IRS News Release  
May 11, 1995

Archer Announces Hearing on
Replacing the Federal Income Tax

Congressman Bill Archer (R-TX), Chairman of the Committee on Ways and Means, today announced that the Committee will hold three days of hearings on replacing the Federal income tax. The hearings will take place on Tuesday, June 6, Wednesday, June 7, and Thursday, June 8, 1995, in the main Committee hearing room, 1100 Longworth House Office Building, beginning at 10:00 a.m. each day. The Committee will receive testimony from invited witnesses.

BACKGROUND

The first Federal income tax was enacted as part of the Revenue Act of 1862 to finance the Civil War. However, the modern income tax was enacted as part of the Revenue Act of 1913, following the ratification of the 16th Amendment. The income tax had a maximum rate of 7% (for taxable incomes over $500,000).

Since 1913, the Federal income tax has steadily expanded, as has public dissatisfaction with it. Major revisions to the Internal Revenue Code occurred in 1938, 1954, and 1986, but significant revisions occur on nearly an annual basis, and minor amendments to the internal Code are generally made several times a year. this torrent of tax legislation has been followed by a flood of tax regulations, tax forms, and tax litigation.

The cost of complying with the Federal income tax has grown with the complexity of the tax. The cost of complying with Federal taxes is generally considered to be well in excess of $100 billion annually. This compliance burden is particularly brutal for small businesses.

Frustration with the current Federal tax system is widespread. The current Federal income, estate, and gift taxes treat savings and investment too harshly. Many aspects of the current tax code place American workers and businesses at a competitive disadvantage. All the various rules in the tax code have not stopped widespread tax avoidance by the underground economy.

In announcing the hearings, Chairman Archer stated, "I am committed to tearing the income tax out by its roots. If we don't tear it out by the roots, I am afraid it will grow back just as tangled as it is now. Therefore, I intend to have the Committee on Ways and Means carefully examine alternative tax systems that would replace completely the current income, estate, and gift tax system. However, alternative tax systems must not be measured simply against the current tax system. That's too easy. Instead, all of the proposed tax systems considered by the Committee should be measured against four goals: (1) Is it easy to comply with and does it reduce the role of the Federal Government in our lives; (2) Does it encourage greater savings and investment; (3) Does it improve the international competitiveness of American workers and businesses; and (4) Does it pick up revenue from the underground economy and others who currently do not comply with the tax laws? I believe that a broad based tax on consumption best meets these goals, and every proponent of a new tax system should be prepared to explain how that tax system meets these four goals."

WAYS AND MEANS COMMITTEE

FOCUS:

This hearing will review the problems with the current Federal income, estate, and gift taxes and examine various alternative tax systems, including consumption taxes, a flat tax, and the Unlimited Savings Account tax proposal.

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

Any person or organization wishing to submit a written statement for the printed record of the hearing should submit at least six (6) copies of their statement, with their address and date of hearing noted, by the close of business, Thursday, June 22, 1995, to Phillip D. Moseley, Chief of Staff, Committee on Ways and Means, U.S. House of Representatives, 1102 Longworth House Office Building, Washington, D.C. 20515. If those filing written statements wish to have their statements distributed to the press and interested public at the hearing, they may deliver 200 additional copies for this purpose to the Committee office, room 1102 Longworth House Office Building, at least two hours before the hearing begins.

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