November 22,2004

Finance Committee Jurisdiction Over Tax Issues

M E M O R A N D U M

To: Reporters and Editors
Re: Finance Committee jurisdiction over tax issues
Da: Monday, Nov. 22, 2004

On Saturday morning, Finance Committee staff for Sen. Chuck Grassley, chairman, found and took issue with language in the omnibus appropriations bill that would have given appropriations members and their staff access to confidential taxpayer records. Grassley’s Finance Committee staff members were not consulted about the provision and never saw it until they found it on their own.

Throughout the day, Grassley and Sen. Max Baucus, ranking member, and bipartisan Finance Committee tax staff made efforts to remove or otherwise nullify the offensive provision, but were rebuffed. No movement occurred until even more senators became intensively involved. Comments from appropriators in today’s media reports appeared to overlook the Finance Committee’s role asthe Senate committee with jurisdiction over tax policy, even as they acknowledged the provision wasa mistake and is rightfully being removed. On Saturday, as the Senate debated the omnibus, Grassleysubmitted the following statement into the floor record.

Floor Statement of Sen. Chuck Grassley
Saturday, Nov. 20, 2004

As I listen to the debate tonight about Sec 222, which invades the privacy rights of taxpayers,I would like to point out an important lesson in all of this. The lesson is that tax measures shouldbe left to the tax writing committees. Only the Finance Committee and the Ways & MeansCommittee have the jurisdiction and the technical expertise to write our nations’ tax laws. And taxlaws are technical. As Sec. 222 in this bill shows, you’d better know what you’re doing when youwrite a tax provision. You had better understand the history of the measure and all of itsramifications.

In the Finance Committee, we use great care in drafting our tax provisions, and we do it inan open manner. All members can see what we are doing and have a chance to understand why weare doing it, and to comment on it. But too often, the Finance Committee has to go through a riteof scrubbing Appropriations bills to remove poorly conceived and poorly drafted tax provisions thattry to sneak in at the dark of night.

It is not just Appropriations bills where this occurs. It happens on many other bills as well.Often, these provisions have been rejected by the Finance Committees as bad policy, only to turn upin an unseen attack on our Committee’s jurisdiction. As the bill shows tonight, it is not necessarilymembers that do this. It is sometimes staff who add an idea. This allows staff to bypass the scrutinyof the entire Finance Committee – 21 senior members of the Senate are deprived of their right to passjudgment on a tax measure. Let me give you some examples of what we have had to fend off lately.

Last week, we had to defeat an Appropriations proposal that would have cut off funding forfederal agencies that help the IRS obtain information about Americans investing in foreign countries.That measure would have undercut U.S. tax law enforcement and damaged our initiatives to combattax shelters. It would have damaged our international competitiveness and undermined our nation’sefforts to combat money-laundering and terrorist financing. I am confident that the proponents of thismeasure never knew about its broader ramifications. But that is what happens when tax proposalsevade the scrutiny of the Finance Committee.

Here is another example. Recently the Armed Services Committee sought to create a charityfor assisting servicemen and their families. On its face, this is certainly a good cause that we can allsupport. Unfortunately, the statutory language drafted by the Armed Services Committee had veryserious flaws and was unworkable under the tax code. It was only after significant time and energyby the Finance Committee, exerted after the fact, that we fixed something that shouldn't have beenbroken in the first place.

If members will learn to work with the Finance Committee, instead bypassing it, we canusually achieve the results you seek. Here is an example. The House Appropriations Committeetried to expand the definition of census areas for determining eligibility for a certain tax program.This provision was not agreed to by the Senate Appropriators. The provision was later passed in theJOBS bill. This highlights that we try in good faith to work with members who will work with theCommittee.

So let me send a very clear message. The controversy around this Appropriations bill shouldserve as a warning to all who would bypass the jurisdiction and expertise of the Congressional taxwriting committees. We work to defeat stealth tax measures not just to protect our Committee’sjurisdiction, but to protect the American people from bad ideas. In the Senate it is the FinanceCommittee, and only the Finance Committee, that has the experience, expertise, and seasonedresources to process tax laws for our nation. Members and staff should remember today’s events thenext time they are approached to insert a “harmless” tax measure into an unrelated bill.

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