Mr. COOPER. It may be presented up until next Saturday. (The following letter was received from Mr. Angell:) DAVIS, POLK, WARDWELL, SUNDERLAND & KIENDL, Hon. ROBERT L. DOUGHTON, Chairman, House Ways and Means Committee, House Office Building, Washington 25, D. C. DEAR CONGRESSMAN DOUGHTON: On behalf of my colleagues, Mr. William A. Sutherland, Mr. Mark E. Richardson and myself, I wish to thank the members of the Ways and Means Committee for the opportunity afforded us to appear before the committee last Wednesday in support of the principles of H. R. 6127, introduced by Mr. Curtis of Nebraska. The committee very generously afforded us an opportunity to file a written statement in support of our views, but inasmuch as the major aspects of the problem were covered in the oral statements and the time now available does not permit the preparation of a comprehensive and considered statement, we have concluded not to submit a written statement at this time. We shall, however, hold ourselves available in case the committee should desire anything further from us either orally or in writing and I trust you will feel free to call upon us at any time, inasmuch as all of us are deeply interested in sound tax administration enforcement. Very respectfully yours, MONTGOMERY B. ANGELL, Mr. ANGELL. I have already gone on more or less official record in favor of this suggestion. In 1948 the Hoover Commission was created and John Haynes of New York City, at one time Under Secretary of the Treasury, was designated as chairman of the subcommittee to make recommendations with respect to the Treasury and the Bureau of Internal Revenue. Mr. Haynes asked Mr. William Sherwood and me-Mr. William Sherwood was once Deputy Commissioner of the Bureau-if we would prepare a report covering the administration of the Bureau of Internal Revenue and its organization. This we did, and perhaps I can best set forth my views to the committee by reading certain excerpts from this report which was prepared and submitted to Mr. Haynes in October 1948. I shall read the introductory paragraphs and only two or three other paragraphs which bear directly on the matter which is under consideration. [Reading:] Our system of taxation is based upon voluntary returns and self-assessments subject to audit and examination to ensure equality between taxpayers and compliance with the law. If such system is to be successful, the cardinal principle of enforcement must be a strict adherence to the requirements of the statutes, honestly and fearlessly administered, regardless of how the chips may fall. The Bureau stands as the guardian of the citizen as well as the arm of enforcement, collecting only what is owing under the statute and not a penny more. All Bureau and field personnel from the top levels down should be indoctrinated with this cardinal principle. A policy of overemphasizing additional revenue leads only to taxpayer resistance and a rationalized evasion. Official denial is not sufficient. The tone of enforcement should be improved and the rule of equality between Government and taxpayer made a reality. I think those precise considerations obtain today as well as in 1948. Then we turn to our recommendations. 1. An Independent Commissioner of Internal Revenue, Free From Treasury Interference in the Administrative and Enforcement Matters. Due to everincreasing Treasury interference, the Commissioner has lost control of many major activities falling directly upon him as the Bureau head. Even the Commissioner's annual report was made subject to approval by subordinate employees of the Treasury. This condition should be rectified. The Commissioner should be the supreme authority in Bureau administration and enforcement, subject only to general responsibility to the Secretary of the Treasury as the cabinet officer under whom the Bureau is placed for organizational purposes. His power should be commensurate with the duties which devolve upon him. He should be free from Treasury interference in all administrative and enforcement matters. To this end the existing advisory tax groups which have grown up within the Treasury, such as the legislative counsel and the tax research division should be abolished and the work now performed by these groups should be placed in the Bureau under the Commissioner's supervision and control. Many provisions of the existing statutes now invite development within the Treasury of supervisory groups to review many of the Commissioner's actions. This increases the cost of Government and at the same time divides the responsibility. The administrative and enforcement problems resulting from our present broad tax base and high rates require that the Commissioner and the staff be free from supervision of Bureau functions. As an example, the present requirement that offers in compromise and statutory closing agreements must be approved by the Secretary of the Treasury or the Under Secretary should be eliminated and the Commissioner's action should be made final. Our second recommendation covers the relationship of the Chief Counsel of the Bureau to the Commissioner. Prior to 1934 the general counsel for the Bureau was the Commissioner's law officer, responsible only to the Commissioner. In 1934 the title was changed to Assistant General Counsel for the Bureau, usually called the Chief Counsel, and the Chief Counsel and his staff were placed under the supervision and control of the General Counsel for the Treasury Department. This created an analogous situation. The Chief Counsel, as the Bureau's principal law officer, exercises wide powers in the interpretation of the tax laws and the promulgation of Bureau regulations and Treasury decisions, and determines largely the Bureau policy respecting tax litigation. As the Bureau's principal law officer, he should be responsible directly and only to the Commissioner of Internal