as commander in chief, the world will know our objective is peace. the world will not mistake our desire for peace for passivity. the world should not mistake our reluctance for war for inaction. if war should prevent avoidable, america will fight with overwhelming force and we will not relent until victory is ours. [applause] behind me is the uss yorktown, the ship men on the original yorktown were silent as they watched it seemed to the depths of the pacific during the battle of midway. vc was a mass of bobbing heads wrote a reporter for a magazine. there was no conversation, no hysteria. these men were brave and proud lawyers. over 100 sailors died that day. is it any wonder that the people who have served in combat are usually more circumspect than those who have never fought?

the men of the uss yorktown were on the front lines. they knew better than anyone in washington the sacrifice necessary to protect liberty. they did not talk about strength and courage. they lived it. they did not seek war but with a -- they were there when called to fight. i believe that the men and women protecting our liberty deserve leaders who are accountable to the american people. the crew of the uss yorktown understood that our freedom and prosperity must be defended against those who would attack us. they learned the terrible lesson that war is not a game and should not be used for political advantage. too many lawmakers in washington have not learned that lesson. in 1964, ronald reagan warned of the dangers, the dangers of seating our freedom to a little

intellectual elite and a far distant capital who think they can plan our lives for us better than we can for ourselves. freedom nurtured our country from a rebellious group of colonies into the world's , greatest nation. when tierney threaten the world, america led the way to rid the world of nazis. resolutely we stood decade after decade against communism. the engine of capitalism finally winning out against the sputtering, incompetent engine of socialism. we won the cold war. american and freedom are so intertwined that people are literally dying to come to our country. the freedom we have fostered in america has unleashed genius and advancement like never before in the history of man. yet our great nation still needs new ideas, new answers to old problems. if america is to lead again.

today we sit atop a powder cake, a troubling $18 trillion deficit. our debt threatens our national security. our debt equals our entire economy. and special interests continue to hold the government hostage. together we will take our country back from the special interests that use washington as their personal piggy bank. the special interests -- [applause] these special interests seem to be more concerned with their own welfare than with the general welfare. the washington machine that gobbles up our freedoms and invades every note and cranny -- invades every nook and cranny in

our livs must be stopped. [applause] when i first ran for office, nobody thought i could win including my wife. [laughter] nobody thought i could win. they said why are you running. i said the same answer now as then. i have a vision for america. i want to be a part of a return to prosperity and an economic boom that lists all americans, return to government restrained by the constitution, return to privacy, opportunity, liberty -- [applause] too often when republicans have won, we have squandered our victory by becoming part of the machine. the republicans win and then we become part of the washington machine. that is not who i am. that is not why i ran for office. the truth is i love my life as a small-town doctor. i have been fortunate enough to enjoy the american dream.

i worry though that that opportunity and hope is slipping away from our sons and daughters. as i watch our once great economy collapse under debt and spending, i think what kind of america will our grandchildren see? it seems to me that both parties and the entire political system have let us down. big government and debt doubled under republicans, and now it is tripling under democrats. president obama is on course to add more debt than all of the previous presidents combined. [boos] we borrow a million dollars every minute. [boos] this fasting stimulation of debt threatens not just our economy but our security. we need to wake up now and do the right thing. we need to quit spending money that we don't have. [applause]

this message of liberty is for all walks of life. the message of liberty opportunity, and justice should not let the liberals take the word justice to it we need to be the party of justice. we need to be for all americans, whether you wear a suit, a uniform, overalls, rich, poor, white or black, we need to be the party of all americans. we need to be the party of all americans. [applause] we need to go boldly forth under a banner of liberty that clutches the constitution in one hand and the bill of rights and in the other. [applause] we need to be boldly for what we are for. washington is horribly broken. i fear it can't be fixed from within. we need your help and we the

people must rise up and demand action. congress will never balance the budget. i have been there. i have met these folks. they will never ever balance the budget. unless you force them to do it. [applause] congress has an abysmal record at balancing anything. our only recourse is to force them to balance the budget with the constitutional amendment. [applause] i have been to washington. let me tell you, there is no monopoly of knowledge in washington. i ran for office because i thought we had too many career politicians. i believe that now more than ever, we limit the president to two terms, why don't we limit all of congress?

[applause] and while we are at it, we need more commonsense rules in washington, the place is crazy topsy-turvy, upside down, common sense is a rarity. that is why i have introduced something truly extraordinary, a read the bills act. [applause] the bills are thousands of pages long, often put on her desk with a couple of hours to reach. -- read. we actually have rules that they cannot give them to us without 48 hours to reach them. i got one bill last year, on my desk for four hours, 1000 pages long. i raise my hand and said we are not obeying our own rules. you know what they did?

they voted to override their own rules for there is a disrespect in washington for the role of laws. the freedom we have fostered in america is something extraordinary. it has unleashed genius and advancement like never before. yet our great nation still needs new ideas, and new answers. i have a vision for america where everyone who wants to work will have a job. many americans though are left behind. the reward of work seems to be beyond their grasp. under the watch of both parties, the poor seem to get poor, and the rich seem to get richer. trillion dollar government stimulus packages have only widened the income gap. politically connected cronies get hundreds of millions of dollars -- think solyndra. one of the richest guys and our -- in our country got a 105 million dollar loan. what is up with that? i have a different vision. i have an ambitious vision that will offer opportunity to all americans.

my plan includes economic freedom zones to allow impoverished areas like detroit, columbia, eastern kentucky -- allow them to prosper by leaving more money in their hands and sending less money to washington. [applause] in my vision for america, we will bring back manufacturing jobs that pay well. how will we do this? we will dramatically lower the tax on american profit overseas and encourage it to come home. [applause] more than $2 trillion of american profit is overseas and we can bring it home and create jobs here at home. in my vision for america, new highways and bridges will be built across the country, not by

raising your taxes, but by lowering the taxes and encouraging this american profit to come home. [applause] liberal policies have failed our inner cities. our schools are not equal and the poverty get continues to widen. martin luther king spoke of two americas. he described them as two starkly different experiences that exist side-by-side. in one america, people experience the opportunity of life, liberty, and the pursuit of happiness. but in the other america, people experience the daily ugliness that dashes hopes, leaving only the fatigue and despair. although i was born into the america that experiences and believes in opportunities, my trips to detroit, chicago have revealed what i consider to be an undercurrent of unease.

