i'm so serious about this is that people need to understand the five-year implications and ramifications of where we're headed. and as i've said in other contexts, i don't want anybody to say we didn't warn you. so you should treat this as your warning that this is a real problem, and it's a serious problem, and we're beyond the simplicity of saying well, we'll cut your budget and you'll be more efficient. or we'll make sure you know what you're doing, you know? cut our budget again and i know what we're going to do. we're going to have fewer people, we'll have technology that doesn't respond

effectively, we'll do fewer audits. and if that makes somebody comfortable that we now are paying more attention to what we are doing, that'll be the result. but it does seem to me to be a fairly strange way to run an organization where we are the producers of 92% of the revenues that run the government. >> one last question, and i'll turn it over to the audience. have you e seen any evidence yet this is affecting compliance? >> no. we don't -- compliance is a difficult thing to measure. the economy's been good so tax revenues go up. when the economy gets not so good, tax revenues go down can. that by itself doesn't tell you much about compliance. rosemary's good research analytic and statistical organization does tax staff analysis. we audit 40,000 returns in which we can -- and we go through those in detail. not to catch people who haven't paid their taxes but to see what is going on with

compliance. it's how we know what our improper payment rate is more or less with the earned income tax credit. so we expect by the end of this year, early next year to issue the next updated tax gap report which will give us some indications where we are with compliance. the problem with compliance is we aren't measuring it 1% at a throw. so my concern about it is whenever it gets to be visible and noticeable, it's going to be a lot more than 1%, and it'll be a lot harder to fix. >> thank you. a few questions from the audience. yes, sir. and please wait percent mic. and intro-- wait for the mic. and introduce yourself, if you could. >> [inaudible] rapid change that you mentioned give you an opportunity given the compensation structure of the federal government senior the city to hire more -- seniority, more younger people to replace the older people as they retire to help solve some of your budge problems? >> it would if we weren't in a

position if, as i say, this year the only way we could deal with the budget cut was to say we wouldn't hire anybody. the only way we've gotten down 13,000 people is primarily attrition. but you're exactly right. the other side of the coin though, is the people who are retiring have great knowledge and insight. part of the challenge for us is how do we engage in what we call our knowledge management program we've just started over the last year which is how do we capture as much of that experience and those insights in the way they do their business those employees before they go? but you're right at some point many time particularly my concern is when you simply say we're not hiring then wherever the turnover's the greatest, in some places we don't have enough support people because we haven't hired anybody. so we have not enough secretaries or administrative support. many some places we don't have enough people to run the i.t.

helping. but if we rational use the process, then you're right. it's important to bring bright young people in, they'll start early in career which is why we're going to continue to train people. i don't think we can afford to send people out with the public who don't know what they're talking about or aren't properly supported. not only do we need younger experienced, energetic people coming into the work force, we actually in five to to ten years when we look at need for front-line managers and supervisors, if we keep going the way we're going, we're going to look at a group, and there's not going to be anybody there. but you're right if we balanced out the work force over time, that would actually assuage us. i think if we could get enough money to move forward with our information technology work, the call volume would go down.

and if we get more money we're not talking about hiring 13,000 more people. we ought to be able -- because we have such an antiquated system -- if we just as terry mulholland says we shouldn't be at the cutting edge, we should just be fast followers. i'd love to be in the 21st century with our i.t. rather than the 0th century. but it's all part of that single package. >> yes ma'am. wait percent mic. wait for the mic. >> hi, carolyn kramer with brookings. you mentioned you lost 5,000 enforcement employees. i was wondering when making those cuts to what degree does return on investment of the various enforcement activities inform those cuts? >> actually what we have is, as i say, we have to do statutory mandates, so we have no choice

about the new bills congress has passed. the second highest priority after that is to run the filing season and collect the there are 3 trillion we -- the $3 trillion we collect. to that leaves us with enforcement, tax services and i.t.. so when you take a cut, we've done the best we can the try to balance that. we've got our appropriations coming in those buckets, but in terms of the trade-off, we have probably 3,000 fewer people answering phone calls right now than we used to have to go along with the 5,000 fewer enforcement people and the 3,000 people we've put into identity theft. so what you're trying to do is making a balancing decision to figure out, okay, how do i minimize the negative impact of the cuts i'm going to take. so we understand that depending on how you measure it, every revenue agent, revenue officer, criminal investigator reduces somewhere between a million and a half, $1,800,000 a year each.

so we mow when we in effect leave money in the table, you can talk to any revenue agent, and they will tell you we know when we look at returns, we start with the returns that have the biggest most egregious problems, so we're leaving on the table -- that's the point of tax cuts for tax cheats. there are people who have made mistakes coppsly or otherwise that we're not going to reach because we don't have the people. if we put more people into enforcement, we'd have even more miserable taxpayer service on our phones and in our walk-in centers because we don't have enough people there anyway. as i said in my confirmation hearing, i spent 20 years dealing with troubled, bankrupt large private sector companies. i've never dealt with a company where across the board there aren't enough people. theren aren't enough people in any of ore operating division and it's just systemic. and i learned that a not because people were complaining as i interviewed people as i was

getting ready, it was clear across the board. they would describe how they were dealing with the pact that they didn't have enough -- with the fact that they didn't have enough people. i was just stunned there was literally no place that had enough people. >> one more maybe two more questions. yes, ma'am. >> my name is mindy riser. two quick comments and a question. in my dealings with irs by phone be, i have almost uniformly found fine and helpful people who take their job seriously. there's an increase in phishing. i've gotten calls, luckily, i was in another part of the u.s. and i didn't answer the phone but someone pretending to be the irs perp and you're in trouble call me back, and then the person called me the second time and i called the irs and they told me phishing once again. my question, i've always been curious -- >> those are the worst. when somebody says i don't understand this, you grab your wallet and then you say, yes.

>> the question is this, we've heard of multi multimillion dollar payments by corporations, banks that have not paid the appropriate taxes, minuted. where -- manipulated. where does that money go, and is there any way that the irs can get hold of some of that? we are talking probably billions at point. >> every year. as we say, we collect $60-$70 billion a year just in our enforcement activities alone. it all goes to the general treasury fund. and in some ways, in fact, in a lot of ways it probably shouldn't come to us. in other words one of the things it's clear in the way we run the organization is nobody gets measured by let alone a performance award by how much they collect. so people should be comfortable that the agent they're dealing with isn't going to get mores pay depending on -- more or less pay depending on how much you

owe. somebody suggested well, you know, we're doing this, we could give a little of that money to the irs, and it certainly would help the funding problem, but i think ultimately we need to be funded directly, and people ought to be comfortable that we're, by being more aggressive we're not helping ourselves by building the budget up. i would note just maybe as a closing point, i've now -- i've been to 37 offices i've held front line meetings with front line employees at every place managers at every place union people at every place, had lunch with 20 employees. and when i talk to, go to call centers, the issue i get from people in the call centers isn't they're underpaid the issue they have is there respect enough people to answer the phone and provide the service that our employees think taxpayers have a right to get. and i talked to one woman who had been promoted into a managerial position out of the call center who went back. and it's, i think reflects what everybody i've talked to in a call center.

the reason they're there is because they feel a sense of satisfaction. if you've got a question, they can answer it, and they feel they've helped you. last year as i was wandering around seeing these 13,000 employees and listening to them one of the objections i got from call suspect people was it was the year -- call center people was it was the year that we'd said if you had a complicated tax law question, you had to go to our web site, and the employees kept saying, but we know the answers. and i had to explain to them we know the answer, but by definition, it take longer to answer the questions and, therefore, the coup gets longer -- queue gets longer. so we had no choi these are -- no choice. as i say t not good for taxpayers. they ought to be able to get that answer and, in fact, we ought to be answering the complicated questions the simple ones are the ones you ought to to go to the web site for. i think it's important to understand the people who care most about that are, in fact, the people in the call centers who feel they could help

taxpayers more if they just had more resources. >> mr. koskinen, thank you very much. [applause] [inaudible conversations] [inaudible conversations]

