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Stop The Tax Code Insanity

By Tom Bevan

Every year right around this time Americans come face to face with a harsh reality: our tax laws are insane.

Yesterday I gathered up a bundle of papers - you know, the ones marked "important: tax document enclosed" that start trickling in through the mail during the first few weeks of the year - and took them over to our tax preparer's office. There is something positively nuts about the amount of time and effort it takes these days to calculate how much money you owe the government.

It's not about paying the taxes themselves. At this point we're all resigned to the fact that paying taxes is a part of life - though like most people I would generally prefer to pay as little tax as possible to the federal government. My gripe is with the process itself, and the fact that I have to hire someone and pay them hundreds of dollars to help me wind my way through the mind-boggling labyrinth that passes as today's tax-return.

Just how burdensome is the current U.S. tax system? Consider the facts: the Office of Management and Budget estimates Americans will spend 6.4 billion hours and $265 billion this year alone complying with the obligations of a tax code that now contains more than 66,000 pages of rules and regulations. More than 6 in 10 Americans now hire someone to help prepare their returns every year.

Not to be redundant, but this is crazy. The current system is not only suffocating and massively inefficient, but it's also riddled with complicated clauses, deductions and loopholes that put the average taxpayer at a disadvantage.

Despite the obvious need for a simpler, fairer system, tax reform has gotten surprisingly short shrift from a Republican-controlled House of Representatives. Republicans have been batting around ideas for a flat tax and a national sales tax since 1994 but have never come to a consensus on what shape tax reform should take.

In the meantime, things have only gotten worse for taxpayers. In the last eleven years the number of pages of rules and regulations issued by the Internal Revenue Service has shot up 60.9% and the number of pages contained in a standard Form 1040 instruction book has ballooned to 142 from 84. Even the most recent round of tax cuts passed by the House under President Bush have added to the complexity of the tax code with various sunset provisions and phase outs. The truth is that most Americans show up dutifully each April to comply with their obligation to pay taxes without having a clue what that obligation is or how it changes from year to year.

In January 2005, President Bush tried to add some momentum to the movement for tax reform by establishing an advisory panel to study and recommend options for making the tax code "simpler, fairer, and more conducive to economic growth." The panel's final report, issued on November 1 of last year, was a serious disappointment, dismissing the idea of a value-added tax or a national sales tax and making no mention of a flat tax.

Instead, it recommended two plans offering some simplifications to the current system like reducing the current number of tax brackets from six to four (or three) and doing away with the Alternative Minimum Tax. Any simplification would be a positive, of course, but on a scale of one to ten with zero being no tax reform and ten being the most innovative reform imaginable, the panel's recommendations seem to rank about a three.

It's amazing that the United States government - with all three branches currently controlled by Republicans, no less - continues to burden its citizens and its economy with such a Byzantine tax system when countries around the world with much less of a history of tax freedom than America are reaping the economic rewards of simplified tax codes.

We can argue about tax rates and we can also argue about how "progressive" our tax code should be. One thing that is beyond dispute, however, is that the current system is driving Americans crazy and needs to be reformed and simplified. Voters will reward the party that can make that reform happen.

Tom Bevan is the co-founder and Executive Editor of RealClearPolitics. Email: tom@realclearpolitics.com

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