January 18, 2009
BE LIKE MAVERICK:
Broken tax code snagged Obama's Treasury pick: The Geithner episode highlights the lunacy of a federal tax code that now runs more than 60,000 pages. (David Lazarus, January 18, 2009, LA Times)
Aside from the entertainment value of our likely next Treasury secretary either being ignorant of tax rules or being a tax cheat, the episode highlights the lunacy of a tax code that now runs more than 60,000 pages. More than 500 changes were made last year alone.The Internal Revenue Service's national taxpayer advocate estimates that the complexity of the tax code results in taxpayers spending about $193 billion a year complying with filing requirements -- the equivalent of 14% of all income taxes collected.
About 60% of taxpayers feel it necessary to pay a professional to handle their taxes, and another 22% purchase tax-preparation software like TurboTax. In other words, more than 80% of Americans pay each year for help with their taxes.
"The system is broken," said Gina DeRosa, a certified public accountant in Torrance. "Eighty percent of the country should not need help filing taxes."
Most tax-reform mavens will say any remedy should include at least three key components: fairness, sustainability and simplicity.
Fairness means we want people with more money to pay more in taxes -- a progressive system like we have now.
Sustainability means that any changes will either maintain existing revenue levels or increase revenue.
As for simplicity, well, that speaks for itself. And it's perhaps the most challenging goal of all.
When John McCain similarly stumbled over campaign finance rules he dedicated himself to cleaning up the system. Were Mr. Geithner to use his time in office to focus on tax simplification it would be well spent.