>> good afternoon. i wasn't sure of the choreography, so i was just sitting here. thank you howard. so thank you very much howard and thanks to the tack policy center the urban -- tax policy center the urban institute and brookings for inviting us here and featuring the irs budgetary column p ma on -- dilemma on tax day this year. perhaps you're doing that in the spirit that those of us who are associated with taxes are definitely in a challenging endeavor, and april is as good a time as any to commemorate that. so thank you. i'm also delighted to be participating with this panel. they're all well established tax experts, and eric and david as well part of their distinguished careers were at the service where they are still fondly remembered. and it's always a pleasure to be

on a panel with nina who is simply our most important, trusted adviser and comment tater. commentator. and nina is a black belt at keeping the experience for the taxpayer in the forefront. and i'm going to talk about that today the too. but nina will be more dynamic. i'm an economist. nina will be much more dynamic. but this is, in fact, the issue of the day. and thank you so much for coming here, you in the audience. you are our people. you've come here in april on a drizzly day to hear us talk about the irs budget. thank you. so the commissioner talked about a more complete online experience for all taxpayers and that is, in fact, what the irs is focused on now, and this is what we are working on, and i'd like to take this opportunity just to put some bones on that and explain what it is that we're doing. these will be online taxpayer accounts secure online

communications better infrastructure for telephone and tax assistance center people so they can fix things the first time around. better service delivery through all channels and the taxpayers and the representatives, tax preparers, would be more in driver's seat for issue resolution. three out of five taxpayers use paid preparers. taxpayers can pay online and this would allow us to deploy people to work with taxpayers who want or need personal contact, and many do and many will. they will persist. those people need to be trained better, and they need to be given information technology to do the job. and the point that i want to emphasize this afternoon is it will also reduce the cost of enforcement, including the cost of enforcement to the taxpayers

themselves. the costs borne by the taxpayers. and so what's new at the service about this? president bush everything's new about -- parish everything's new -- pretty much everything's new about that um imagine. we have figured out what investment is needed in what order, and re translated that into budget initiatives so we can going forward describe what it is that we need to do to be a 21st century tax administration. and we can put that forward to the congress, and we can show how we will be responsible and accountable for the funding and the investment that will be needed for that. that will benefit it can-savvy taxpayers -- tech-savvy taxpayers, but it will also benefit other taxpayers as commissioner koskinen mentioned. for example, the cost of coming into compliance through exam for which over a million taxpayers have an experience every year.

it will provide more cost effective enforcement which should raise net revenue per dollar spent and it also builds more bridges and more cooperation with our partners that is tax preparers and software companies. and we appreciate the title of today which is how budget cuts affect taxpayers in the tax system. and this is a point that i would like to leave you with. i want to broaden the picture of who bears the cost of a low-tech tax system. we should think of the total cost of compliance of having two parts; the cost to the irs, the administrative cost, and the cost borne by the taxpayer. and the cost borne by the taxpayers are unevenly are distributed. and the cost borne by the taxpayers overall far exceed the administrative costs of running an irs. so the story in "the washington post" today is a story of taxpayers bearing the cost of a low-tech irs. i mean, you can go online, and you can change your address for

rangerrer rick magazine in a minute, and that gentleman reported in the post today that just wanted to change his address didn't get in two days running. i mean, that's, as the commissioner said, that's not going to mars that's like information technology number one. so we at irs are determined to move through this path towards better information technology. and i'll give you two examples of how we hi this will -- we think this will make a big difference in my few minutes are remaining. we want to move and we'll be able to move issue -- identification resolution forward in time. for example for many taxpayers during the filing season, keep in mind that four out of five taxpayers are anticipating a refund. any delay in the add judeification of their -- adjudication of their tax return is a delay. to many of them, the largest single payment they will get

during the year. if we can preemptively look at the tax returns and communicate by e-mail, be able to say -- like the gentleman in the post story today as well -- you've got a very big refund. that is exactly what we see in identity theft returns. could you provide some documentation for why that refund is so big? apparently, he had it in his pocket for the two days he was waiting to get in to talk to someone. it could be uploaded and sent to the irs. and keeping in mind that traditional enforcement in our world is expensive. so we can effectively lower the costs, and i'll give an example of two ways. so for preemptive, preemption and quick outreach to taxpayers if we could deal with taxpayers on line, over half of returns have at least one error. but it's not really cost effective to seek to evaluate all or even a majority of those because the apart deficiency is less in monetary terms than the

cost of addressing that where the cost of the approaches we have at hand is very high. and the cost to the taxpayers of that examination to the taxpayer actually end up in exam given today's irs technology and communications channels often substantially exceeds the return to the fisk. so if we were able to evaluate before we accept returns keeping in mind that if more of our -- that for many of our enforcement responses it's more than a year after the filing that the taxpayer hears about them, if we can deal with taxpayers digitally early we will have many returns that actually never move into exam. and then the other aspect here again, i want to emphasize that we at the irs look at the total cost of administration as including the cost to the taxpayer, and these are not so

apparent, and it's not apparent when the irs is struggling for budget that much of this additional cost is actually being borne by the taxpayers. so if we invest to improve taxpayer experience it will lower the total administrative and taxpayer burden cost per dollar of enforcement revenue and raise net revenue. and here's a way to think about it. voluntary come prudence revenue finish compliance rf knew has a higher total rate of return after you subtract the administrative cost and the burden to the taxpayer than enforcement revenue. taxpayers, just to file each year, incur about $60 billion in costs. and our estimates show that taxpayers who end up in exam bear another 10% another six billion in cost, and many fewer people -- a million in exam and maybe seven or eight million in

various stages of accounts receivable -- bear all that cost. so the cost of compliance to the taxpayers dwarfs the cost that the irs is expending. so this is where much of the burden of the low-tech irs rests. it rests with the people standing in line in dallas that you read about today, but it rests also with taxpayers who are trying to come into compliance in a very low-tech world. so where are we now? we're at the first steps. the commissioner mentioned get transcript, that's something that we're doing. there are online payment agreements taxpayers can structure, but they have to be handed off to the irs and the irs gets back to them. we know we have a long way to go. we know this requires investment to move anything like an interactive irs it's going to involve quite a bit of investment, a change in the skill mix. we're developing comprehensive plans how we will deploy that investment, thousand we will --

how we will get there. we have translated that into budget initiatives so we can be accountable the or that. we're taking first steps now because we must demonstrate that an investment in the irs is not going to just reduce lines from four hours to two hours, it would bring the irs up to an organization unlike any other financial organization or, indeed, you can order a sandwich online. there's a lot of things you can't coat the irs because of our information technology. it will also allow new ways of working with our partners such as software companies. so i will turn the podium over to the others on the panel. i'm very interested to hear what they have to say, and then we'll be looking forward to taking your questions. [applause]