it is time for a new way, always -- a way predicated on justice opportunity, and freedom. [applause] i want all our children to have the same opportunities that i had. we need to stop limiting kids in poor neighborhoods to failing public schools and offer school choice, not just for the privileged but for everyone. , [applause] currently some $3 trillion comes in in taxes. couldn't the country just survive on 3 billion -- $3 trillion? i propose we do something extraordinary. why don't we only spend what comes in? [applause]

in my vision for america freedom and prosperity at home can only be achieved if we defend against enemies who are dead set on attacking america. without question, we must defend ourselves. and american interests from our enemies. until we name the enemy though we cannot win the war. the enemy is a barbarous aberration, the enemy is radical islam. [applause] and not only will i name the enemy, i will do everything in my power, everything it takes, to defend america from these haters of mankind. [applause] we need a national defense robust enough to defend against all attacks modern enough to

deter all enemies, and nimble enough to defend our vital interests, but we also need a foreign policy that protects american interests and encourages stability, not chaos. [applause] at home, conservatives understand that the government is the problem, not the solution. conservatives though should not succumb to the notion that a government inapt at home will somehow succeed in building nations abroad. [applause] i envision an america with a national defense unparalleled, undefeatable, and unencumbered by overseas nations building. [applause] i envision a national defense

that promotes as reagan put it peace through strength. [applause] we must realize that we cannot project strength by barring -- borrowing money from china to send it to pakistan. [applause] >> president paul. president paul. president paul. rand paul: let's quit building bridges in foreign countries and use that money at home. [applause] it angers me to see mobs burning our flag and chanting death to america in countries that

receive millions of dollars of our aid. i say -- [applause] i say it must end. i say not one penny more. [applause] i say not one penny more. >> president paul. president paul. president paul. rand paul: to defend our country, we do need to gather intelligence on the enemy, but when the intelligence director is not punished for lying under oath to congress, how are we to trust our government agencies? warrantless searches of america's phone records and computer records are un-american and a threat to our civil liberties. [applause]

i say that your phone records are yours. the phone records of law-abiding citizens are none of their dam business. [applause] the president created this vast dragnet by executive order. as president on day one, i will immediately end this unconstitutional surveillance. [applause] i believe we can have liberty and security. i will not compromise your liberty for a false sense of security, not now, not ever. [applause] we must defend ourselves, but we must never give up on who we are as a people in the process. we must never diminish the bill

of rights as we fight this long war against evil. we must believe in our founding documents. we must protect economic and personal liberties. america has much greatness left in her. we are still exceptional. we are still a beacon for the world. we will thrive when we believe in ourselves again. i see an america, strong enough to deter foreign aggression, yet wise enough to avoid unnecessary intervention. [applause] i see an america where criminal justice is applied equally. [applause] i see an america with a restrained irs that cannot target or harass american citizens for the political or religious beliefs. [applause]

i see our big cities once again shining and beckoning with creativity and ingenuity, with american companies offering american jobs. i have a vision for an america beyond partisan squabbling beyond petty divisions. with your help this message will ring this message from coast-to-coast, a message of liberty, justice, personal responsibility. today begins the journey to take america back, to rescue a great country now adrift. join me as together we seek a new vision for america. i am in south carolina today to announce, with god's help, with the help of liberty lovers everywhere, that i am putting

myself as a candidate for the presidency of the united states. [applause] ♪ [applause] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] [captions copyright national cable satellite corp. 2015]

announcer: former secretary of state hillary clinton is expected to announce for -- her run for president tomorrow online. making her the first democratic candidate to officially enter the race. this will make her second bid for the white house. that video is expected to be released tomorrow afternoon. we will air it here on c-span as soon as it becomes available. and marco rubio is expected to announce he will be seeking the republican nomination for president at an event in miami.

we will have live coverage monday on c-span. announcer: monday night on the communicators, carl livia will speak on the importance of w and the public. >> when i first started in spectrum management back in 1979, i came out of the marine corps after being an artillery officer. i had no idea about spectrum. some people did not understand it. now everyone realizes that our daily lives rely on it. how we stay in touch with our families. announcer: monday night at 8:00 eastern on the communicators.

announcer: irs commissioner spoke recently at the tax policy center about the recent budget cuts. he is followed by a panel discussion that includes to irs officials and a representative from intuit, this is two hours. >> good afternoon everyone. nice to see some reunions. thank you everyone for coming today. my name is ted geer, i am the vice president of studies here

at brookings. i am delighted to welcome commissioner john cosco and -- koskinen. i like to put reminders on my calendar. it is nice to have the commissioner here on april 8. you all have your one-week reminder of the deadline. we are delighted to have you here again today. as some of you know, i have a textbook i co-authored. i pulled it off of my shelf half of the book is devoted to taxes. bonus question if anyone can name the case. an 1899 supreme court decision and it there is a quote. it says, the power to tax is the one great power upon which the national fabric is based. it is as necessary to the

prosperity to the nation as is the air we breathe to the natural man. it has not only the power to destroy, but also the power to be alive. that was an appropriate quotes to kick off today's event to the irs continues to be an essential part of government responsible for collecting tax revenue that amounts to 18% of our economy. commissioner koskinen manages employees and has a budget of $11 million, and i am sure you will hear it is streaking. previous to the irs he served as a non-executive chairman of freddie mac from 2008 to 2012. prior to that he was the president of the u.s. soccer foundation. we have a lot to talk with you about on that one.

he has also served as the deputy mayor and city administrator of washington dc assistant to the , president's chair on the council dealing with the erosion and deputy manager of the office of management and budget. he has also had 21 years of private sector experience in various private sector positions hoping to turn around troubled organizations. i'm detecting a pattern. the idea is for the commissioner to give a keynote speech and , then we will follow up with a panel discussion moderated by howard gluckman. on that panel, we will hear from rosemary marcus and nina olson both from the irs, eric toter of the tax policy center, and david williams of intuit. all of their bios are in the packets you received. with that, i will asked you to join me in welcoming the commissioner to the podium. thank you. [applause]

commissioner koskinen: i have to be careful not to do something with the computer this year. i'm delighted to be here. over a course of years, i have a number of good friends, both at the irving institute and the brookings institute. it's fun to be here. and have a chance to talk to you. it's particularly good, because rarely do i get a group that actually commemorates tax they every year. where else could you find that is kept in washington? -- except in washington? and as a public service announcement, i would remind everybody to file their taxes by april 15, but you party taking -- but ted's has already taken care of that for me. we still have a lot of leading minds on taxes and budgets here so it should be superfluous to make that reminder, because nobody here would file their taxes at the last minute, i'm sure, right? [laughter]

including me, with any luck. a special thank you to rosemary marcus, the head of our research division, who helped put together today's event and will be on the next panel. rosemary is retiring soon after more than three decades of wonderful public service at the irs, the congressional budget office and more. she will be missed. she has done a terrific job there. i also want to recognize someone else who will be on the next panel, nina olson, tax repairing -- taxpayer advocate. i have found nina's advice and recommendations for improvement a great help to me in charting a path forward for the agency. turning now to why we are here i need to thank the tax policy center for selecting my subject for today's event. on the question of how the irs budget cuts affect taxpayers and the system it certainly

, something that keeps me up late at night, budget cuts. and it's a bit at all politicians in washington should be losing sleep over. and i'm grateful for you fostering discussion that should continue until we achieve the right result. my view is simple. i believe the underfunding of the agency is the most critical challenge facing the irs today. and the serious ramifications of five years of budget cuts are becoming increasingly visible and will worsen if action is not taken soon. this is not just about the agency. it's about the entire tax system. we are coming to the where a point significant reduction has already taken place in the irs budget, the grading the agency's -- by degrading the agencies ability to continue to deliver both on its mission during the filing season and beyond. i'm sure most of the people in this room know how critical our situation is. in case you are just back from a antarctica, or missed this

morning's washington post or missed the story from bloomberg, i will recap it for you. the irs budget for fiscal year 2015, 10 $.9 billion, less than $1.2 billion it was five years ago. the irs is at its lowest level of funding since 2008. if you adjust for inflation, our budget is comparable to where we were in 1998. while our budget has been shrinking, the taxpayer base has grown by millions. we've also taken on many new responsibilities, such as implementation of the foreign account tax compliance act and the tax related provisions of the affordable care act. since 75% of the budget is more or less personal, the agency has been absorbing the budget reductions mainly by shrinking the workforce. as a result, we entered fiscal 2014 with more than 13,000 fewer permanent full-time employees compared to 2010. we expect to lose another 3000

