Tuesday, April 15, 2008

Why We Have An Impossibly Complex Tax Code

(USATODAY EDITORIAL) As Americans approach another income-tax filing deadline, they are still burdened by an impossibly complex tax code that, with accompanying regulations, now consists of more than 60,000 pages.

The average person who prepares his or her own taxes spends 34 hours on a 1040 long form, according to the IRS. That's almost a full work week.

Of course, 84 million taxpayers, about 60% of the total, find the whole thing so daunting that they pay someone else to prepare their returns. This helps underwrite a $65 billion industry of tax preparation and related services, and it enables the wealthy to exploit the code's many artfully crafted loopholes.

Alas, few people in Washington seem to care about the taxpayer's plight. The last serious pruning of the tax code came in 1986; since then, it has grown like kudzu.

In his first three years in office, President Bush added new marginal rates, new deductions and a raft of temporary tax cuts. In 2004, a number of House Democrats, led by then-Minority Whip Steny Hoyer of Maryland, decided to criticize Bush for the impossible complexity of the tax code. But the call for simplification went nowhere.

Even another presidential election year hasn't generated much talk of tax simplification. The major presidential candidates all propose tax changes, but none sees simplification as an end in itself.

Their plans can be summed up as follows: Democrats Hillary Clinton and Barack Obama want to rescind Bush's tax cuts on upper-income Americans to help fund ambitious and expensive health care plans; Republican John McCain promises not to rescind the Bush administration's tax cuts.

Beyond that, each candidate's plan has some modest tweaks. Obama, for instance, wants a 0% tax rate on low-income seniors. Clinton proposes an expanded savings account plan. McCain seeks some tax changes for health coverage.

Nor is there much interest in tax simplification in Congress. An early effort to repeal one of the most vexing elements of the code — the alternative minimum tax — fizzled for the simple reason that it would have to be paid for.

The sad truth about America's current political culture is that it no longer looks at the tax code as a way of efficiently raising revenue to provide for the common good. If it did, it would not tolerate a system so complex and subject to manipulation.

Rather, the income tax has morphed into a way of appealing to broad demographic groups and narrow lobbies to achieve political and policy goals. Groups that have influence get tax breaks. Groups that don't end up paying, in dollars and in time.


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