>> thank you. i'm eric with the tax policy center. i'm -- let me make sure i i know how to work this. well, okay. good. i'm very glad to be here, and i want to thank commissioner koskinen for coming and speaking to us on our tax day event and thank rosemary and others at the irs for helping to organize this. i'm probably the outlier on this panel. my organization deals with tax policy not tax administration. and as the commissioner pointed out, there's a division of lay wore in the u.s. government the elected officials, the white house, treasury and congress make the tax law, the irs administers the tax laws. it's, of course, very important for us to remember that distinction, but we also should understand the vision is not as clean as we like to think it is. tax administrators operating

with scarce resources inevitably influence policy outcomes by their choice on how much to spend on enforcement, how much to spend on service who to audit and how intensively to audit particular issues on tax returns. so the outcomes of policies do depend on what the irs does. and, of course, from the other side the policies that the president and congress enact are not going to work unless the irs can effectively enforce them. so there is much more of a link between the two than we commonly think. i'm going to comment on three areas, a little bit on trends in irs resources, and i'll be a little bit repetitive of what the commissioner said and what rosemary said. a few comments, again slightly repetitive on changes in irs workload that have happened that have accompanied the nongrowth in resources, and those are really coming from two courses;

one, demographic changes changes in the economy which none of us can do very much about, and the other from policy changes which we have done something about. and finally, i want to make a few comments on whether or not tax reform would help matters. so let's start with the data here. the upper left-hand quadrant shows real irs operating costs in billions of 2014 dollars and that, you can see, has gone up only slowly over time and then dropped, dropped pretty sharply after 2010. all these pictures look the same with this big break after 2010. operating costs on top right as a percentage of gdp, i could have also shown operating costs relative to labor costs or wage index. that would have looked very similar, and that's actually been declining gradually over time. the irs as a share of the

economy has been shrinkiing but there's this more precipitous drop after 2010. the bottom left shows average irs employment again dropping but really plummeting in the last but years. and as the commissioner mentioned, there are also the demographic issues at the irs with the aging of the work force. and the increasing number of experienced people who are retiring or eligible for retirement. and finally, the last one actually, doesn't show the same picture. that's operating cost per dollar of collection. that's bounced around but hasn't really moved up and down very much. but that's really being driven more by collections than by operating costs as fluctuations are due to revenues going down during recessions, going down when there are tax cuts, going up when there are tax increases and there are economic booms. so the important thing about this figure is the level, not the trend about four-tenths of a

cent it costs the irs for every dollar it raises in revenue which, as the commissioner said is very low in terms of international comparisons. so just a little bit of data. while irs funding has been level or declining, individual tax returns files have grown between '98 and 2005 the number of itemizers grew the characteristics of returns have also changed. you have more returns with business income which are more complicated to examine. you have more returns with partnership or s corp. income you have more returns filing amt, although that's a low number and it's more or less stabilized. and you have more people filing the earned income tax credit. those are from the individual area. on the business side there have also been changes. there's been the growth in

internationalization and the increased tax avoidance both by individuals and corporations which the irs has to deal with, deal with transfer pricing deal with all those complex international corporate issues. and on the business side there's been the very large growth over the past 20, 30 years in the share of businesses that are organized as s corporations in partnerships instead of as c corps, and that creates the additional issue that you not only have to audit the individual taxpayer with that form of income and see whether they're reporting correctly what the entity has reported to them but you have to make sure the entity is reporting it correctly and is reporting it correctly to the right taxpayers. so that makes the job very complicated. these are entities that don't pay any taxes themselves, but what their report affects individual tax revenues a lot. finally, i'll get to the policy issue on tax expenditures. i always resent it when people

try to add up the number of individual tax expenditures, and here i am doing it. and it's pretty arbitrary because it really depends on how you group different provisions in the jct and the treasury does things differently. in defense of myself, i would say i use treasury figures which i adjusted to make them consistent for the changes back and forth in the way they reported different things differently during the bush administration. and since it's all coming from the treasury, it's a consistent measure. pleasure and what you could see is every year the number of tax expenditures grows so that this is something that is growing. the dollar value, volume of tax expenditures as a percentage of gdp -- oh, by the way, pack to the last chart. at the bottom i have refundable credits which have multiplied by a factor of 500 going from 1 to 5. that might seem like a pretty small number even though it's a large growth, but again these

refundable credits are -- could be a major headache. and now talk about the revenue loss from, this is just from individual tax expenditures including the focus of this talk is on individual taxes, and that's individual tax expenditures that are including those that individuals collect, claim on business income. and those numbers have been gradually rising over time. and the bottom of that chart the top black box showszlwñ dark blue shows the revenue losses. the bottom shows the portion of that tax expenditures which comes from the refundable portion of refundable credits which are scored as outlays in budges. and note -- budgettings. note that's really gone up from .6% to .58% of gdp. and you look at the next or

charted, the refundable credits are really scheduled to soar primarily because of the premium assistance credit under the affordable care act. but also the or earned income credit even though this chart from treasury assumes the expansion -- elimination or expiration of the expansions enacted in 2009, the earned income credit still continues to grow over time. so why does this matter? one, the tax expenditures create a lot of boundary problems betweenactivities that do or do not qualify for tax breaks, so that multiplies the compliance issues for taxpayers the administration issues for the irs, things that need to be checked. and finally, refundable credits -- as neil that has reminded me ott times -- create additional opportunities for refund fraud and that's, of course, a serious threat to the system. so i would make one more comment about this. when you look at the dollar,

revenue per dollar collected the four cents, .4 cents per dollar, it really should be more like .3 cents if you were to count the tax expenditures, add that back into revenue and saying what the irs is really doing is not collecting 18% of gdp, it's collecting 24% of gdp, and then it's giving 6% of it back in the terms of programmatic policies. so the job is a lot bigger than it seems. so met me make a few -- let me make a few comments on tax reform because some people say oh, the solution to this problem is tax reform. clearly, if you went to a flat tax, it was discussed in the discussion with the commissioner or a v.a.t., you would reduce compliance costs but you would have a very very different kind of tax system and a very different kind of economic policy, and so you can't just evaluate that in terms of solution to the irs. that is a very, very big change

in social and economic policy for cup. for this country. the more modest tax reforms such as 1986 or representative dave camp's would eliminate or reduce tax expenditures and lower rates, and when you think about them tax reform is trying to reduce the costs of the tax system. but what are the costs of the tax system? well, if you talk to economy itselfs, a little arcane concept, but economists would say the biggest cost is what's called the excess burden. the fact that there are taxes and because taxes are are not neutral, it causes people to behave differently than they would in the absence of the tax system reduces economic pisht city reduces output. so everybody says reducing those costs are -- and helping economic growth -- are the biggest reason for reforming the tax system. those are the biggest costs of operating the taxes. the second cost is the

compliance cost for individuals and businesses and come plying with the tax system -- complying with the tax system. that turns out to be about 10-15% of the costs of tax of revenue raised which is maybe less than the excess burden, but still a substantial cost. then you get to the cost of administration which are way less, about .4 cents per dollar. so if you're thinking of tax reform as a purpose of reducing the cost of operating the irs, that is the last thing that matters in tax reform. tax reform is about other things, and because it's the last thing that matters, i think it's very doubtful to expect that tax reformers when they get through all the other goals of tax reform are really going to care about that. so my bottom line is no matter what you do with tax reform you really have to adequately fund the irs. and i will turn over to nina.

[applause] >> our next speaker's nina olson. [inaudible conversations] >> more complicated than i can handle. i am technology -- technologically challenged on powerpoint. i never use powerpoint slides but this is a special occasion. i'm using some powerpoint slides to make my point. today i'm going to talk about trust and power and how that relates to the funding cuts of the irs in particular how that relates to the funding cuts of taxpayer service. as i think we talked about in the beginning, the irs is the most powerful creditor in the united states today. it has awesome powers to assess tax and collect tax, in many

instances without giving the taxpayer the right first to go to the united states tax court before they pay the tax. and, certainly, we don't have to go to any court of law to do most of our collection actions. we don't have to ask a judge to let us to grab money from your checking account from your um, from your wages or anything like that. we don't need to get a court's opinion to file a lien a federal notice of tax lien. and i think this power cannot -- we cannot think about the budget cuts until -- unless we keep in mind this power of the irs. and so if you have an -- and that sort of triggers the visceral reactions that people have to the irs and that you hear in some of the presidential statements, you know? the irs can actually take your hard-earned dollars. so if you have a power like that, you want that power to be very, very regular lated and

careful -- regulated and careful. you want it to be used legitimately. so you want the employees in the irs to be trained, and you want the irs to be accessible by you. you want to be able to get through to that power and say don't do this to me. you know? you got it wrong, irs, and i've got the information to tell you. i'm entitle today that dependency exemption or that earned income tax credit. i switched the digits on my return. listen to me, fix them, let me fete that $3,000. you want due process in that tax system, the ability to come in what we promise in our taxpayer bill of rights, the right to challenge the irs and be heard. so now let's look at how the urs is doing as the taxpayers attempt to reach the irs and be heard. i have been practicing now for four decades. i thought about whether i'd say 40 years or four decades. there's no good way to say -- two score i have been

practicing. [laughter] and involved in the tax system. and i have never, ever seen anything like this filing season on the phones. this is just the roll-up, the customer account services are really all of our taxpayer help lines. and so a year ago we were able to answer seven out of every ten calls. and this is the filing season so it starts from january 1st. pleasure and today we can't even answer four out of ten calls. and you have to wait on average 24 minutes. now, let's look at some of the lines. the top line is the 1040 number, the number that taxpayers call. 25% of the calls that want to get through to a live assister are getting through. after the privilege of waiting 23 -- 22 minutes. now, i just want to note to you all that, actually, some policies changed up front this year that these numbers mask.

