try to balance the burden and the benefit for the changes in the Tax Code.

Mr. RYAN. OK. In your role, though, wouldn't it-what I am trying to get at is, we heard Mr. Rossotti's testimony with respect to paperwork reduction. OMB-it is OMB's role to find other recommendations, maybe to check on the work. Why hadn't OMB come up with a separate recommendation for the IRS, or is there a history there that you can shed some light on to this, why there was no recommendation?

Ms. LEE. I don't believe there is a specific history, but I would be glad to get the details for you.

[The information referred to follows:]

With reference to your two questions about the Internal Revenue Service, OMB works with the agencies, including Treasury, to ensure that there is a continued focus on reducing information collection burdens, increasing the productivity, efficiency, and effectiveness of Federal programs, and balancing the practical utility of information collections against the burden imposed.

Federal agencies face difficult challenges in reducing burden - data collection is critical to agencies meeting their program responsibilities and new statutes require additional information collection. The Taxpayer Relief Act of 1997, for example, increased reporting burdens by over 64 million hours in FY 1998 and over 92 million hours in FY 1999 (as of December 1998). Moreover, there are factors outside the control of agencies that increase burden. OMB has worked with the agencies to meet these challenges, but more work needs to be done.

Fortunately, Treasury has undertaken a number of burden reduction initiatives that we can build on. IRS, for example, revised the requirements for the IRS Form 1040-ES, Estimated Tax for Individuals, doubling the threshold for having to file this form from $500 estimated taxes to $1,000. This change reduced burden by 3.7 million hours. IRS also continues to report increased use of its popular e-file system, including electronic filing and Telefile. IRS expanded eligibility for the 941 TeleFile program, which allows employers to report employees' wage and tax information by touch-tone phone instead of on the paper Form 941, Employer's Quarterly Federal Tax Return. An additional 300,000 businesses used the 941 TeleFile program last year, reducing burden by almost 14 million hours.

IRS also plans to replace its current burden estimation methodology with a new measure of compliance burden that will achieve a number of important goals. These goals include (1) measuring compliance burden more comprehensively and accurately by, for example, accounting for electronic filing methods; (2) providing a tool to reduce compliance burden during the development and analysis of legislative and administrative proposals; and (3) providing a tool to explain current levels of taxpayer burdens and the changes in those burdens due to administrative or statutory changes. We plan to work closely with Treasury, in its planning for FY 2000 and beyond, to build on this and other important initiatives so that more burden reduction can be achieved.

Mr. RYAN. OK. One thing I did want to quickly ask you, since the HHS is expected to levy the third largest paperwork burden on the American public, why did OMB accept the Department of Health and Human Services, the act of not identifying any specific paperwork reduction accomplishments in 1999?

Ms. LEE. We are working with HHS. They have some increases. In many cases, that is because they have some key legislative initiatives: they have the Prescription Drug Marketing Act; they have the Health Insurance Portability and Accountability Act; they have the Personal Responsibility and Work Opportunity Reconciliation Act; and the Medicare reform initiatives. So those added burden, and now we are trying to again balance that burden and responsibility and find out what reductions can be made to offset the increased burden.

Mr. RYAN. So we shouldn't pass so many laws, you are saying. Ms. LEE. I will leave that up to you to decide.

Mr. RYAN. Ms. Lee, I have a question from Chairman Horn. Chairman Horn asked Commissioner Rossotti about the President's failure to submit nominations for the IRS oversight board. Mr. Rossotti did not know why no names had been submitted. Do you? Ms. LEE. No, sir, I don't; but I, again, would be glad to look into that and tell you if we have any knowledge.

Mr. RYAN. If you could, and if you could give that to Chairman Horn, I sure would appreciate that.

Ms. LEE. I will do that.

[The information referred to follows:]

The President is firmly committed to making the strongest possible appointments to the Internal Revenue Service Oversight Board. The individuals who serve on this Board will have access to sensitive tax information and play an important role with respect to the Internal Revenue Service. The background review, which includes a review of financial information and tax history, is thorough and takes time. The Administration is moving as expeditiously as possible and intends to make these appointments soon.

Mr. RYAN. I would like to ask Mr. White another question from Chairman Horn. Could you touch on why the IRS has failed in its efforts in the past, and if you feel this effort is proceeding in a way that is different?

Mr. WHITE. In terms of its efforts to modernize?

Mr. RYAN. Yes, I am sorry, in terms of modernization.

Mr. WHITE. I think that what IRS is doing right now is a much larger effort than it has attempted in the past. One of the points that we made repeatedly in our past work is that, systems modernization, which is an area in which IRS has had a number of problems over the past years and wasted a lot of money, needs to be done in an integrated fashion with business process modernization; and the current commissioner is operating that way. They are in a planning phase right now where they are trying to do both. It is ambitious and it increases the risks, but I am not sure that there is an alternative to it.

Mr. RYAN. You do think it does increase the risk for failure?

Mr. WHITE. It is a huge undertaking; and therefore, it is risky. But I don't think there is an alternative. If you are going to change IRS and the way they do business, the way they operate with the American taxpayer, you have to modernize both their business

Mr. RYAN. OK. Well, thank you very much. I appreciate the panel attending.