Revenue. We then made all-told some 12 recommendations. The balance of which I will not stop to read, but I should like to recite the conclusion now before you. The major objective of the foregoing recommendations is to make the Bureau of Internal Revenue self-contained and as independent as possible from the influences of changing political administrations, realizing at the same time that it must be subordinate to a major department of Government under a cabinet officer for organizational purposes. With the exception of the Commissioner, the staff of the Bureau, including the collectors of internal revenue and two assistant commissioners, preferably should be career men. In framing the revenue laws the Congress can act wisely only if it has to assist it the impartial views of experienced Bureau personnel. Our scheme of taxation, affecting as it does some 40 million taxpayers, should have permanence and stability uninfluenced so far as possible by the changing political philosophies as different administrations come into power. Mr. MILLS. Does that complete your statement? Mr. ANGELL. No, I have not. I am about to complete it. So as this report indicates, I am already on record in favor of creating an independent Bureau insofar as administrative and enforcement matters are concerned. The bill which Mr. Curtis of Nebraska introduced, H. R. 6127, in the main is directed toward carrying out precisely that end. Accordingly, I most heartily endorse the principle lying behind H. R. 6127 and commend the principle to the consideration of this committee so that necessary legislation may be framed to carry it out. Now, as I see it, there are three major reasons for creating an independent bureau: First, the larger the responsibility which is placed on the bureau head, the more attractive that office will be and the more likelihood there will be of obtaining to fill that position men of outstanding ability and unquestioned integrity; second, as I see it, with the bureau as a self-contained independent unit, we will attract more able career men to staff the bureau, particularly in Washington. That is a very important matter both from the standpoint of the Government and from the standpoint of taxpayers; third, and perhaps of the greatest importance, a bureau independent of Treasury influence, will insure a permanence and stability in administration and enforcement, uninfluenced by the changing political, social philosophies of different administrations. After all, gentlemen, the purpose of the Bureau of Internal Revenue is to collect the taxes imposed by law as easily and with the least possible to hurt the taxpayer. It is the collecting arm of the Government. The Treasury is the spending arm of the Government. Accordingly, it seems to me that if administration of the revenue laws and their enforcement can continue uninterruptedly regardless of what administrations come and go, the tax laws will be placed on an equal, fair, honest basis, uninfluenced by the political considerations which may arise in connection with changing administrations. Now, let me say in closing that it seems to me that in order to insure proper administration and enforcement of our revenue laws, the top man and the top men of the Bureau should be in a position to give their whole attention to tax administration and to the problems involved in the determination, assessment, and collection of taxes. Administrative policy should, it seems to me, be made by officials who devote their whole attention to such matters. Under a system such as we have today such men are subject to supervision and control by a separate department, the Treasury, are readily overruled by treasury higher-ups, whose heavy duties in other fields do not fit them for any such drastic and important supervisory control. Mr. COOPER. Does that complete your statement? Mr. ANGELL. Yes. Mr. COOPER. All right, we will be pleased to hear the next witness. Mr. SUTHERLAND. I think it might be helpful if I take just a minute to trace the history of my own thoughts in connection with this matter over the past 10 or 15 years. There has been a discussion by a number of people of this subject during that period and many of them have discussed the subject with me, particularly when I was chairman of the tax section of the bar association, and have suggested that the bar association make the subject of Mr. Curtis' present bill a project of the American Bar Association. My reaction at first was that the complaints which these people had arose out of the fact that they differed in philosophy from the people in the Treasury who happened to be taking such a large part at the particular time in guiding the Bureau. I felt that you were no more likely to have people whose views would accord with your own if you had an independent agency than if you left matters as they were. As I considered the problem further, particularly in the light of the expanding tax base and the greater administrative problems cast on the Bureau, I have come to feel that I was mistaken in my first reaction. The present type of organization which places the Bureau under the Treasury itself breeds many of the difficulties of which we complain and these difficulties would be less likely to occur if the Bureau were established as an independent agency. I would like to develop that thought for just a minute. What is the principal task of the Secretary of the Treasury? He is usually chosen from the banking profession. His problems are dealing with money, with borrowing, and with the fiscal policies of the Government, and in the tax field, with the larger policies as to how much money should be raised by taxes and how much by borrowing. Also, he has seen fit to advise Congress, and I think properlywhether I might agree with his particular recommendation or notas to how he thinks the economy of the country will best be