as bad as they are, they mask what the taxpayer experiences because the irs, i think rationally, made the decision that if you're looking on average at 22 minutes of sitting on a line, we know what volume we're getting in, and there is no way that a human being is going to be able to pick up that phone and answer you within a reasonable period of period of time, so we do what i call, i love this term the courtesy disconnect at the very beginning of the call. and this year to date in the filing season we have -- or through fiscal year 2015 this one is 6.8 million calls at the beginning of the process. and that is seven times more this year to date can as it was last year to date. that's extraordinary and shows you what's, what, you know, how much the limited accesses that taxpayers have. now, if you just keep going a little bit further, i want to talk about what actually people

are supposed to be doing when they reach us on phone. they can ask us about math error corrections. i gave you the example of the switch digits on the social security number. they ask for penalty abatements. i was sick, i could not do x i relied on my return preparer that we're pushing people to rely on more and more even though they're unregulated and there's no minimum standards to prepare income tax returns. they can ask ask to enter into installment agreements so we don't go out and grab that money from their account. and if they can't get through guess what we're going to do? it's all automated, folks. if we don't hear from you, we're reaching out scheduling that -- touching your account or your wages, and then you're going to have to get in queue to ask us to return the proceeds, because you can't pay for your food or your medicine. this is happening every single day. it is happening while we're standing up here. you can call the irs to get them on these phones to put you into

currently not collectible status which says i cannot afford to pay my basic living expenses if you take my money. you can't get through the phones, then we are taking your basic -- not, you know, extraordinary or extravagant -- basic living experiences -- expenses. that's what we can do. that's the exercise of the power of that the irs has and it is not legitimate. it looks to the taxpayer like an illegitimate exercise of power. and, in fact while you're standing in line at the walk-in sites or waiting on the phones for anywhere from on average 25 minutes if you're a low income person and you have a lunch break that might be a half an hour, you know, you cannot wait for 25 minutes. it might be that you've got the 45 minute wait. you're going to have to hang up, and then bad things are going to happen to you. and, again, that drive cans even down to the more -- drives even down to the more expensive use

of resources on the collection side or the enforcement side or the taxpayer advocate side, the organization i head. because anytime we get a case in, there are two employees working that case; my employee and the irs employee that we're making do the right thing. okay? so how cost efficient, someone was asking about return of investment. you can see the downstream consequences of failing to fund the phones. and there is no answer to the phones except more human beings. it is just a math problem. and no matter how much we drive to the online process, there is an unmet demand. and irs research and my own office's research show that that there is an unmet demand for people who have problems that cannot get through to the irs, and it cannot be solved online. they need to talk to a person, and they cannot get to that person. so as we move people to other things, the phones have not dropped. we've had more hits on the refund online product, and yet

our phones are still getting the calls. it's just a different group of taxpayers with a different group of issues. including those 6.8 million that couldn't even get through. so let me come back to power a minute. you can't -- taxpayer trust in the irs in the legitimate use of power is, i am more and more believing, is what drives voluntary compliance. and as we walk away from the ability for taxpayers to talk to us and the ability of us to hear what taxpayers are saying our actions look increasingly arbitrary and capricious and the illegitimate use of power. and that more than the absence of the decrease of auditors and collection personnel, that is what i believe is going to drive the compliance rate down. because taxpayers will take every opportunity they can to

not report income, the not engage in us with us to not feel like they're part of a greater civic hole and that taxes play a role in government and a legitimate role in government. you know the government is sending a message that we can't talk to you right now. we're busy. you know, we're busy answering other calls, but we're busy and your call doesn't get through. and how that feels to the individual tax taxpayer and how that feeling translates into their actions going forward is, to me, the crisis in our tax administration system today. and i will just say one last thing about this point about power, that as the irs moves to online and as the irs moves to automated enforcement activity and activity where there's no personal p engagement between the irs employee, and as the irs moves away from a physical presence in the states, there are today, you know, 13 states where there is no one located in

that state to conduct outreach and education to small businesses. o.k.? no one person in that state, all right? that's a quarter of our states. as we become more and more remote then it is, it is likely that the only interaction that taxpayers will have with an irs employee is when it is, they are trying to do something bad to you. there are trying to take your property. there's no one answering the phone to talk to you about why they shouldn't be taking you are your property, but there are people that will come knocking on your door to take your property. what does that mean for the taxpayers' relationship and trust in the most powerful creditor that we have in the united states? just some things to think about. [applause]

>> is there a way to turn off the -- [inaudible] excellent, thank you. i should look at it first. i'm dave williams. i'm the -- actually, of the folks that are on the panel i've worked at the irs the longest, believe that or not. i've had a career both working in the u.s. senate and then working in tax administration at the irs. just to give you a sense of that, when i talk about some of this stuff as we go forward the very first tax bill on which i worked was the 1986 tax reform act. i'd just come out of grad school, and i got to work on the tax-exempt bond provisions. that act, of course as you know lives in legend as the holy grail of tax reform at least in myth. i don't think in fact, that's the case. and certainly not an achievable goal today. but i was able, also when i went to the irs to have the privilege of working on running to the earned income tax credit

program which, for me to this day, is a really high honor because of what that program does for people. it is run through the tax code and, therefore, it has challenges, but i don't -- the ability to say i was able to run one of the largest means-tested anti-poverty programs in the world is a pretty good thing which is part of why the commissioner didn't mention it, talk about working at the irs has to, you have to think about it as the amazing things that you can do for and with people. and not not just as a job. so with that frame, i left the irs a couple of years ago, went back to capitol hill briefly and then went to work for intuit. just a expect about then company before i make a few comments. most folks think of intuit as the turbotax company so the diy world. you might find it interesting to know that we also sell tax software to more than 100,000 tax companies, professionals -- small, we call them

solopreneurs, but we also think about ourselves and are beginning to articulate it more as a full-service company. so some of the comments you'll hear me make are intended to think about the industry as a whole. i'm going to make just a couple comments. one is about the challenge to the irs. you've heard about it today but just a brief comment about that. the technology enablement is where i want to focus. i'm heartened to hear some of the things rosemary was talking about about what's coming to the irs. one of my other jobs was the direct canner of electronic tax administration, and, in fact, i think the commissioner may have used or rosemary may have used part of my speech from ten years ago when we made some of those very same predictions and comments. that is not a criticism one of the things i always found challenging at the irs. things that were the program of the future and they always would be. and it is my hope -- [laughter] that we have passed across that rubicon and we really are at a point where we can begin to move forward. so with that frame, just the

reality that you've heard from all the others i think, i've experienced and i think we need to recognize it as we look at a discussion about resources. and that is the irs is big and continually growing mission, it's not just growth in the population, it's complexity in our entire lives. and it is a complexity that in this year have been particularly noticeable like the growth in tax fraud. and i will talk a little bit about that now and just say it is a threat, i think, that threatennens the very fabric of the tax administration ecosystem. it does not affect one company or one actor it affects everybody and will affect our ability to administer the tax code going forward. more on that later. but i think the recognition of all that leads me to believe that there is not a solution that can be affect chaited just -- effectuated just by the irs or by industry, and there's an actor that's not here today