more or less, through attrition by the end of this year. you might think that shrinking and agency will force it to do more with less. that may have been true for us in the early going. we have heard the comments on the hill and elsewhere that our funding was deliberately lowered to make sure we think twice about spending. the irs does need to be as efficient -- the irs does need to be efficient as possible and be careful stewards of the taxpayer money. after five years of budget cuts and a hiring freeze that has lasted for four years, people need to understand that the irs is going to have to do less with less. it means that both enforcement and taxpayer service will suffer. the problem is that our levels of staffing are insufficient to deliver on our mission. consider that the 13,000

employees we've lost since 2010 include 5000 key enforcement personnel. these are the people who audit returns, conduct election -- conduct collection activities, and investigate refund fraud and other cases. we estimate the drop in audit and collection case closures this year will translate into a loss for the government of at least $2 billion in revenue that otherwise would have been collected. essentially, the government is forgoing billions of dollars to achieve budget savings of a few hundred million dollars. since we estimate that everyone -- every one dollar invested in the irs budget produces at least four dollars in additional revenue. the cuts in the irs budget in enforcement personnel alone since fiscal 2010 results in an estimated $7 billion to $8 billion every year in lost revenue for the government. this amounts to a tax cut or tax , cheats. we have enforced to reduce substantially the hiring of

seasonal help the we usually have during the filing season. as a result, our phone level service at the start of the season was just 54% and as we've gotten close to the end of the filing season, it dipped below 40%. that means more than six out of 10 people who called could not reach a live assistant. that is simply an acceptable -- unacceptable especially when , you consider our goal for a phone level service in a given year is 80%. the negative impacts of funding -- of underfunding affects the business side as well. it might sound good that we are conducting fewer audits, but the ones that we do are likely to be more burdensome because we have fewer specialized trainings that understand complex businesses. as for tax law guidance needed by businesses we are having to , target our resources more to retail issues involving individuals and their 1040 filing forms.

that means it guidance thought -- sought for more highly specialized issues in the corporate area will likely suffer. service and enforcement need to be viewed as two sides of the same compliance coin, because our system is held on the notion of voluntary compliance. if people think they will not get caught if they cheat, or they are just fed up because they cannot get the help they need from us to file their taxes, the system will be put at risk. consider that a 1% decline in the compliance rate translates into $30 billion in lost revenue for the government every year. as edward turks and would have said, you are into real money. it is important not only to point out what the irs cannot do, but also what we can do and are still doing. while the agency is cutting in discretionary areas over which we have control, we continue to

deliver on core functions. a great example is the current tax filing season, which has gone smoothly in terms of the tax return processing and the technical issues around it, and the operations of our i.d. systems. through april 3, the irs received more than 99 million individual tax returns and on the way to an expected 150 million. we have issued more than 77 million refunds for more than $217 billion. one thing i have been trying to get people to understand is that delivering the filing season does not happen automatically and it doesn't happen by accident. it happens because of the talent, expertise, and dedication of our workforce. to get ready for this filing season, irs employees built into the system we use the back end , of the affordable care act the front end of fatca and tax extension season all without missing a beat. i told the employees a year ago

during my visits to irs offices around the country that if we , could pull this off, it would be an amazing testimonial to the skill of the irs employees, and that is exactly what it is. in the public sector, if things go well, they often passed unnoticed will stop so i view part of my job is to make sure that the press and the congress understand the magnitude of this achievement and see it for the great accomplishment that it is. let me give you an illustration of the disconnect between our funding levels and responsibilities. last december, just three days after cutting our budget by nearly 350 million dollars congress passed legislation requiring the irs to design and implement two new programs by july 1 of this year. the punchline of those programs, the able act, and the certification requirement for professional employer organizations did not come with

any additional funding. but we are a can-do agency and will do the best we can. and that is because we have no statutory mandates, even if those are often underfunded, implementation often comes at the expense of taxpayer service and enforcement. it is a strange position for us to be in. the irs is such a capable agency that congress keeps giving us new responsibilities. we deliver on those responsibilities and we deliver a smooth filing season year after year. and then they tell us, well, we will give you less money and see how you do next year. up until now, we have been able to manage. but i am extremely concerned that the crack's are beginning to show. i said it before, but i think it bears repeating. i have never found an organization in my 20 years of private sector experience that said, i think i will take my revenue producing arm, set it off to the side, started for -- starve it for funds and see how it does. that is happening to the irs. -- starve it for funds and see

what happens. that is what is happening to the rs. people need to know what is at take will stop the problem goes beyond not having enough employees to adequately run current operations. the continued under funding of the irs threatens our viable workforce five to 10 years down the road. the high water mark of the agency's workforce in terms of size was in 1992, and since then we've lost more than 30,000 full-time employees and are at our lowest level since the 1980's. the current composition of the irs workforce also presents a challenge. the problem is simple. our workforce is maturing at a rapid rate. in fact, the workforce over 50 years of age has been growing steadily in the last several years. today, over half of our employees are in the age group. and by next year, we estimate over 20% of the irs workforce

will be eligible to retire. by 2019, that number will be over 40%. meanwhile, the irs employees under 30 has been steadily declining. it is now less than 3% of our workforce. 1900 out of 87,003 essentially, the irs is facing its own version of a baby bust. the risk to our future workforce is generally overlooked in our funding discussions, but this issue is critical to the future of the agency and will only grow in importance in the months and years ahead. as i've noted along the way, my term will end before the full magnitude of the problem is visible to outsiders. but it would be irresponsible to just slide along without addressing the situation. i'm talking about issues posed in underfunded agencies, and one of my biggest concerns involves our ability to improve and modernize our technology systems. because of inadequate resources, the irs is operating with antiquated systems that are increasingly at risk and will fall behind despite more than a

decade of upgrades to the core business systems. we still have very old technology running alongside our more modern systems. it's like a model t that has a gps and rebuilt engine, but is still a model t. we have in fact many applications that were running when john f. kennedy was president. about the only good thing you could say about them is that i determined in a cyber security meeting last week that the code they use has been out of date for so long it has the unintended effect of creating problems for hackers who may be hacking in and trying to figure out how the system works. so that is our case for adequate funding for the irs. i think we need to broaden the discussion. i'm increasingly convinced the irs needs to do more and take a different approach and one that doesn't just rely on resources.

our goal is not nearly enough to get enough funding to hire back 13,000 people and go backwards in time and perform the way we used to. we are not going to build the irs back to the year 2010. we need to be looking forward to a new and improved way of doing business. this involves looking at the future in a more comprehensive way. and considering how we can take advantage of the latest technology to move the taxpayer experience to a new level and do it in a way that is cost-effective for the government. in particular, we are focused on how best to use our limited resources. our goal is for taxpayers to have a more complete online experience for all of their transactions with the irs. the online experience should give everyone confidence in knowing that they can take care of their tax obligations in a fast, secure, and consistent manner. the goal is not overly unrealistic. we are not trying to go to the moon or mars. we are simply saying that people

should have the same expectations of the irs in the future as they have now from a mortgage company or brokerage company. the idea is to have an account at the irs were they or their preparers can login securely and get all of the information about their account and interact with the irs as needed. most things taxpayers need to do to fulfill their obligations could be done virtually and there would be less need for in person help, either by waiting in line at an irs assistance center, or calling him by phone. improving the experience to taxpayers in this way can also help us on the compliance front. we need to be faster and smarter in that area. with a more modern system, the irs could identify problems in tax returns when it is filed rather than coming back years after the fact while the meter is running on potential penalties and interest. we want to interact with the taxpayers as soon as possible so the issues can be corrected without costly follow-up contact, or labor-intensive audits. and it's not as if all of this would be new.

