Finding ways to simplify tax code should be priority

Posted: Jan. 10, 2013 10:34 am Updated: Jan. 31, 2013 2:15 pm


THERE WAS a time when many Americans sat down at their kitchen tables with a pencil and a calculator to figure out their taxes. Those days appear to be long gone, however.

National Taxpayer Advocate Nina E. Olson, an independent government watchdog, told Congress in her annual report this week that most taxpayers would be lost without outside help. She said nearly 60 percent of filers will pay someone to prepare their taxes this year, while another 30 percent will use commercial software to figure out how much they owe the government.

The reason? Congress has made nearly 5,000 changes to tax law since 2001, an average of more than one per day. The tax code now stands at nearly 4 million words -- or roughly 10 times the size of the Bible.

Understanding and paying taxes should not be so difficult. There has to be a better way.

Olson contends our country's tax law has become so cumbersome and complicated that individuals and businesses spend more than 6 billion hours a year complying with filing requirements. That, she said, is the equivalent of 3 million people working full-time, year-around.

In her report, Olson ranked complexity as the most serious tax problem facing taxpayers and the Internal Revenue Service. She wants lawmakers to finally follow through with promises to overhaul the nation's tax laws, making them simpler, clearer and easier to comply with.

"On the one hand, taxpayers who honestly seek to comply with the law often make inadvertent errors, causing them to either overpay their tax or become subject to IRS enforcement action for mistaken underpayments," Olson said. "On the other hand, sophisticated taxpayers often find loopholes that enable them to reduce or eliminate their tax liabilities."

Lawmakers repeatedly have promised to make overhauling the tax code for the first time since 1986 a top priority this year, but negotiations to avoid the fiscal cliff showed that Democrats and Republicans have yet to find common ground on tax policy.

Many lawmakers say the best way to simplify taxes is to eliminate or reduce some tax credits, exemptions and deductions and use the additional revenue to pay for lower income tax rates for everyone.

However, there is no consensus on which tax breaks to scale back. That's because Americans like their credits, deductions and exemptions -- the provisions that make the tax law so complicated in the first place -- and lawmakers do not want to anger constituents.

Until comprehensive tax reform finally becomes a reality, set aside plenty of time to prepare your tax returns. April 15 is just 95 days away.