We will now call our next panel. We will begin with Sydney Hoff Hay from Phoenix, AZ; Kay Whitehead from Muncie, IN; William Lindsay, who is the president of the Benefit Management and Design, Inc. of Denver, CO; and John Nicholson, owner of Company Flowers in Arlington, VA.

Ms. Hoff Hay, we would love to hear from you first.

STATEMENTS OF SYDNEY HOFF HAY, PHOENIX, AZ; KAYE WHITEHEAD, FARMER, MUNCIE, IN; WILLIAM N. LINDSAY, PRESIDENT, BENEFIT MANAGEMENT & DESIGN, INC., DENVER, CO; JOHN NICHOLSON, OWNER, COMPANY FLOWERS, ARLINGTON, VA

Ms. HOFF HAY. Mr. Chairman, thank you for asking me to testify before this subcommittee. I am here because I am a patriotic American. I don't really want to be here, but when a staff Member of the U.S. Congress calls and asks you to appear in these august halls and participate in this process, you feel it is your duty as an American to respond. So I am here to tell you my story.

May I first express to you that I am not a tax protester, not by any stretch of the imagination. This is not even about paying taxes. Now, I have been a tax activist at the State level. I have a history of that. I organized an initiative at the State level to require a twothirds majority for tax increases in Arizona. I worked on that with Congressman John Shadegg. It was successful. I have other of those types of successes to my credit. But this is not even about that. This is about the fact that I am a taxpayer.

I am self-employed. Now, I have two assets which enable me to make a living as a self-employed consultant. No. 1 is my knowledge and my abilities. No. 2 is time. The IRS has zapped a whole lot of my time over the recent past. There is a third thing: it is my creative energies and my enthusiasm for what I do, and that may be an even greater loss to the IRS.

Now, this past weekend, upon returning home from a grueling business trip, a very difficult trip indeed, the latest communication appeared in our mailbox from the Internal Revenue Service. Now, when you see that envelope, you immediately panic, your blood pressure goes up. You go, oh, my gosh, what now, you have this heavy sigh, and then the "what now" was an unexpected bill from the IRS. It was a bill when I opened it for 16 cents.

Now, can you imagine that? They sent this bill with a 33 cent stamp at a cost of how much time and computer time and staff time, and I don't even know how you write a 16 cent check; and I have to respond and take my time and my 33 cent stamp in order to comply. This is just another invasion of my valuable time. But more than that, what is so annoying is this invasion of my precious few moments in my home with my family to deal with this after a long and grueling business trip.

Now, how did this come to happen? Well, a few weeks ago I received a bill, an unexpected bill from the IRS for about $54 which they said I owed from an underpayment of my daughter's 1996 taxes when she was 18 years old and still living at home. Now, when you get a bill for $54 from the IRS, you do what any normal

person would do. You pay it, because you don't have time to take out of your life to even look into why you are getting the $54 bill. I still don't know why, but I paid it. Now, you know, it would have cost me hundreds of dollars in time, let alone my enthusiasm and energies in order to even look into it, so I just paid it. Now, that latest example, the $54 and the 16 cents may seem very trivial. But it came to me at a time that came after a very grueling experience that I had over the last year with the IRS. Here is what happened.

After an examination of my husband's and my 1996 tax return, which took about 4 months, an amount we owed as a result was agreed upon. It was settled upon. A large portion of that amount was agreed that it was deductible. It is just that I paid those expenses in December 1996, and the IRS said they really belonged deducted in 1997, so they were deductible; but what I needed to do was write a very large check to the IRS and then get my accountant to refile 1997 and a large portion of that check would come back to me. So December 3 of that last year I wrote a large check to the IRS for the precise amount. We hand-delivered it, datestamped it in at the IRS Phoenix office. Then our accountant redid the 1997 return, as had been suggested; and it requested a refund. Now, a month or so later we received a bill from the IRS. It was for the amount of the check that we had written in December. Now, it said in there, if you have already paid your tax, you can ignore this notice. Well, we had already paid it, date-stamped it in. We had the proof. We ignored the notice. A couple of weeks later comes a certified letter from the IRS with the words, we may seize your paycheck, bank account, auto, other property. We can file a notice of Federal tax lien, plus there was $200 in penalty and interest for a check we had written. We proved it. We showed them the date stamp. Uh-uh. The burden was on us. We had to prove it to them by going to our bank, getting a copy of both sides of the check, and then, so that they could find out where they had applied our money, to whose account. More time lost, more creative energy spent. Eventually they were satisfied, I think up to this point, I understand, but then came the next blow. That certified letter, another one, came in the mail, denying the refund for 1997.

So now I realize I am just about out of time, but I would like to go into I had one employee up until about a month ago. I had one employee. I don't have any employees right now, so I hope that you will give me an opportunity to talk a little bit about the payroll tax burden for one employee. Thank you.

Mr. MCINTOSH. Thank you, Ms. Hoff Hay. Certainly in the questioning I will make sure that we get that into the record.