to the extent that we have been able to, even with our budget constrained, we have already moved into knowledge with our taxpayers. one of the most popular features on irs.gov is the tracking the refund option. taxpayers have already used in more than 70 million times this tax season and it is very close to surpassing the total last year. i always try to note that does , not mean we have 187 million taxpayers. there are just some people who cannot resist punching a button to see where it is. another example is get transcripts. it's a secure online system that allows taxpayers to view and print the record of their account in a matter of seconds. so far this year, taxpayers have used it to obtain with a 15 million copies of previously filed tax information. in both cases without the online applications, all of those people would have had to either try to call us on the phone, or

had to walk into one of our assistance centers. without them we have been able , to provide better service than we would have, even though it is hard to imagine how it could have been worse. but it is better than it would be. we already have a few of the building blocks in place we , still need to engage in a full-court press. i went to duke, so i'm using terms like "full court press" today. in an organized way to build towards a better future. in moving toward this future state, i should mention that the irs will continue the extremely valued partnerships we have with the private sector. these partners run the gamut between the tax industry to developers of software and other products. they are critical to our ability to run a system that helps millions each year fulfill their tax obligations and we will look to our partners for their assistance as we continue on this road. i will also point out that as we

improve the online filing experience, we recognize the responsibility we have to serve the needs of all taxpayers whatever their age, income, or station in life. improving service to taxpayers must include special consideration for those were not comfortable in the digital environment, or cannot afford to or do not have access to online transactions. in the end our ability to improve online and both traditional taxpayer service will depend on agency funding. but even with budget constraints, we will continue to find some funds to support his -- these efforts to build for the future, even at the expense of other areas and activities. otherwise, if we just wage a guerrilla style fight every year, focusing only on the present, we will wake up in five years and be no further down the road than where we are today. and in fact, we will be five years farther behind. so that is our story. the challenges of the irs today lead policymakers with a choice.

a decision to adequately fund the irs will give us the tools we need to fulfill the funding needs for the future post of a decision to underfund will reduce the money needed to run the government and inject risk into the system of voluntary tax compliance. i will continue to urge you to make the right decision. i took this job nearly 16 months ago because i understand the critical role the irs place in the lives of taxpayers and in the funding of the government. i speak for thousands of employees of the irs when i say we are committed to building the future for the american taxpayer. thank you and i will you happy to answer any questions you have. [applause]

>> thank you very that interesting talk. we will chat here for about 10 minutes and then you will all be able to asking questions. i'm asking you to make them questions and not speeches since there is a limited amount of time. keep them as questions. commissioner koskinen: you can send me the speeches afterwards. >> absolutely. and then the panel will come up. commissioner, i would like to

start by saying, you didn't think you could make yourself less popular, then you had to talk about going to duke. i couldn't help but notice in the last few days that two candidates announced for president. once of the irs is too big and too powerful and we should scrap the code. and the other said, i think we ought to abolish the irs. to try to put this in corporate terms -- i know it's not an exact analogy, but if people want to run for chairman of the board that really want to eliminate the enterprise, how does an organization responded that? commissioner koskinen: as i said in the past, i understand there are different ways of framing the issues as you go. in both cases, what people are basically saying and i think resonates with most people in the public is that the tax code is too complicated. some people are talking about

abolishing the irs and have said, everybody ought to be able to file on a simple a small card. but the only way you could do that is if you had a very simple tax code. and i've made it clear from the start that while tax policy is the domain and providence of the treasury department, the white house, and the congress and we are just in administration, once i said that, i've also told members of the congress that anything they want to do to simplify the tax code we will do our best to support it. it is beyond understanding. i don't know how anybody understands the full sweep of the impact of the code. chairman camp of the ways and means committee before he retired, he introduced a very comprehensive proposal for tax reform and had a way of framing it that the tax code was longer than the bible without any of the good news. i told him that my rule of life is that i will give him credit for that statement for a year and then i will steal it. unless you think that people

have no money, someone has to be there to collect the money and some has to make sure the numbers are right. someone has to make sure they are reporting the right amount of income. against which they are applying a simple formula. i view it as a cry against the complexity of the tax code and a desire to make it simpler. my standpoint, if we could do that, that would be a great step forward and i think the irs employees would agree. >> that said, it has been a long time since congress only asked the irs to collect money. you run a large welfare organization and you manage the child tax credit. you are responsible for a huge health insurance program. is it realistic for congress to continue to expect a tax collecting agency to do all of these things that really have nothing to do with collecting taxes?

commissioner koskinen: it's a reminder of what i should have said was well that if you are , going to have a simple card that you fill out for your adjusted gross income, you have to have a program for what we will do with all of these tax credit programs that we run. you either have to abolish them or you will have to have a more , complicated form for people who are eligible for the education tax credit, the child tax credit, the earned income tax credit. it is ironic, as shown in december, that at the same time people attacked the irs they keep giving us more things to do. and particularly in the social welfare area. and it is because we are efficient and will get the job done. in terms of efficiency, and some members on the hill have talked about that we have purposely cut your budget to make you more efficient. on the update of tax efficiency around the world, the irs spent

-- spends half the amount of collected dollar revenue than the tax administrations for germany, france, england canada, and australia. we are spending half as much. that will give you some indication of how efficient we are. i have met with tax administrators around the world and a number of them have had programs of one kind or another. and again, because people have figured out it's a simple way to reach out to constituencies. we have 150 million individual tax returns, so they cover the gamut of people across the income strata unless you have , people who cannot file. then they could be eligible for the income tax credit. but it is true the earned income tax credit is an interesting duality. only the one hand we have an obligation to make sure everyone is -- who is eligible gets it.

about 30% of the beneficiary's turnover every year. they get a better job and they are no longer eligible. on the other hand, we have to make sure that the right people get the right amount. it is one of the major challenges we have because i was looking at the educational tax credit. congress has a way of giving us requirements to pay tax credits and then hitting us the third-party information after the credits have already been done. we do educational tax credits and we are not required to get the information from colleges or universities until the end of march. but people expect their credits in january, february, and into march. it is more complicated than you would expect. most people thinking about the irs and paying their taxes have no idea the amount of money and the amount of time and effort we spend.

