(Washington, D.C.) – Today, U.S. Senator Patty Murray questioned Treasury Secretary John Snow about Bush Administration proposals to privatize Social Security, impose new fees on Washington’s wine industry, and cut back on services that help taxpayers. Murray also questioned Secretary Snow about a series of troubled procurement projects. The discussion took place at a hearing of the Senate’s Transportation, Treasury Appropriations Subcommittee, of which Murray is the highest-ranking Democrat. The hearing was called to review the President’s FY 2006 budget proposal for the Department of Treasury.
Senator Murray’s opening statement follows:
Secretary Snow, I want to welcome you back to this Subcommittee. Since your last appearance, we’ve expanded our jurisdiction a bit, but I want you to know that your Department remains a priority for us and an area of deep concern.
The President’s Social Security Proposal
I know that you’ve been traveling around the country trying to drum up support for the President’s proposal to privatize Social Security. To me, breaking the promise of Social Security and putting millions of Americans at risk is wrong. I know that you and I aren’t going to reach an agreement on that today.
But I think we can both agree that this national conversation has shown many Americans just how important Social Security is. Today, more Americans understand how important Social Security’s guaranteed benefit is. More Americans know that Social Security helps – not just the retired – but also provides critical income for the disabled, for widows and for surviving children. And I think more Americans appreciate the stability and certainty of their Social Security checks as we’ve seen the stock market rise and fall like a roller coaster lately.
While I know we’ll have a chance to talk about Social Security and issues like the health of our economy and the strength of the dollar, I want to make sure this subcommittee attends to its central responsibility – reviewing the President’s budget for your department and reviewing how your department has spent the money Congress has appropriated.
So today I want to discuss what’s in this budget, including the new initiatives the Secretary wants to launch. I also want to talk about what’s not in this budget – the things the Secretary wants to terminate and the user fees the Administration wants to impose on American families and small businesses.
I especially want to discuss the Department’s continuing problems in managing major procurements. When it comes to addressing the agency’s physical and IT infrastructure, it’s clear that Treasury needs to do a better job in how it spends the dollars it collects from taxpayers.
Boosting Tax Law Enforcement
Let me start with what is in this budget request. The Administration is requesting a boost of more than $446 million for tax law enforcement activities. However, this boost will not signal a new historic high in IRS enforcement activities – far from it. As the IRS Commissioner told this committee recently, the agency’s enforcement efforts have been allowed to wane in the last few years. I’m encouraged that the agency now wants to reverse that trend. And since the IRS fails to collect between $250 – $330 billion each year from tax cheats, I would say that this reversal couldn’t happen soon enough.
Cutting Services to Taxpayers
While the agency is finally addressing something it’s allowed to languish for years, the way it’s addressing it troubles me. The Administration wants to pay for more enforcement by cutting direct services to taxpayers. The President’s budget would cut services that are essential in helping citizens comply with the tax laws. For example, your budget proposal would close as many as one out of every four Taxpayer Assistance Centers across the country; eliminate phone tax filing, which is used by more than five million individuals and businesses each year; shorten the number of phone hours that IRS personnel are available to answer taxpayers’ questions; discontinue tax law assistance through the internet; and cut outreach efforts to high-risk taxpayer groups. I don’t believe that these cuts are merited if they will only heighten confusion and hassle for taxpayers and, perhaps, even make the compliance problem worse.
Imposing New Fees on Washington’s Wine Industry
Unfortunately, funding for these basic taxpayer service functions is not the only thing missing from this budget. I am very concerned about the Secretary’s proposals to eliminate funding for many essential functions in the Alcohol, and Tobacco Tax and Trade Bureau. Instead of continuing to provide appropriated funding, the Secretary would impose new taxes on industry to pay for these functions.
Let me give you one example of great importance to families in my state. Over the past few years, the people in Washington state have built a world renowned wine industry through hard work, research, and creativity. These vineyards are providing jobs for communities that have struggled. They’re bringing tourists to many parts of our state, and they are helping our economy.
Over the past decade, wine has become a $2.4 billion industry to my state. Production has doubled, and now wine grapes are the state’s 4th largest fruit crop. Today there are more than 300 wineries throughout the state – nearly double the number in 2000. And Washington’s wine industry supports more than 11,000 related jobs.
Many of our wine producers are small, family-run vineyards. They should be encouraged and supported for the progress they’ve built with their own hands. Instead, this Administration wants to hit them with more taxes in the form of new user fees. Mr. Secretary, I can tell you that your proposal to fund the alcohol tax bureau with “user fees” is going to impose a hardship our small family-owned vineyards. Forcing vineyards to pay a fee just to get their labels approved will hurt new entrants into this promising market. We should be encouraging their success instead of putting up more barriers to their viability. This proposal is especially puzzling coming from an Administration that claims to encourage entrepreneurship and reduced tax burdens.
Major Procurement Problems
Finally, Mr. Secretary, I want to raise my concerns regarding the Treasury Department’s deeply troubled record in handling major procurements, especially IT services. We receive a continuing stream of reports from the GAO and the Inspector General regarding projects that are way behind schedule, that cost more than they should, or that are not adequately secure.
The Treasury Department has finally established its new human resource information system – known as “HR Connect.” That system cost taxpayers $173 million. A similar system at the Coast Guard cost one-seventh that amount. A similar system at the Agriculture Department cost less than one-tenth that amount.
The Department’s renovation activities are also a concern. The initiative to repair and restore the Treasury Building and its Annex has been badly mismanaged. The cost so far will soon top a quarter of a billion dollars. But for all that money work on the Treasury Building is still not complete, and the Treasury annex has not yet been touched.
Other examples of Treasury’s poor management of major projects abound. Just last week, we read in the paper about an employee tuition assistance program at the IRS. More than 60 percent of the funding has gone to overhead, and less than 40 percent went to actual tuition assistance.
Treasury’s efforts to procure a new secure communications system was recently slowed down because the agency failed to grant all the bidders access to the relevant information. As a result, the GAO sustained a bid protest.
And, speaking of the GAO, that agency informed us that, despite the progress the IRS has made in correcting information security weaknesses, more than half of the deficiencies identified three years ago are still not fixed. It’s been three years, and half the improvements still haven’t been made. And these aren’t minor issues. Some of the vulnerabilities that still exist include the opportunity for any employee at the IRS and elsewhere in Treasury to have easy, unauthorized access to sensitive information including filings under the Bank Secrecy Act.
In terms of the largest amount of taxpayer dollars lost, we could hold several days of hearings on the Business Systems Modernization program at the IRS. It might take that long to compare what has been delivered under that program compared to what was originally promised.
Mr. Secretary, I recognize that you personally cannot stay on top of each and every one of these programs. But when I look at these persistent management problems at your agency, when I look at taxpayer dollars being wasted, when I look at the rapid turnover and high number of vacancies at your agency, I have to worry whether there is anyone at home minding the store.
I know that we both agree that taxpayers deserve better. I hope that as we discuss some of these problems this morning you will be frank with us on how we can help you get some of these troubled programs under control.
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