Treasury to Simplify Tax Code

Treasury Secretary Timothy Geithner told a House subcommittee that he intends to simplify the Tax Code and devote more money to IRS enforcement.

In testimony before the House Appropriations Committee’s Financial Services Subcommittee, Geithner defended what he called a “modest increase in funding” in the budget for the Treasury’s Office of Tax Policy and “more substantial increases” to expand IRS enforcement activity and to improve its information technology.

“The president has asked Treasury to redesign and bolster enforcement of our Tax Code so that it supports growth, sets the stage for our return to a sustainable fiscal path, and accomplishes these goals in a manner that is fair, efficient and supportive of our society’s broadest goals,” said Geithner (pictured) in his prepared testimony.

He cited new policies to curb the use of offshore tax havens, close the international tax gap, remove tax incentives for companies to shift jobs overseas, and “replace these incentives with ones that encourage creation of jobs at home.”

Geithner wants $332 million to go to new IRS enforcement efforts, including $128.1 million to improve international tax compliance. The balance of the funds would be used to support 755 employees to increase examinations of tax returns for businesses and high-income individuals; 300 employees to expand the IRS document-matching program, which compares tax returns to other forms such as W-2s and 1099s; and an additional 491 employees to improve collection operations and build two new IRS automated collection center sites.

The Office of Tax Policy is working with Congress to flesh out initiatives in the budget to enhance retirement security and savings, and to design the auction mechanisms to implement the administration’s proposed greenhouse gas cap-and-trade program. At the moment, the Office of Tax Policy’s career staff includes 30 lawyers and 44 economists, as well as support staff, for an overall staffing level of 93, which is lower than its usual complement of over 100 professionals.

The fiscal year 2010 budget would increase the office’s budget by $4.9 million to add 15 full-time-equivalent positions in order to increase overall staffing to 108, representing a return to historical norms, according to Geithner. The additional staff would perform analysis and revenue estimates for new policy proposals, conduct research for congressionally mandated studies and other matters, and develop regulations and guidance for new legislation.

During questioning from representatives, Geithner also pledged to do more to simplify the Tax Code.  “We think there are important opportunities to simplify this complicated Tax Code,” he said. “In the corporate tax area, there are ways to reform and make that simpler as well.”

He noted that the recovery act and the president’s budget contained a list of priorities to make the Tax Code more fair and balanced, along with incentives to encourage savings and investment over the long term.

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