that, actually i think is becoming more and more apparent which is all of those state departments of revenue who also have an incredibly important role in what i would like to call the tax ecosystem. i think anything we talk about in terms of impact in the i rs we need to recognize there's a whole ecosystem of actors who are affected by changes in the environment in which we also have to to cope and also specifically environments here in washington. i would note that the commissioner -- this is not the first time the commissioner's talked about using technology to help the irs meet its objectives. obviously, as the guy who now works in industry after a long career in government i am going to talk about technology because i actually believe it will make an enormous difference in the ability of the irs and the entire tax e to cosystem to -- ecosystem to meet customers' needs. i'll touch on both i think those are incredibly important. i do want to ask, though, how many people in the audience have@nq&c @&c% a flip phone? don't be shy, you can put your

hands up. wait wait, no one? both of you back there in the corner right? i see -- when i think about a flip phone, jeep's checking. gene, is that a flip phone? yeah. i don't remember because i don't use it that much. i want to -- when you think about technology, i want you to-in how quickly it moves, and think about the word "innovation." i think one of the challenges the irs in many places face is the, is the speed with which technology evolveses. it was a challenge when i was there, and what has happened since that time is that technology has sped up. and so when i think about how we can help the irs and what the challenges are that are facing the irs and i think about technology, i think there is -- and, obviously, there is an incredibly important role that industry can play in helping the irs and, in fact, the entire tax ecosystem meet the challenges that it faces. we've talked about them, you've

heard about the challenges from everyone else. i fundamentally believe the only way some of these challenges can be met whether it's in the constrained budget environment we find today or an expansive budget environment that was probably in existence about the time i worked at the irs where the budget continually went up to meet continuing needs. i don't believe that irs can succeed without industry and partnership and cooperation. i know that there are folks who have concerns about how one involves industry, and i want to talk about that a little bit because i think it is very important that when we talk about partnership, we also understand that there are limits and there should be constraints or principles which i would articulate and will articulate about how the irs the states and the ecosystem should work and, specifically expectations of industry in order to help. so when i asked you about your cell phone, that was not just a joke, it was -- it is, it brings to mind the fact that this device, which most of you have

probably seen, how many of you have an iphone 6 plus because the plus really matters -- [laughter] right? this thing is already out of date. literally out of date. because it's been surpassed in the past two months alone by several other devices. and this is the hottest thing on the market. this was the biggest christmas present around right? people -- and i think the commissioner had it right. the expectations that people form in their daily lives are the ones they bring to their interactions with government. so if you're used to the iphone 6 and you think that's new and you're still looking at a flip phone, it's a real challenge to break that barrier and actually communicate with people. so i think industry can help irs leapfrog deliver benefits and experiences that the urs wants to deliver to its -- irs wants to deliver to its customers in ways that actually meet their expectations. i do have one area where i just -- before i articulate the principles, there's one thing i want to mention, and i actually have come to believe this more

and more and it's probably one of the areas where nina and i will disagree. we disagree on several things but we are quite good friends i will say that. i think in general people do not want to interact with the irs. i don't think that's a hard concept to grasp. i think it's pretty obvious. it is why virtually everyone either employs tax software or prepared to do their returns with the exception of nina olson and i suspect only other people in this room who take pleasure in doing their returns themselves. how i do we bridge our relationships with taxpayers to enable tax agencies to do what hay need to do to provide the service and compliance that they have to provide? in that context i think industry can make ooh huge difference but with guiding principles. let me articulate some of the proposals for you to think about as you think about how the irs should engage with industry. number one is clarity of goal. what are you trying to achieve? and the more specific you can

be, the more effective you can be. because if you say better service, well, we can all nod and smile, but how does one actually make service better? what is it that we're trying to achieve? is it reduced time on the phones? is it average speed of answer? what are the metrics that we use? and the more clear you can be about what you expect the better industry can help you with it. secondly, clear roles and responsibilityings. and i think that -- responsibilities. and i think that's absolutely important when you think about, let's say tax fraud for example. the i have cannot -- industry cannot be a law enforcement agency by law. so understanding what it is that's expected of industry what the role and respondent of industry and players in it have to be defined by the irs and by the state departments of revenue. but clearly understanding who is doing what in the system, very important. i have 33 seconds, i'm seeing a phone pointing to the time. no worries. it also should be as you think about what you might want to

require of industry or ask, it should be standards-based. so if you're trying to deliver services through tax practitioners, it shouldn't be specific about exactly what they should do, you should be looking at the outcome or the objective you're trying to achieve. if it is better service, what specifically are you trying to achieve and enable industry to try and meet that. and lastly -- and this is one that i think is a principle that often raises concerns when one talks about the participation in industry -- which is that taxpayers should be and recognized to be the owner and controller of their own data. it is not industries. and for that matter, it's not governments. it's theirs. and to the maximum extent possible in all of the system when you're thinking about empowering taxpayers through industry or any other way, you should be thinking about the irs' part of it. excuse me, you should be thinking about the control of the data as part of it and that the irs should recognize that. so i've actually had my ten minutes. so let me stop right there. i think we're moving to a panel

discussion at this point? okay. [applause] [background sounds] [inaudible conversations]

>> nina let me ask you to respond to dave on this question about technology. were you saying that this is a bad idea or just that we have to be very careful in how we do it? and to his principles, how should the service think about this sort of new technology without getting in the kind of trouble that you worry about? >> well i think there's one thing that the commissioner referenced, and i'm glad to hear him say it. i've been sort of a broken record at this. my office did some research to see who the taxpayers were, the low income tax credit program. and these are taxpayers who are so low income, congress has said you are eligible to get assistance from federally-funded programs in irs disputes.

250% federal poverty level. 46% of the individual taxpayer base is at or below 250% federal poverty level. that's from our data from 2013. that's extraordinary. ..

so that they are not dropped on the floor without any services provided to them. and then you go to the cost. we are taking things previously free because they provided them and we are shifting them to generally prepare because a lot of them don't have access and it's an intermediary. nobody is going to do that for free. there is a cost involved in that and it's regressive. one of the audiences they than the administration of the system. so don't view it as a bad thing. technology is a great enabler but i am saying and this is one of the consequences of budget it drives us to drop services before we have strategy to replace them. and what happens to people in the meantime. i've said this a lot. trust lost is almost impossible to regain. how do you bring them back into the system after that? we have to have a migration strategy.

we have these data in psychology and sociology and all of those skills to understand what the consequences of our actions are in shift in the future. i'll just say this last thing. we are not a bank. we are not an airline. we are the internal revenue. we can do a lot worse things to you they need missing your plane. you know, we just have to really keep that in mind when we talk about eliminating services for taxpayers. >> you talk about putting this together in a budget. can you talk about how much it would cost to create this new system? >> a lot. i'm not exactly sure how much. i want to respond to a couple of minas points. the last thing we need to worry about right now is russia because it is a very long process. we have really been forced to

drop before the vision comes. i am very short -- but it will be a fairly major investment in it will take a long time. one of minas points -- nina's points if it does figure out a lot to figure out who are these taxpayers. we have no impression that everyone will gain from technology. but we are trying to do is get ahead of the low-tech response that we are inefficiently using people like in "the wall street journal" -- the "washington post" article were trained advisors were giving out daily lions tickets to people trying to get in.