i would be happy to give some of these programs over to somebody else whether it is hhs or the labor department. our life would be a lot simpler. ted gayer: you have been pushing very hard for congress to give you more money. i'm not sure if you think it's likely you will get much more money. let me ask you to get out your crystal ball for a minute. if you don't get additional funding. what will the irs look like in five years? john koskinen: that is our concern. when i got there, the deputy and i had been talking about what the vision of the future ought to be. the answer to that question, what should the irs look like. i started looking at the demographics. when i got the charts it showed,

it became clear to me that we have a significant problem. again my point about guerrilla work fighting its way through if we don't do something about this and we keep being constrained, and we look at the aging workforce, we will go out of business one day. we are going to have this significant challenge. let's assume flat funding which hasn't been the case. the good news is things will not get a lot worse, the bad news is they will not get significantly better. we have to find ways to make even modest investments in information technology to try to move more and more people on the web to get better services quickly and to try to move them out of the channels of calling

us. and coming into the taxpayer assistance centers so that the people who need to get a hold of us, whether they have complicated questions, can get through on the phone or get service at a walk-in center. i do think it we just a flat in the next five years no with additional responsibilities. the irs will become increasingly more dysfunctional. my concern is not just what do we collect with our own efforts. my concern is at some point, the voluntary tax compliance system begins to erode. it's not an on-off switch. you cannot wake up one day and say, i did not know that was going to happen. here is more money. this is a real problem, a serious problem.

i don't want anyone to say you didn't warn me. we are beyond the simplicity of saying cut your budget and it will be more efficient. current budget again, we will have fewer people and technology that doesn't respond effectively. if that makes somebody comfortable that we are now paying more attention to what we are doing, it does seem to me a fairly strange way to run. an organization where we are collectors of 92% of the revenues that run the government. ted gayer: one last question and i will turn it over to the audience. have you seen any evidence that this has affected compliance? john koskinen: compliance is a difficult thing to measure. the economy has been good.

the research and statistic organization does tax staff analyses. we audit 13,000 returns a year. for three years, that is 40,000 returns in three years, and we see what is going on with compliance. it's how we know what our improper payment rate is. we expect by the end of this year, early next year to see the next updated cap tax gap report. it will give us some indication of where we are with compliance. the problem with compliance is, we are not measuring with 1% of the throw. my concern is that whenever it gets to be visible and noticeable, it will be a lot harder to fix. ted gayer: a few questions from the audience. please wait for the microphone

and introduce yourself. >> [inaudible] hire younger people to replace the older people as they retire to help solve the budget problem? john koskinen: it would if we were not in a position where the only way we could deal with the budget cut was to say we were not hiring anyone. you are exactly right. the other side of the coin is that the people that are retiring have wonderful years of experience, great knowledge, and insight. how do we engage in what we call the knowledge management program that we started over the last year? how do we capture as much of that experience and the insights and the way they do that experience before they go.

but you are right, at some point in time particularly, my concern is that when you say you are not hiring, you have the biggest need. enough support people. secretaries, administrators, and in some places, we don't have enough to run the i.t. helpdesk. the ability to fill visions appropriately. over time, it's important for an organization to bring young, bright people in. which is why even in the worst of days, this year and next year, we continue to train people. but it goes back to the baby bus problem. not only doing needy need younger experience and energetic people, in five to 10 years when we look at the need for frontline managers and

supervisors, if we keep going where we are going, we will look at a group and there will not be anybody there. if we balance out the work force overtime, i think if we could get enough money to move forward with our information technology, the volume of calls would go down. if we get more money, we are not hiring 13,000 more people. because we have such an antiquated system, we shouldn't be at the cutting edge but we should be fast followers. i would love to be in the 21st century with the i.t. rather than the 20th century. it is that kind of single package. >> you mentioned that you lost 5000 enforcement employees.

i was wondering when making those cuts to the enforcement divisions, to what degree does return on investment of the various enforcement activities inform those cuts? john koskinen: we have to do statutory mandates. we don't have choices about the affordable care act or what other bills congress has passed. and the three chilean dollars we correct -- collect, it leaves us with enforcement, taxpayer services, and i.t.. we have done the best we can to try to balance that. but in terms of the trade-off, we have 3000 fewer people

answering phone calls right now. the 3000 people we put in to identity theft. you're making a balancing decision to figure out, how do i minimize the negative impact. every revenue agent, criminal officer and criminal investigator. we know that you can talk to any revenue agent. when we look at returns, we start with the returns that have the biggest most egregious problems. there are people out there that have made mistakes. as i said in my confirmation hearing, i never dealt with the company where across the board there are not enough people. getting ready, it was clear across the board. they describe how we dealt with not enough people i was just

stunned that there was no place that had enough people. ted gayer: one or two more questions. yes, ma'am? john koskinen: two quick comments and a question. i have almost uniformly found fine people and helpful people. i did not answer the phone, but somebody pretending to be an irs person. you are in trouble, calmly back and the person called me a second time.

i called the irs and they told me it was phishing once again. john koskinen: those of the worst. -- are the worst. >> we have heard of multimillion dollar payments by corporations and banks that have not paid their appropriate taxes. where does that money go? is there any way the irs can get hold of some of that. john koskinen: we collect $60 billion to $70 billion a year in enforcement activities. it does not go to us. it goes to the general treasury fund. in a lot of ways, it probably

shouldn't come to us. it is clear that the way we run the organization is nobody gets measured by or paper or ms. award by how much they collect. the agent they are dealing with is not going to get more or less paid depending on how much you end up owing. one of my recent hearings, someone suggested that we are doing this and we could give a little of that money to the irs. ultimately, we need to be funded directly and people ought to be comfortable that we are being more aggressive. i would note that i have been to 37 offices and held frontline meetings and employees. i've had lunch every place with plenty of employees. when i go to call centers, it's

not that they are underpaid. the issue is there not enough people to answer the phone and provide the service that taxpayers have a right to guess. i had a manager on the call center that went back and i think it reflects what everybody have talked to in a call center says. they feel a sense of satisfaction. if you've got a question, they can answer it and feel that they helped you. one of the objections i got from call-center people is it was the year that we said, because of the concern about the lines, we would answer simple tax questions. and the employees kept saying, but we know the answers. by definition, it takes longer to answer.

we had no choice but to say these are the questions you can answer. it's not good for taxpayers. we are to reverse it and be answering the complicated questions. the simple ones you can go to the website four. the bottom line is the people that care most about that are the people in the call center that feel they could help taxpayers more if they just had more resources. ted gayer: thank you very much. [applause] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] [captions copyright national cable satellite corp. 2015]

>> good afternoon. i was not sure of the choreography. of the tax policy center, the urban institute, and brookings for inviting us here and featuring the irs budgetary dilemma on tax day this year. perhaps you are doing that in this era that those of us associated with taxes are

definitely in a challenging and ever. april is as good a time as any to commemorate that. i am also delighted to be turned to skating -- to be participating in this panel. and eric and david, at the service where they are still fondly remembered. and simply our most important trusted advisor and commentator. and a black belt at keeping the experience for the taxpayer in the forefront. and i will talk about that today, too. nina will be much more dynamic. this is the issue of the day. thank you so much for coming here. you came to hear us talk about the irs budget. that is what the irs is focused on now. i will take a moment to explain what it is we are doing.

infrastructure for telephone and tax assistance. so that they can fix things the first time around. there are service deliveries through all channels. and taxpayers and representatives would be more in the drivers seat for issue resolution. three out of five taxpayers use paid preparers. they can arrange payments online and pay online. this would allow us to deploy people to work with taxpayers who want or need personal contact.