served by the type of tax to be imposed and as to where the burden should fall. There is no feeling on the part of anyone that the Secretary of the Treasury and the experts who serve under him, should be deprived of any of their prerogatives in that field. On the other hand, the people whom he employs to advise him in these very important fields are essentially, to a very considerable extent, theoretical people. That has certainly been true in the tax field. I may say that he has had on this staff some of the most competent theoretical people in the country. While I do not always agree with the views of the Secretary, I have agreed with him in a great many situations, even though some of the more conservative members of the bar have felt that he was wrong. But theoretical men are not by training or nature qualified to pass final judgment on how the internal revenue laws which the Congress finally enacts should be administered. That is completely different from the policies behind the recommendations which the Treasury makes or the laws which the Congress enacts. Now, the people who would be capable in the administrative field are not likely to be the sort of people who would ever be chosen for the job for which the Secretary of the Treasury employs the people that he has directly under him in the Treasury. Administration requires experience in dealing with people. It is a system of trial and error, of finding out what works and what does not, what satisfies the public in their relations with the Government and what does not satisfy them. It is a tremendous personnel job and there is nothing that takes the place of experience in that field. Now, by having the final word on these purely administrative problems placed not in the Commissioner of Internal Revenue and the people under him but rather in the hands of the theoretical people whom the Secretary of the Treasury has employed primarily for other purposes, we have lost the benefit that I am sure we could have by setting up an independent department to administer these laws which you gentlemen enact. There is one other matter which I think is important. I think there would be much less tendency on the part of an independent Bureau of Internal Revenue to read into the tax laws which you enact interpretations which you did not intend. I think that if the primary responsibility for interpretation and administration of the revenue laws were in the Commissioner of Internal Revenue, you would find the Commissioner of Internal Revenue seeking very assiduously to follow exactly what the Congress intended. It is the Congress alone that has the right and duty under our laws to enact tax policy. You would find that the Commissioner would follow the congressional intent until it was changed by statute. None of us would ever deprive the Treasury, or anyone else in Government, from coming to the Congress and making any recommendations on any subject. However, under the set-up we propose you would look primarily to the Commissioner of Internal Revenue for information as to the administration and collection of taxes imposed by law. Under the present system we do not have the benefit of the kind of administration and the kind of administrative advice which Congress could receive and should receive if we had the sort of system which Mr. Curtis is suggesting. Now, I think I can say for Mr. Angell and myself that neither of us has considered the exact type of set-up for an independent Bureau of Internal Revenue. It is not settled in our minds whether it should be exactly what Mr. Curtis proposes. I do not believe that Mr. Curtis himself would feel his proposal should be accepted without the fullest public consideration. But I do think his bill in fundamental principle prescribes just what should be done. I hope that at the earliest moment the Congress will have a full hearing on this question and that we can have a full discussion of all of the details. I certainly thank you. Mr. COOPER. Does that complete your statement? Mr. CURTIS. Mr. Sutherland, does the gentleman with you wish to be identified and say something? Mr. RICHARDSON. Mr. Chairman, with your permission, since I have offered to assist in answering questions, should there be some, I should identify myself. The name is Mark E. Richardson, a certified public accountant here in the District of Columbia. I would like to make it clear at the start that I have had the privilege many times of representing before this body the American Institute of Accountants and offering official proposals for that body. My appearance today is not in that capacity in any way, and this bill has not been the subject of any official consideration by the American Institute, and I would prefer that there be no confusion on that subject. Mr. COOPER. Any further questions? Mr. CURTIS. Mr. Chairman. Mr. COOPER. Mr. Curtis of Nebraska will inquire.. Mr. CURTIS. Mr. Angell, you concur in the proposition that the fiscal policy, spending policies, how high our tax rate should be, the management of our public debt, those sorts of things should be retained in the Treasury Department? Mr. ANGELL. I do very definitely. Mr. CURTIS. Now, you feel that the administration of the laws after they are passed, dealing with the taxpayer, the setting up of regulations, the striving for a system with continuity of policy and a striving for a system of taxation under law, should be by an independent agency with full responsibility? Mr. ANGELL. I do; self-sufficient and self-contained. Mr. CURTIS. And you feel that the chief legal adviser to the Internal Revenue Commissioner or the Internal Revenue Commission, if it is more than one, should be someone selected by the Commission or Commissioner and responsible to him? Mr. ANGELL. I do or otherwise I do not see how such a legal adviser can properly fulfill his functions in advising the Commissioner. |