Government Spending

Complex Inferiority

A simpler tax code would be fairer, more efficient, less intrusive, and less infuriating.


This year, for the first time in more than a decade, I ventured outside the reassuring realm of TurboTax while preparing my return, looking for a late-arriving form at the IRS website. It's scary out there.

Staring at bewildering forms and instructions, I flashed back to the days when I did my taxes by hand, based on my uncertain understanding of what was required, and hoped for the best—"the best" being a future free of audits, interest on back taxes, liens, fines, and prison. Although clever software has helped shield me from the infuriating, nerve-wracking complexity that the Taxpayer Advocate Service identifies as "the most serious problem facing taxpayers," it has not changed the underlying reality.

The federal tax code, which in 1913 could be published as a single 400-page book, today occupies some 72,000 pages. In the last 10 years alone, reports National Taxpayer Advocate Nina Olson (your designated friend at the IRS), "there have been approximately 4,428 changes to the tax code." The instructions for filling out Form 1040, which took up two pages 75 years ago, are 179 pages long this year.

No wonder that nine out of 10 taxpayers use software or professional preparers to do their taxes. Olson estimates that the process consumes 6.1 billion hours and costs $163 billion a year. "If tax compliance were an industry," she writes, "it would be one of the largest in the United States."

And what do we get for all this effort? Well, the federal government gets about $1.5 trillion in revenue (meaning that Americans pay 11 cents in compliance costs for every dollar they surrender). At the same time, according to the Joint Committee on Taxation, the government forgoes $1.1 trillion in credits, deductions, and exemptions that reduce people's tax bills.

The enormous magnitude of these "tax expenditures," the main factor driving the tax code's mind-boggling complexity, represents an enormous opportunity for reform. In December the president's fiscal commission estimated that eliminating all credits and deductions would make it possible to reduce the top individual and corporate rates, both currently 35 percent, to 23 percent and 26 percent, respectively, even while setting aside $80 billion a year for deficit reduction.

Tellingly, the commission immediately retreated from the idea of zeroing out tax expenditures, saying "the new tax code must include" child credits, the earned income tax credit, the exemption for employer-provided medical coverage, and the deductions for mortgage interest, charitable contributions, and retirement savings. This list includes some of the biggest tax preferences, which not only complicate the code but distort the economy.

The mortgage interest deduction, for instance, contributed to the recently burst housing bubble by driving up the cost of homes, benefiting builders, real estate agents, and homeowners at the expense of renters. The policy of not counting employer-provided health insurance as income feeds medical inflation by cutting off price signals to consumers. The deduction for state and local taxes (as well as the one for interest on municipal bonds) encourages state and local governments to spend more than they otherwise would.

Such preferences nevertheless remain highly popular, since their benefits are more obvious and immediate than the benefits of lower rates. "The dirty little secret is that the largest special interests are us—the vast majority of U.S. taxpayers," Olson writes. "We cannot pretend that broadening the tax base means eliminating someone else's tax break while preserving our own."

Here is another pretense that stands in the way of a simpler, fairer, more efficient tax code: the idea that politicians can improve our decisions by using tax preferences to encourage officially approved behavior, whether it's giving to charity, going to college, adopting children, investing in research, converting corn into fuel, or buying a house, a hybrid car, or a health insurance policy. It's bad enough that the government forcibly extracts a share of our income; it should not presume to direct the spending of the rest.

Jacob Sullum is a senior editor at Reason and a nationally syndicated columnist.

© Copyright 2011 by Creators Syndicate Inc.

NEXT: Amok Time

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  1. Simplify the tax code and you take away 90% of the promises candidates can make to voters. “If elected, I will give a tax credit to every working family who adopts and then deports an anchorbaby!”

    1. ^^this^^
      If you simplify the tax code, you take away the government’s power to use it to hand out goodies – it ain’t never gonna happen.

  2. The obvious winners from complex tax systems are the big corporations. Running a small business, one cannot afford the hordes of lawyers and accountants that can navigate the tax maze as well as the big companies. The left wingers no doubt will scream about the evil corporations and that government needs to create more taxes, and then they wonder why the big corporations are the doing even better than before.

    1. The tax code is the least part of the problem. In general,

      regulation –> artificial economy of scale –> bigger corporations –> more regulation

      It’s possible that Progressives are blind to this vicious cycle because it serves their need for an oppressor. If they were to actually de-fang the plutocracy, how then would they define themselves?

      1. A more charitable take would be that Progressives can’t separate themselves from the fight enough to see that their actions are self-defeating.

        Either way, this stupidity is fast resulting in economic monoculture.

      2. The US are flooded with bad regulations. Regulations like “you have to fill in 100 forms before you are allowed to sell your product” indeed lead to bigger corporations, and are supported by big corporations to push efficient small competitors out of the market.

        However, regulations like “you are not allowed to fire your female employee just because she did not want to suck your dick” do make sense.

        1. I’m not so sure. We start with sensible regulation and end up with oppressive nonsense, due to bureaucratic mission creep. Hire someone to punish the assholes, and they inevitably start treating everyone like potential assholes.

          It’d be better to simply punish the assholes after the fact (thru civil litigation, etc.), but we’ve become so risk averse that we keep trading in our freedom for the illusion of security.

          1. I don’t think that an after the fact condition of employment that you need to suck the employers cock should necessarily be subject to a regulatory agency, but it should be a tort.

            1. You mean “tart.”

  3. The quickest way to tax reform is to eliminate payroll withholding and make people write a check once a month. Not only does “clever software” mask the complexity of the tax code, payroll withholding masks the true amount that working people pay.