so nina is exactly right. we have to figure out the migration strategy. the idea is to free up the people and train them who are really needed. and people are needed. the hope is that we can actually recognize that things that are not the things that matter and then get people on the things that do matter. so it will be a major, long-term investment. >> so this is what worries me when i hear long-term investment. i remember the 1970s talking to people in the service about technology. the process is so slow. the design is built and rfp is put out. before it is even completed, the technology is obsolete. how can this service make this transition and the careful way by rosemary was talking about

without getting caught in this trap of building a system? >> a couple things. first of all the irs does a remarkable job with technology despite what i'm about to say, which is speed matters. i really do believe we don't have a long time to wait. the irs has fundamentally demonstrated its ability to manage technology. the best example is to look at the aca implementation this year. the prediction of cataclysm that work on cleaning up for discussion about aca up until it vanished when you realize the irs have figured out most of the major problem. that said speed matters a lot. this is where partnering between business and government can make a difference on the service side and i agree with nina and rosemary about the notion that

not everyone is going to move immediately to technology. there are segments that will or already are. but they are also on the compliance site, places her industry can partner. i never let go of wanting to solve some of the challenges. i convinced the treasury and the irs early this year late last year to work with us on an experiment to use behavioral economics and online products to prompt for taxpayers who might be willing to fudge a little bit to make the right choice. in other words, run a real-time experiment very quickly to determine whether they can help the irs with a small piece of a specific goal. i think there are lots of opportunities out there and this can be done on the tax practitioner side as well. there are many places we can work to think about interesting ways of innovating against the goals articulated using our let

me switch gears a little bit. i asked the commissioner and he said he had not had a change in compliance. i talked to other people out there who say taxpayers are getting more aggressive. because they know they are much more selected. what is your sense of it? are you beginning to see compliance problems? >> when you see what the service had to do this here responding to taxpayers when you ask me if i can see it, it's very hard to measure. you can't really see. there is enough error about your measures that it's hard to maintain. we are very, very worried about that. that really is the amgen of the revenue production from the u.s. government. it is effective and as commissioner koskinen says, you don't come back after you've

lost that. you really are worried. we will be doing another estimate. we are doing one now. as the commissioner said if we pick up a change, it will be a noticeable change. it's obviously a big worry. this is the heart of alienation. >> let me say something here. you know, 2% of trillions of dollars is directly attributable to enforcement actions. 2%. so while the other dollars are coming in either because the taxpayer service or because of the indirect effect of the enforcement action the exception that the irs is going to come out and get you. or that they might. they might find you. it is hard to fuss out exactly

what the ratio is. we have pulled the numbers since before 1998 through today just on the pier collection revenue looking at how many revenue losses people had how many acs people they had, how many lanes the irs is issuing. i am here to tell you it is inelastic. it doesn't matter. the years after 1998 people went down like this and they stopped issuing lanes and levies. that is inflation. in fact, you just look at that and say it doesn't matter. the collection activities regardless of staffing regardless of enforcement is stable. i have no explanation for that. that is one of my holy grail, can i figure it out. so i don't know what the impact will be of us not having

auditors and collectors. i do know that conversations about the irs be in a two-foot tiger might have some risk-taking at the greatest -- the population that does the greatest risk-taking. that goes back to the tax administration. we will go after the portal of people dear in the headlights because we can find them. but we won't be able to go after the people who are doing the most aggressive stuff. we don't have the resources. we don't have the training. when you look at enforcement revenue at $50 billion. but what is that bigger picture as the perception that the service is on the case of tax fraud all the time. one of the things you learn inside the irs is the breathtaking amount of attempts a fraudulent tax styles. just breathtaking. and so the perception that the service is not holding out

against where the fraudsters are using high technology is a very big issue. nina is right. we can slice a number thousand ways. partly that is also going to take five and six years to resolve a lot of the big cases. there's this enormous inertia. the corporations that the money in escrow and if it's around. that is not where the action is. but the perception and reality if you are actively protecting the breathtaking level and as david and others have said a growing model of fraudulent activity and internally you realize how serious that is and how important that reality but also the perception. it is not going after the person in exam. a million taxpayers the year bear a very high cost.

we would like to be able to deal with those taxpayers as we can address so if you are highly likely to owe taxes. we aren't a punishment agency. we are the tax administration and those taxpayers are paying very high compliance costs. many related to the technology. >> let me ask you the policy question you discussed a little bit in your presentation. we are talking about these expensive, complicated ways to make the system work. is this just kind of getting chewing gum and rubber bands as long as the tax code itself is so complicated and as long as the services does things that have nothing to do with collecting tax revenue? >> no. i actually don't did so. obviously costs more to administer a tax code than a

simple one. but the tax code is complicated because we want the law to do certain things. we want to deliver social programs in a certain way. given that level of complication, we are spending 24 cents for every hundred dollars of revenue that comes in. we can afford to spend more if we want to have a tax system that is a social welfare fee and accomplishes those goals. it is just a misdirection of resources in my view. now whether the irs -- how much the irs is capable of doing a better job with more money, that is something that collects on the panel can address better than me. i certainly have some doubts about that in my mind. certainly with less money. >> let's give you an opportunity

to ask a few questions and then we'll come back. >> i actually want to get back to the flip phone. my mother works at the irs in 1967 and they were doing a major overhaul of their i.t. system. 10 years later they were done. they had a state-of-the-art 1967 computer system. forever since then that has been the case that eventually because they are always behind. when i was at treasury, the tech expert, someone with proven ability as far as i know it seems likely need to do something fundamentally different and you were getting at that. how can i solve this technology

problem if they have the resources? >> are you asking me? >> i'm asking all of you. >> you know i do think he is not trying to be the leader in this, but we would like to get to the 21st century. so that would be a good start. i have been privy to so many conversations about this over the years and i do feel like the irs is making progress in this area. i think it is very hard -- part of the problem is getting people to understand you have to invest in dollars and you won't see the immediate return. in our budgeting environment, where you have to sort of show there's no cost. so i think that it is a challenge for the irs.

something about the aca i have been privy to all the planning on the aca. one thing i saw which is different from other programs is three years to get our act together and deliver something. it is amazing what the irs can do this given that time and can put a structure around the planning and having the other side of contractors, et cetera. there's glitches, the relatively without glitch, which is huge for the program where you get in the middle of the filing season, how do you do that? programming as people filing their return. i think you've got to have the least time very shortly three years is still a short time. i don't know. you pick it up from there.

>> i think particularly in government we often get boxed into this reality that this is how government works and it takes time. that is true. but we have critical pay authority and there's two categories, those who are ready to run things because they knew how it worked and most are recognized this as an objective function and who actually try to optimize and the ones who couldn't get the constraints failed nine times out of nine times and the others were more effective. what i am about to say is not to be a criticism of the agency, but i do believe based on my two years of experience in the dirt i work in an industry where innovation happens at the pace of hours. literally hours where one can test environment a change certainly in the diy space, but

the assistant, which is a term we would use literally changing things and running controlled experiences. that mindset of having to innovate and move quickly is not simply grafted onto government as an immediate gain. however bringing people and who understand the limited objective function but also see problems differently and are inside trying to think about solutions. it is absolutely critical. i would propose taking some of the executives in the irs which they can afford to lose one of the exposing them to a different world, the cross-pollination would help at the margins and i believe that's what were talking about. slowly over time that adds two significant change. we just have to continue to do that. >> banks. bill gale tax policy center.