many do and many will. those people need to be trained to better and they need to be given information technology to do the job. the point i want to emphasize this afternoon it is it will also reduce the cost of an tour smit -- the cost of enforcement. and the cost borne by the taxpayers themselves. pretty much everything is new about that image. we are taking a comprehensive view and figuring out what investment is needed and in what order, they have translated that to budget initiative. so we can go forward and describe what it is to go forward in the 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. it will benefit savvy taxpayers and others as john koskinen mentioned. the cost of coming into compliance, it will provide more cost-effective enforcement's. it should raise net revenue for dollars spent. it also builds more bridges and more cooperation with our partners. it tax preparers and software companies. we appreciate the title today, how budget cuts affect taxpayers. i want to broaden the picture of who bears the cost of a low-tech tax system. the total cost of compliance has two parts. the cost to the irs, the

administrative cost, and the cost borne by the taxpayers. and the cost borne by the taxpayers are unevenly distributed. and borne by the taxpayers overall. it far exceeds the administrative cost of running an irs. it is a story of taxpayers bearing the cost of low-tech irs. you can go online and you can change your address for ranger rick magazine in a minute. and that gentleman reported in the post today that one change of address did not get in. that's not going to mars, that's like information technology number one. they are determined to move through this path towards better information technology. i will give you two examples of how we think this will make a big difference in my few minutes remaining.

we want to move and we will 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 is a delay in a payment that is the largest single payment many of them will get during the year. if you communicate what they will say by e-mail -- like the gentleman in the post story today, a very big refund. could you provide some documentation for why that refund is so big? he had it in his pocket for the two days he was waiting to talk to someone. and keeping in mind that traditional enforcement in our world is expensive. we can effectively lower the cost. for preemption, they have one error.

it's not really cost-effective to seek to evaluate all or even a majority of those. the cost of addressing that. where the cost of the approaches we have at hand is very high. the cost of the taxpayers. it is more than a year after the filing that the taxpayer hears about that. we will have many returns that

actually never move into exam. another aspect here again, i want to emphasize that we look at the total cost of administration in these are not so apparent. the irs is struggling for budget. much of them are being borne by the taxpayers. if we invest to improve the taxpayer experience, it will lower the administrative taxpayer burden cost per dollar of enforcement revenue. here is a way to think about it. voluntary compliance revenue has a higher total rate of return after you subtract the cost of the irs and the burden to the

taxpayer. taxpayers filed each year and incur $60 billion in costs. our estimates show that taxpayers that end up in exam bear another 10%. another $6 billion in costs. and many fewer people, in various stages of accounts receivable they're all that cost. it rests with the people standing in line and it rests also with taxpayers who are trying to come into compliance. in a very low tech world. we are at the first steps. there are online payment agreements, but they have to be handed off to the irs. we know we have a long way to go.

we know it requires investment. it will involve quite a bit of investment. we are developing comprehensive plans of how we will deploy that investment and how we will get there. we translate that into budget initiative so we can be accountable for that. we are taking positions now as we must demonstrate an investment from the irs is not just going to reduce these long line's from four hours to two hours. an organization like any other -- there are a lot of things you can't do because of our information technology. so i will turn the podium over

to the others on the panel. i am interested in hearing what they have to say and we look forward to taking your questions. [applause] >> i am with the tax policy center. we make sure i know how to work this. -- let me make sure i know how to work this. i am glad to be here and i want to thank commissioner john koskinen for talking to us rosemary, and others at the irs for hoping -- helping to organize this. i am probably an outlier on this panel. it might organization deals with tax policy and not administration.

the division of labor in the u.s. government, elected officials in the white house and the treasury and congress make the tax laws. the irs administers the tax laws. it's very important for us to remember that distinction. also understand the vision is not as clean as we would like to think it is. tax administrators operating with scarce resources inevitably influenced policy outcomes by their choice. and how to audit particular issues. the outcomes of policies do depend on what the irs does. and from the other side, the policies that the president and congress enact are not going to work unless the irs can effectively enforce them. there is much more of a link between the two then we commonly think.

i will comment on three areas. a little bit on irs resources. i will be a bit repetitive on what the commissioner said and what rosemary said. a few comments, slightly repetitive, on changes on irs workload that has accompanied the non-growth in resources. it is coming from demographic changes that changes the economy. none of us knew very much about. the other from policy changes. finally, i want to make a few comments on whether tax reform would help matters. let's start with the data here. the upper left-hand quadrant shows real irs operating costs in millions of 2014 dollars. it has gone up slowly over time and dropped pretty sharply after 2010.

all these pictures look the same after 2010. operating costs from the top right as a percentage of gdp, i could have shown operating costs relative to labor costs are wage index, and that would look similar. that has been declining gradually over time. there is a more precipitous drop after 2010. the bottom left shows average irs employment, again dropping but really plummeting over the last few years. there are also these in the graphic issues at the irs with the aging workforce and the increasing number of experienced people that are eligible for

retirement. finally, the last one actually does not show the same picture operating costs per dollar of collection. that bounce around but has not really moved up and down much, but that is driven more by collections than by operating costs. the fluctuations are revenues going down during recessions going up when tax increases and when there are economic booms. the important thing about this picture is the level, not the trend. about .4 of a cent, it costs the irs when it comes to revenue which is very low when it comes to the international comparison. a little bit of data -- while irs funding has leveled or is declining, individual tax returns filed have grown. between 1998 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 for partnership. more returns filing amt, although that is a low number and is more or less stabilized and more people filing the earned income tax credit. those are from the individual area. on the business side, there have also been changes. there has 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 and it with complex international corporations. on the business side, there has been the very large growth over the past 20 to 30 years in the share of businesses organized as corporations and partnerships,

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 are reporting directly with the entity has reported to them, but you have to make sure the entity is reporting correctly and reporting correctly to the right taxpayers. that makes the job very obligated. these are entities that do not pay any taxes themselves, but what they report fx individual tax revenues a lot. finally, i will get to the policy issue on tax expenditures. i always resent it when people try to add up the number of individual tax expenditures but here i am doing it. it is pretty arbitrary, because it depends on how you group different provisions. the treasury does things differently. in defense of myself, i will say that i used treasury figures which i adjusted to make them

consistent to changes to the way the reported things differently during the bush administration. this is all coming from the treasury. it is a consistent measure. every year, the number of tax expenditures grows. so this is something that is growing. the dollar value, volume, of gdp -- by the way, back to the last part. at the bottom, i have refundable credits, which have multiplied by a factor of 500, growing from one to five. that may seem like a pretty small number, but these are -- this may seem like a pretty small number, but these can be a major headache. this is from individual tax expenditures, including focusing on individual taxes, and that is individual tax expenditures that are including those that

individuals claim on business income. those numbers have been gradually rising over time. the bottom of that chart, the top black box, dark blue, shows the revenue losses. the bottom shows the portion of the tax expenditures which come from the refundable portion of refundable credits. that has gone up, again, a small never, 2.6% to 2.58% of gdp. in the next part, it is scheduled to soar because of the premium assistance credit under the affordable care act. also, the earned income credit even though this chart from treasury assumes the limitation or expiration of the expansion enacted in 2009, earned income credit continues to grow over time. why does this matter? tax expenditures great boundary

problems. it multiplies the compliance issues for taxpayers and issues for the irs, things and need to be checked. refundable credit creates additional opportunities for refund fraud and that is a serious threat to the system. i would make one more comment about this -- when you look at the revenue per dollar collected, the .4 cents per dollar, it should be more like .3 cents if you would count the tax expenditure. add that back to revenue, saying the irs is not collecting 18% of gdp -- it is collecting 24% of gdp and then giving 6% of it back in terms of programmatic policy. the job is a lot bigger than it seems. that may make a few -- the tax reform. some people say the solution is tax reform.

