Nearly 100 million Americans will have filed their 2013 tax returns by today, and a large percentage of them — about one in five — will have filed at the last minute, during the week before tonight’s deadline. That statistic speaks less to the tendency of people to procrastinate than to the maddening complexity of the tax system itself.
The intricate nature of the tax code has bred a kind of chronic national exasperation: even people who are due sizable refunds are not inclined to tackle the filing process until they absolutely have to. A large number of public opinion surveys have shown majority interest in reforming the tax system with an eye toward simplification. Most pundits give little chance of any meaningful reform happening in the near future.
Proposed tax reform efforts have become tied to larger battles over fiscal policy, budget priorities and — most particularly — reform of large-impact Social Security and Medicare programs. But aside from discussions over revenue and spending, and of appropriate tax rates for corporations and individuals, there is a perennial interest in pruning the tax code’s labyrinthine mass of regulations and requirements.
The IRS’s own Taxpayer Advocate Service points out that tax code complexity results in taxpayers devoting “excessive time to preparing and filing their returns.” It constitutes 3.7 million words! The IRS says taxpayers and businesses annually spend 5.6 billion hours in complying with filing requirements. The government is also concerned about the ability of professional tax preparers to file accurate returns, and the IRS has approached Congress about ways to better regulate the tax preparation industry.
A simper solution would be a simpler code. There are proposals in Congress that could accomplish the task. The House Ways and Means Committee in February introduced an outline for reform that would reduce corporate rates from 35 to a more reasonable 25 percent. It would contain three rates for individuals in a streamlined system allowing 95 percent of all taxpayers to use a standardized filing form including a standard deduction. It would also do away with the Alternative Minimum Tax, a feature that has tended to compound the complexity. The bill preserves the tax-deductibility for charitable contributions, although it limits such deductions to 50 percent of a taxpayer’s adjusted gross income. There are many sound public policy grounds for allowing charitable contributions to be deducted.
The measure offers a means to a political compromise that could result in satisfactory reform. It was just such a compromise that led to the Tax Reform Act of 1986, passed by a Republican Senate and a Democrat-controlled House and signed into law by Republican President Ronald Reagan. The history lesson here is that the policy inertia brought on by ideological disagreement over the particulars of tax policy can indeed be overcome.
We encourage bipartisan efforts to forge such a compromise, and to do so in a timely fashion. With the arrival of every April tax filing deadline, it becomes increasingly clear that reforms leading to a less perplexing and intimidating system are deserving of a higher priority among leaders in Washington.
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