i'm wondering what we can learn from other countries in this discussion. it has been very focused on the irs. the united kingdom for example just announced they are going to file a free system. probably two dozen countries around the world repopulated returns. i am wondering do the tax administration systems in europe use computer systems from the 1960s? if not why can they do it and we can't? >> i'll take a stab at that. in the past to decide is an online account. we are behind the rest of the country. things that do have repopulated returns as they have a pay as you were her pay-as-you-go system. they are getting a real-time throughout the year all the data about withholding or how hours

to administer credits based on how many hours you are working and dealing with it in that way. they have an amount of information and may also have a lot of cross government agency information. one of the ways they are going to the return and australia is looking at creating a huge multiagency databases. i don't know the united states has an appetite to have the government have that information in one repository. that is terrifying for folks and i don't think the employers of the country are willing to take on more responsibility other than the withholding they are already doing so you would convert to a pay-as-you-go which is essential to do that kind of administration. otherwise we don't know what the family is made of. we actually did a little bit of

their research to see how many taxpayers you could actually do a return that don't have a credit involved with it, where they have to tell us within the household, et cetera appeared it's not a lot of taxpayers. everyone has to tell us something more. what i recommend if you have accelerated information reporting you can get it early in the system menu could maybe move back return filing time at the start of the season. people could download the information into their software give it to their prepared downloaded on pre-fillable forms or be archaic lake mead and printed out and look at the plain tax returns and fill them in. you could do that and i would be a big advance. >> just a couple things. i chaired the oecd taxpayer services for three and a half

years. i would tell you the tax systems in the cultural systems in the country's that have returned or versions of it are extraordinarily different than mine. i will tell you a story because it tickles me every time i think about it. i was visiting with members of the korean tax administration who are inches in setting up an earned income tax credit for korea. i spent a lot of time explaining the virtues and talking about how it lifted millions out of poverty and how important it was. i also said there is that dowd either 25% of the money goes out the door erroneously over claim. they said why. there's two major elements to determine the value of who you lived with and where and for how long and how you are related to data. the guy looked at me and goes,

not a problem for us. that is south korea by the way in case you were wondering. but in all seriousness, we have a tension in our system that is borne out that says the more third-party decision that occurs the more compliant the taxpayer, which is not the surprise. for which the critical element in determining eligibility are unknown and culturally there's not a high comfort level with it. you set up opportunities for problems that mean the citizen has to be more in control of his or her tax situation. i believe that i work for industry, but i believe always there is something important about citizen engagement and that it should not be lost. i could talk about other concerns i have but i fundamentally believe it's one of the few times people come and

look at how much they are making, what is happening and was already kind of -- we have made it easier for them, but i think we should be leveraging it, which is why department of the treasury where we are trying to prop folks to look at refunds and save some of it. can we get them to do it and now the cfpb is working with the tax industry to do the same thing. i think there may be opportunities there. >> the tax agencies that most expected government agency that they have. there is a direct connection but it's a completely different culture and there is a sense of what you get back from the government. the government gives you incredible benefit in the wake of the benefit is complying with the tax system and that is a sign of being a good citizen. i set up a conversation about trusted legitimate power. that relates to how much the tax

system can do. >> wait a minute the tax system we have is so open. how can anybody try some name? >> that's another reason you do want tax reform. and may not make a difference, but i think trust, transparency is a big role and trust is going to compliance. there's the hard data to show that, but it stands to reason. >> if we have systems like universal health care that they had another countries the kind of health care credit that we have which are incredibly complicated to administer and doing a great job but they are being complicated. a lot of work for the taxpayers. we have individual filing instead of family filing a big

determinant in making a predictable and how much an individual's for constitutional reasons and state reasons in 1948 but the community property stuff. in new zealand the system is so simple. you had individual filing. break up into the right answer. if you didn't have all these benefits going through the tax code. i don't see us having that kind of reform because we are not going to eliminate these benefits and move follows these things to the spending side of the budget. that is the problem. we can make it simpler, but it's just not going to get to that level. >> all of those points are well taken. i do want to come back and make some basic points about what the

irs is really proposing to do. if the education allow taxpayers to do secure transactions with the irs change their address do things that are really not come as the commissioner said going to mars. their sound vain behind people saying that is quite powerful. 10 years ago, even if you invested in this communication abilities, it does not handle the incoming information and the tax return information rapidly enough to do it. i think something that is dramatically different, both david and nina alluded to this. are they really handling the data in an impressive way? now we are dealing -- a flip

phone would be a step up with some of the things we are dealing with. we can make that kind of a sad. but i think as everyone has pointed out is a long series of investments in the service must be explicit about what they are for. i think both nina and david knows a thing that is going to come online in february 2017. you never know what it is. so we learned that. we stepped back and we have a lot of small moving parts. but we can do this basic transformation. we are really not. close followers -- fast followers. that would be a step. >> on the point about the opaque system that is very true. when i was talking about engagement come about engagement, part of the week engagement as you can understand

the connection between the things on your return and what is causing the outcome. so i believe tax implications needn't be as broad as widescale. it wouldn't be the 86 even if we could do that. but i do think there are places where we have got multiple policy object is multiple credit that are basically aimed at education. we've got 15 of those. there may be places where you could preserve the policy objective, but simplify some of the complaint that these taxpayers face. we administer what is everyday. i believe there are opportunities to look at places where there are multiple credits or deductions. >> i agree with you. you're absolutely right. lots of things that can be done to eliminate unnecessary complexity without compromising policy object is.

all i was trying to say was you are not going to get to the return free filing within a foreseeable changes. >> and eric just had the last word. i may think david williams rosemary marcuss nina olson and eric toder for coming. thank you for this years of service and good luck. [applause] [inaudible conversations] we are glad this morning that the land to counsel in

washington to hear from the imf director christine the guard. she will be talking about the global economy. she will be introduced by atlantic, ceo fredrik can't. it should get underway shortly. just to let you know about our live coverage today here on c-span2 with a look at military policy, foreign policy. rand paul is in south carolina. we will cover the comments here on c-span2. the vice president will be talking about u.s. policy in iraq coming up at 12:30 eastern on c-span. [inaudible conversations] [inaudible conversations]

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[inaudible conversations] >> here on c-span two live at the atlantic council in washington waiting to hear from the director of the international monetary fund christine lagarde. the imf holds their spring meetings next week. president obama not in washington here do that for jamaica and then on to camelot for the summit of the americas. "the wall street journal" reports this morning the leaders of the u.s. and cuba will arrive here in panama city for a regional summit this week looking to build on the historic ball in relation to anything significant obstacles to normalizing formulations. an informal face-to-face discussion between president barack obama and cuban president wrote castro will disseminate to hand the more than five decades of cold war from "the wall street journal." the president out of town. the vice president speaking today about the u.s. policy in

iraq. we will cover that at 12:30 over on c-span. here on c-span2 at about the same time we will be covering rand paul in south carolina today talking about u.s. military and foreign policy. [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]

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[inaudible conversations] >> this is the atlantic council in washington waiting to hear from imf director christine lagarde should be up momentarily. at 1230 today rand paul on the wall of the u.s. military and foreign policy.

>> good morning. i am frederik kempe, president and eeo of the atlantic council. it is my pleasure to welcome this impressive and impressively large audience. we have no more seats available and said people in our hallway. that may particularly welcome our atlantic council board members. atlantic council members members of the diplomatic corps public officials as well as our online and television audience. if i had known how popular your appearance would be madam lagarde, i might try to scalp

tickets. it's an even greater pleasure to introduce our speaker, a remarkable leader navigating difficult times and wrestling with the vast array of challenges every day with grace purge and clarity, a ranging from ukraine survival to the european union's future to broader underlying issues we'll discuss today regarding where the global economy will drive future strength and sustainability. after madam lagarde opening comments, a curtain raiser as they called it at the "wall street journal," i will engage her in a conversation drawing upon audience questions here and online. so i encourage you to continue to submit your comments and questions using hash tag ac global econ. it is no secret that i am the atlantic council managing

director of the international monetary fund. i first ran across madam lagarde when "the wall street journal" was putting together its 2002 european women in business ranking and was then a girl after her. i was then editor there. to celebrate women pushing through the mostly male ranks and corporate euro. the jury of experts ranked are among our top 10 finalists, but then they had a dilemma. as a french lawyer and a partnership organization, was she a business leader? as she chaired a chicago-based company, those global did she counted the european executive? that they intervened in the judges were taken by her accomplishments in the certainty that she would only achieve more. it was revolutionary that baker mckenzie the third largest law firm had elected her as the first woman coming of his partner in the second

non-american to run the firm. our wall street journey marveled at her consensus building skills such an underestimated and historically crucial talent she demonstrates that the imf. our jury placed her at that time number five on our list which i at the time referred to as a result of the chicago penalty. if i named the other for today, you wouldn't know them. nine years later in 2011, this time the atlantic council got it more right when we gave her our highest recognition in new york alongside the u.n. general assembly, the atlantic council global citizen award. by then she had been finance minister entrance atop the baker mckenzie experiences during 500 lawyer egos at 60 offices around the world greg preparation for running imf and its impressive stab of more than 160 nationalities and 182 countries, often in an evil and corrupt