clearly, if you went to a flat tax, which was discussed with the commissioner, or a v.a.t. replacing the income tax, you would reduce compliance cost but you would have a very different kind of tax system and very different kind of economic policy. you cannot just evaluate that in terms of solutions to the irs. that is a very big change in social and economic policy for this country. the more modest tax reform, such as 1986, would eliminate or reduce tax expenditures and lower rates. when you think about them, tax reform is trying to reduce the cost of the tax system. but what are the costs of the tax system? if you talk to economists, they would said the biggest cost of

the tax system is what is called the excess burden. because taxes are not neutral, it causes people to behave differently than it would in the absence of a tax system and reduces economic efficiency and reduces output. everybody says reducing those costs are the biggest reason for reforming the tax system. those are the biggest costs to operating the tax system. the second is the compliance cost for individuals and businesses. that turns out to be 10% to 15% of the cost of revenue raised, which is maybe less than the excess burden but still a substantial cost. then you get to the cost of the administration which is less than that .4 cents per dollar. it is the last thing that matters in tax reform.

tax reform is about other things. so i am doubtful to expect that tax reform, when you get through all the other goals of tax reform, they will really care about that. my bottom line is -- no matter what you do with tax reform, you really have to adequately fund the irs. i will turn this over to nina. [applause] ted gayer: our next speaker is nina olson. nina: the microphone is more complicated than i can handle. i am technologically challenged on powerpoint. i have never used powerpoint slides, but this is a special occasion.

i'm using some 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 and how that relates to the funding cuts of taxpayers 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 taxpayers the right to go to the u.s. tax court before they pay the tax. certainly, we do not have to go to any court of law to do most of our collection actions. we do not have to ask a judge to grab money from a checking account, from your wages, or anything like that. we do not need to get a court's opinion to file a federal notice of tax lien. we cannot think about the budget cuts unless we keep in mind this

power of the irs. so if you -- that sort of triggers some of the visceral reactions that people have to the irs and that you hear in some of the presidential statements. you know, the irs connection to -- can actually take your hard-earned dollars, so if you have a power like that, you want that power to be very, very 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" or "you got it wrong, irs, and i am entitled to that earned income tax credit." "listen to me.

"fix them. let me get that $3000." you want due process in that tax system, the ability to come in the right to challenge the irs and be heard. let's look at how the irs 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 would say 40 years or four decades. there is no good way to say -- two score i have been practicing and involved in the tax system. [laughter] nina: and i have never, ever seen anything like this filing season on the phones. this is just the roll up -- the customer account services, really all of our taxpayer help lines. a year ago, we were able to answer seven out of every 10 calls. and this is the filing season. it starts january 1. and today, we cannot even answer four out of 10 calls. 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 person for assistor are getting through. i want to note to you all that the percentages and policies up front this year. as bad as these numbers are, these numbers mask what the taxpayer experience is. the irs, i think, rationally made the decision that if you are looking at, on average, 22 minutes of sitting on a line, we know what volume we're getting. there is no way that a human being is going to be able to pick up an answer you in a reasonable amount of time. we do what we call -- i love this term -- the courtesy disconnect. that is at the very beginning of

call to this year, this year in the filing system, through fiscal year 2015, 6.8 million calls at the beginning of the process, and that is seven times more this year to date as it was last year to date. that is extraordinary and shows you how much the limited access that the taxpayers have. to keep going a little bit further, i want to talk about what people are actually supposed to be doing when they reach us on the phone. they can ask about math error corrections. there was the example of the switched digits of the social security number. they ask for penalty abatements -- i was sick, i relied on my return preparer, which we are pushing people to rely on more and more even though they are not regulated and there are minimum standards to prepare tax returns. they can ask to enter into installment agreements so we do not grab that money from their account. if they cannot get through guess what we are going to do. it is all automated, folks.

if we do not hear from you we are reaching out, touching your account or your wages, and then you are going to have to ask us to return the proceeds because you cannot pay for your food or medicine. this is happening every single day. you can call them to put you into currently not collectible status, saying i cannot afford to pay my basic living expenses if you take my money. you cannot get through the phone, then we are taking your basic -- not extraordinary or extravagant -- basic living expenses. no food, no housing. that is what we can do. that is the exercise, the power that the irs has, and it is not legitimate. it looks to the taxpayer like an illegitimate way of using power.

if you're waiting on the phone anywhere from, on average, 25 minutes, and you are a low income person and you have a lunch break that might be half an hour, you know, you cannot wait for 25 minutes. it might be that you have a 45 minute wait. you will have to hang up and then bad things will happen to you. again, that drives even down to the more expensive use of resources on the collection site or the enforcement side or the taxpayer advocate side. any time we get a case in, we have two employees working that case -- my employee and the irs employee that we are making do the right thing. ok? how cost-efficient -- someone was asking about return of investment and 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. no matter how much we drive to

the online process, there is an unmet demand. irs research and my research show that there is an unmet demand for people who have problems and 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. the phones have not dropped. we had more hits on the refund online product. yet, our phones are still getting the calls with a different group of taxpayers with a different group of issues, excluding the 6.8 million that cannot even get through. let me come back to power for a minute. you cannot -- taxpayer trust in the irs and the legitimate use of power, i am more and more believing this is what drives of 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 options look increasingly arbitrary and capricious and an illegitimate use of power. and the absence of, decrease of auditors and collection personnel, that is what i believe is going to drive the compliance rate down. because they will take every opportunity they can to not report income, to not engage in us, with us, to not feel like they are part of a greater civic hole and that taxes play a legitimate role in government or the government is sending a message that we cannot talk to you right now -- we are busy. you know, we're busy answering other calls. your call does not get through. how that feels to the individual taxpayer and how that translates into their actions going forward is, to me, the crisis in our tax administration system today.

one last thing about this point about power -- as the irs moves to online and as it moves to automated enforcement activity and activity where there is no personal engagement between the irs employee and as the irs moves away from a physical presence in the state, there are today 13 states where there is no one located in that state to conduct outreach and education to small businesses. ok? no one person in that state, all right? that is a quarter of our states. as we become more and more remote, then it is likely that the only interaction that taxpayers will have with an irs employee is when it is their time to do something bad to you, they are trying to take your property. there is no one answering the phone to talk to you about why

they should not be taking your property, but there are people that will come knocking on your door to take your property. what does that mean for the taxpayer's relationship and trust in the most powerful creditor that we have in the united states? just some things to think about. [applause] dave williams: thank you. i am dave williams. i have worked at the irs the longest, actually, of the folks on the panel. i had a career working in the u.s. senate and then working and tax administration at the irs. when i talk about some of this stuff, the very first tax bill on which i worked was the 1986

tax reform act. i had just come out of grad school, and i worked on those revisions. that act lives in legend as the holy grail of tax reform, at least in myth. i do not think in fact that is the case, and it is certainly not an achievable goal today. when i went to the irs, i had the privilege of running the earned income tax credit program which, for me, to this day is a really high honor because of what the program does for people. it is run through the tax code and has challenges, but the ability to say i was able to run one of the largest means tested anti-poverty programs in the world is a pretty cool thing. something about working at the irs, you have to think about it as the amazing things you can do for and with people, not just as a job. with that frame, i left the irs a couple years ago and went back to capitol hill briefly and then