settings. in presenting the atlantic council award to you madam lagarde, world economic founder klaus schwab said i would define a leader with four characteristic. to have a soul, to have a heart, to have brains and to have good nerves. leaders by and large don't get to choose the challenges they face. they only choose how they address the challenges. and how you have done so in your time at the imf has been remarkable. we look forward to hearing opening comments today on the state of the global economy and how we might best address the most pressing challenges. we at the atlantic council often speak of how we together as the atlantic community alongside our like-minded global friends confronted to find a moment in

history perhaps as pivotal as 1918, 1945 or 1989 when decisions of leaders like yourself and that the member countries to represent have outsized importance. so as i turned the podium to you, but they paraphrase clouse raub and thank you for making all the personal sacrifices the public service requires that such challenging times and using his words come to see what your soul, your brain, your heart in your nurse. not in lagarde. -- madam lagarde. [applause] >> thank you so much fred. i know you are a true friend because you are one of the very few who introduces me without referring to my muscles. because people typically refer to my belonging to the synchronized swimming national team in france. so thank you for that. and don't believe that fred and i always scored an eight hour

colors. but it so happens that we are black and white together. the council fred, board members and members of the audience is renowned for its capacity to actually bring together top international policy makers from both sides of the atlantic and from further afar. this is clearly something that is in common between our organization. the atlantic council and the international monetary fund. next week we will be hosting the spring meetings of the world bank and the imf and we will be welcoming to washington d.c., representatives of our 188 member countries. finance ministers, governors of the central banks and we will focus a discussion on the state of the global economy. since our last time in october there have been a lot of development on the global team.

i would say that it is first of all inherited from a big shot in the arm as a result of the decline of oil prices. in addition to that it does have the benefit of the strong economic reformists by the largest economy in the world the united states of america and overall, we would say macroeconomic risks have decreased. so the global recovery continues but it is moderate and even. global recovery continues, but it is moderate and uneven. in too many parts of the world it is not strong enough and in too many parts of the world people don't just feel it. in addition to that if macroeconomic risks have declined, financial and geopolitical risks have

increased. it is not that overall growth is bad. 3.4 and 2014. it is not bad. it is actually in line with the average growth that we have had in the last three decades. so what is not so good about it? what makes it moderate and uneven? well rather than given the lingering impact of the great recession on people, it is actually generating hardship for many people around the world including those countries where more than 50% of the youth population is unemployed. so growth is not good enough. six months ago i warned about the risk of the new mediocre.

new mediocre, low growth or long time. today, what we must do is avoid that new mediocre becomes the new reality. we can do better and we must do better. but atlanta says john fitzgerald kennedy once said, and i quote, there are risks and costs to action. but they are far less than the long-range risks of comfortable inaction. comfortable inaction is what must be avoided. that is what i would like to focus on. how to lift growth today by using all available tools and policy space available. how to let tomorrow's growth and

prevent from becoming the new reality. and how do we work together to strengthen the international financial system and be more sustainable. let me begin with a quick health check of the global economy. those who know the outlook will be published on numbers. they belong to the economic outlook. i'm going to talk about the broader trend in policy recommendations. as i indicated earlier growth remains moderate, roughly the same as last year. advanced economies are doing slightly better than last year and as you know, the recovery in the united states and in the

united kingdom. in the euro zone is doing slightly better as the end is promising. but if we look at the emerging and developing economies, they are doing slightly worse than last year with low commodities being the driver. and they still represent and probably will continue to represent 70% of global growth this year. there is tremendous diversity within that group. remember the talk about the bricks? it has changed. there is a bright spot in that group. china is following although it's more sustainable. sub-saharan africa continues to perform strongly, that russia is

experiencing economic difficulties. brazil is stagnating at bats and many parts of the middle east are set by political innate canonic turmoil. we should not think of emerging economies as just one single group. it's country faces specific circumstance is. some of them easier, some of the more difficult. so what does that imply in terms of policies? with overall rose moderate the global economy continues to save a number of significant challenges. there is what i called last year the low low high high risk and that is low inflation, low growth, high unemployment, high debt. and that risk persists for a number of it against economies. clearly as a result, all policy space must be utilized and it

begins with demand support. how is that implemented? first of all continued monetary policy accommodation is needed in the area and japan. fiscal policy needs to be calibrated to the strength of the recovery without ever losing sight of their sustainability. the effectiveness of those measures can be significantly improved and have worked with them for a little while. for example the channel through which monetary easing and fiscal policy work in the area how? trim marks are crucial to the overhang and deal with the total

stock of no less than 900 billion euros of nonperforming loans blocking credit channels. in japan the authorities need to sustain the momentum of the second and the third area is and they take the full benefit of the first area which is monetary easing. they left both growth and inflation. the third way of being more efficient by leveraging low oil prices to reduce energy subsidies are emerging and developing importers could save on average a full 1% of gdp alone and those could he put to use to invest in a substructure and education and health.

those are some of the macroeconomic dimensions. as i said, macroeconomic risks are decreased. what is increased on the other hand is the risk posed by the financial dimension. financial stability is more at risk than it was six months ago. the new mediocre than i thought about, the growth is not a comfortable place with respect to financial stability. financial risks have migrated. for example they have migrated from banks far more regulated and better sympathize than do non-banks. they migrated from advanced economies to emerging markets. let's go through a few of those

risks. for one, there are adverse side effects of the very low or even negative including on the primary market today, very low if not negative interest rate caused by otherwise necessary commodity is monetary policies. these foster a higher risk of tolerance on the part of investors, which can lead to over pricing. if the low-interest environment exists it can create solvency challenges for life insurers and defined benefit pension fund. for the purposes of this policy is to kickstart growth. but if it is longer than i put some of those business models that risk. i think of another one. the wide movement of exchange rates that we've observed

recently. the u.s. dollar has appreciated the major currencies by 12% in real terms. some countries with more macroeconomic conditions unless policy space have of course benefited from a depreciation. large amounts of denominated debt. this dramatic strings can be destabilizing. this is particularly the case for corporate and the emerging market economies between a strong u.s. dollar on the one hand lower commodity prices on the other hand and on my third hand, higher borrowing rates. on top of which they might not have hedged and that is a bit of an insurgency with formation.

it could be manageable. but we also have to contend with a structural decline in market liquidity that was flagged about six months ago. this is primarily to recent changes in the industry and advanced economies which have created a mismatch between the maturity of assets and of liability, which means that liquidity could operate quite quickly if everyone rushes to the exit at the same time. which could make for a bumpy road with the federal reserve beginning to raise short-term rates. the financial risks underscore the importance of strengthening financial policies. the global level means ensuring

market liquidity of markets dressed, improving macro for non-banks in particular and following through on the regulatory reform agenda particularly too big to fail institutions. at the country level it means excessive risk-taking and managing existing abilities. again, for they appropriate the measures the overall set of policies can help us to lift growth. so much for growth today with the moderates, i need then recovery underway. i thought about -- what about growth tomorrow. that is a big issue because growth tomorrow is also moderate

in both advanced and emerging economies, potential growth is being pared down. this largely reflects several factors. several are lasting scars from the financial crisis at the world experienced a few years back now and we had underestimated, but also the undercurrent of changing demographics in lieu of productivity. so to prevent the new media are becoming the new reality structural reforms need to go hand-in-hand with macroeconomic to raise confidence and generate investment. frankly when you look around, there are too many countries that talk about structural reforms but don't actually do structural reforms at the dead, at the speed they should be

done. structural reforms really have a wide range of policies. some reforms have immediate effect. .. construction sites, stopped employing people, and in the long run you improve our tv infrastructure. you make sure good people can