went back to work for intuit. a comment about the company before i make a few comments -- most companies think of it as the turbotax company, so the diy world. you might find it interesting to know we also sell tax software to more than 100,000 tax companies, professionals, very small companies, but we also think about ourselves and are beginning to articulate it more as a full service company. some of the comments you will hear me make are intended -- i'm still getting into that frame, intended to think about the industry as a whole. i will make a couple comments, one of the challenge at the irs. the technology enablement is where i want to focus. i am hardened to hear some of

the things rosemary was talking about what is coming to the irs. i was also director of electronic tax administration. i think the commissioner may have used part of my speech from 10 years ago when we made some of the very same predictions. that is not a criticism. it is one of the things i always found challenging at the irs. there were things that were the program of the future and they always would be. [laughter] it is my hope that we have crossed that rubicon and we are at a point where we can begin to move forward. with that frame, the reality that you have heard from the others, i think i have experienced and we need to recognize it as we look at a discussion about resources fear -- and that is, the irs' big and growing mission. it is complicating our entire lives. complicating things that, this year, have been particularly noticeable, like the growth in tax fraud. there is a threat that is a

threat to tehhe 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 i can be effectuated just by the irs. many of the problems or challenges i just mentioned, or by industry. there is an actor that is not here today that is becoming more and more apparent, which is all of the state departments of revenue. they all have an incredibly important role in what i like to call the tax ecosystem. i think anything we talk about impacting the irs, or we need to recognize there is a whole ecosystem out there of actors who are affected by changes in the environment in which we all have to cope and the environment specifically here in washington. i would note that the commissioner -- this is not the first time the commissioner has

talked about using technology to help the irs be subjective. 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 ecosystem to meet customer needs, whether that is on the service side or the compliance side or a little bit on both. those are incredibly important. how many people in the audience have a flip phone? don't be shy. you can put your hands up. wait, no one? both of you back there in the corner. when i think about a flip phone, someone is checking -- is that a flip phone you have? i do not remember because i do not use it that much. when you think about technology, i want you to think about how quickly it moves. think about the word "innovation." one of the challenges the irs and many places face is the speed with which technology evolves. it was a challenge when i was there. what has happened since that time is that technology has sped

up. when i think about how we can help the irs and what the challenges are facing the irs and i think about technology obviously, there is an incredibly important role industry can play in helping the irs and the entire tax ecosystem meet the challenges that it faces. you have heard about the challenges. i fundamentally believe that the only way the challenges can be met, whether it is 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. i do not believe that irs can go without industry, partnership, and cooperation. a note folks have concerns about how one involves industry. i want to talk about that. 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 will articulate about how the irs the states, and the ecosystem should work, and specifically, expectations of industry. when i asked about your cell phone, that was not just a joke. it brings to mind the fact that this device, which most of you probably have seen or even have an iphone 6, this thing is already out of date. it has been surpassed in the past two months by several other devices, and this is the hottest thing in the market. this was the biggest thing around. i think the commissioner had it right -- the expectations people formed in their daily lives are the ones they bring to their

interactions with government. if you're used to the iphone 6 and using that as new and you are still looking at a flip phone, it is a challenge to break that barrier and actually communicate with people. industry can help irs leapfrog deliver benefits and experiences that the irs wants to deliver to its customers and taxpayers in ways that meet their expectations. i have one area -- before i articulate the principles, there is one thing i want to mention. i have actually come to believe this more and more. it is probably one of the areas where nina and i will somewhat disagree. we disagree on a lot of things but we're still quite good friends. i think, in general, people do not want to interact with the irs. i do not think that is a hard concept to grasp. i think it is pretty obvious. it is why virtually everyone either employees tax software or a preparer, with the exception of nina olson and i expect other people in this room that take pleasure in doing their returns themselves. as you recognize that reality,

you need to think about how we bridge our relationships with taxpayers to enable tax agencies to do what they need to do and provide the services. in that context, i think industry can make a huge difference but with guiding principles. i will articulate some of those proposals. number one is clarity and goal. what are you trying to achieve? number one, clarity of goal. what are you trying question the more specific can be, the more effect you can be. we can all nod and smile, but how does one take service better? is it reduced time on the phones or average speed of answer? the more clear you can be, the better industry can help you with it. clear roles and responsibilities -- it's absolutely important when you think about tax fraud. the irs is a law enforcement agency. the industry cannot be a law

enforcement agency. understanding what the role and responsibility is has to be defined by the irs and state department of revenue. no worries. it also should be as you think about what you might require, it should be standards waste. if you are delivering a service through tax practitioners, it should be specific about what they should do. you should be looking at the outcome of the objective you are trying to achieve. if it is better serviced, what specifically are you trying to achieve and lastly, this is one i think is a principle that raises concerns when one talks about participation in the industry and that is taxpayers should be recognized to be the owner and controller of their own data.

it is not industry's and it is not government's. it is their's. through industry or any other way, you should be thinking about the irs -- you should be thinking of the control and data and i have actually had my 10 minutes. i think we are moving to a panel discussion at this point. okay. [applause]

>> let me ask you to respond to dave on this question about technology. were you saying this is a bad idea or we have to be careful in how we do it and how should the service think about this new technology without getting into any kind of trouble? >> there's one thing the

commissioner referenced and i've sort of been a broken record about this. my office did some research to look at who the taxpayers were and what the taxpayers were eligible called the low income tax credit program. these are taxpayers so low income that congress has said you are eligible to get assistance from federal programs without dispute. 250% -- the taxpayer bases at or below 250% at the poverty level. that is from our data in 2013. that is extraordinary. we did a profile of what are the characteristics of these taxpayers? this is the population we are saying give their preparers the ability to go online. these are the preparers who are

unregulated, often unaffiliated with large chains, so there's no training, and we are opening up our accounts for them to have that information. our concern is the rush to go online that we are not thinking about the characteristics of these taxpayers and we are not coming up with a migration strategy so they are not dropped on the floor without any services provided to them. we were taking things that were previously free for these taxpayers because the irs provided them and should them to generally preparers because a lot of them don't have access to online themselves. nobody is going to do that for free. there's a cost involved. it's regressive. i don't view it as a bad thing. i think technology is a great

enabler. this is one of the consequences of the budget -- it drives us to drop services before we have a strategy to replace it and what happens to people in the meantime? trust lost is almost impossible to regain. how do you get them back into the system after that? we have to use data and psychology and sociology and all of those skills to understand the consequences of what the actions are and this shift to the future. we are not a bank. we are not an airline. we are the internal revenue service. we can do a lot worse things to you than you missing your plane. we have to keep that in mind when we talk about eliminating services for taxpayers.

>> rosemary, you talked about putting this together in a budget. can you talk about how much would cost to create this new system? rosemary: a lot. i want to respond to a couple of points -- the last thing we have to worry about is rushing. it's a very long process. we have been forced to drop services before. i have been brought up short in how many times this has been said, but it will be a fairly major investment and it will take a long time. one of nina's points, a really critical one is that it really does involve a lot of work to figure out who are these taxpayers. we have no impression everyone will gain from technology. what we are trying to do is get

ahead of such a low-tech response that we are inefficiently using people -- like the "washington post" article where trained divisors were giving out deli line tickets for people trying to get into a tax assistance. we really do have to figure out a migration strategy and the idea is to bring up the people who are really needed. the hope is we can then get people on the things that do matter. it would be a major long-term investment. >> this is what worries me -- i