    And, FWIW, most paid preparers use software too. Turbotax is just the consumer version.

    1. Hell, eliminate withholding and then make people write a great big check once a year – the pitchforks and torches would come out pretty quickly when they saw what they had to hand over to .gov.

      1. Also, make Election Day the day after the tax deadline.

        1. It is interesting how they’re almost half a year apart…

    2. Most paid preparers use software? Well of course they do. You should be happy about that, unless you’re willing to pay $3,000 in time charges for a tiny ass return to ensure there are no missing schedules or miscalculations.

  4. “whether it’s giving to charity”?

    So the Kochs won’t get a write-off giving money to “Reason”? You got balls, Jake!

    1. I would like to eliminate from the English language the phrase “write-off” in the context of taxes. So many people say things like, “oh, they just do that because they get a write-off.” Or, “well it’s no big deal for them because they just write it off.”

      But of course those same people who say that don’t even know what the hell that means. What, exactly is a “write-off”? How, exactly, does it benefit the person doing the writing off?

      The simple fact is that what we’re talking about is a DEDUCTION, not a “write-off.” And the deduction is worthless unless the taxpayer has INCOME against which to take the deduction. So you first have to be making money to pay for the item in question to then be able to “write it off” against the income you’ve made.

      It’s not like it’s a freebie gimme.

      Moreover, deductions are not worth 100% of the dollar amount – they are worth only a percentage, based on the rate at which the taxpayer is taxed. E.g., for every dollar you deduct from your taxable income, you save yourself the amount of tax you would have paid on that dollar. So, for example, you one dollar deducted might save you 28 cents in tax avoided.

      Add to that the fact that there are limits on various deductions – see, e.g., the “2% haircut”. And in general, you can deduct charitable contributions only up to 50% of your AGI. So you can’t completely eliminated your tax obligation simply by making a lot of charitable donations.

      1. Don’t forget the AMT which eliminates almost all your deductions entirely (if you are subject to it).

        1. The reasoning behind the AMT (or any phaseout of deductions) is insidious and indicative of the “all your money belongs to us” bullshit mindset.

          1. Of course I could also say the same thing about progressive taxation, too.

            But rich people have more so they should pay more!

            But 15% of $1,000,000 is still more than 15% of $10,000…


    2. All these big companies, they write off everything.

  5. Work for peanuts and the tax code is simple.

    Get paid cash and there are no taxes.

    Most important, the income tax is voluntary.

    1. “[T]he income tax is voluntary.” Many brave people still claim that, whilst sitting in a federal pententiary.

  6. Why do we pay federal income tax, anyway? The U.S. government should be getting its revenue from the states. The states can then decided how to generate that revenue.

    1. Unlike the idiot below, I agree. It is the states that really are the “clients” of the federal government, and I believe it would result in a purer federalism and keep us removed from a monstrosity that shouldn’t be touching us.

      It would also reduce the power the federal government has to conduct tyranny, as it would be dependent on the states for revenue and could not blackmail them with grants. It would be easier for states to withdraw from the union then, which would result in a less oppressive federal behemoth.

      1. I really don’t like the light has cast on secession from the union. I think we should have an amendment allowing for peaceful sucession, with provisions set up for federal gov’t property is the seceding state (I don’t know specifically what those should be, just that they should be there). The Confederacy attacked on the Union, so until that point one could argue that they were within their “rights.” Since then, desire for secession, even peaceful secession*, has been frowned upon to say the least.

        *Yes, I know I overused that word.

    2. I was going to ask for a subscription to your newsletter, but this is such a good idea that I’m wondering what it would take to actually make it happen. Constitutional convention, anyone?

      1. btw, I’m not “the idiot below.”

      2. Sure! We can get rid of lots of other stuff, while we’re at it. And put in some logical stuff (for defending freedoms) that wasn’t in there originally.

        But how are we going to make it happen? Maybe an Article V convention, and slam out a whole bunch?

    3. I agree with you. I said the same on Digg back in the day when it was a liberal utopia. Probably still is a liberal utopia but I don’t visit anymore.

  7. “Jacob Sullum argues that trading credits and deductions for lower rates would produce a simpler, fairer, more efficient, and less intrusive tax system.”

    We had a modest version of that happen with the 1986 TEFRA tax act.

    A bunch of tax deductions were eliminated in exchange for lower rates.

    The problem is that deductions eliminated are gone forever but lowered rates are only temporary and inevitably go back up.

    1. “Forever” = Until the next Congress.

  8. So the Kochs won’t get a write-off giving money to “Reason”? You got balls, Jake!

    As we all know, nobody ever voluntarily contributes money to any cause prior to the deduction enshrined in the income tax code.

  9. Social engineering is the real purpose of the tax code; any revenues generated are irrelevant.

    1. Believe this crap, or not…

      1. He’s over the top, but you gotta admit there’s some truth there.

        1. Oops, should have read on before I fed the troll.

    1. But think of all the jobs it creates. We need a more complex tax code, not less. Won’t someone think of the accountants’ children?!

  10. The U.S. government should be getting its revenue from the states. The states can then decided how to generate that revenue.


    Pure genius!

    We’re so lucky to have you here…


  11. The tax code is a way for politicians to legislate outside their enumerated powers.

    There’s no way they’ll give that up.

    1. Like they give two fucks about legislating outside of their enumerated powers anyway.

  12. These people seem to make a LOt of sense.

    1. Really?

      Here’s what I get:

      Webroot has blocked access to a potentially threatening site

      This Web site is a known source of malware, viruses or spam. Visiting this site will put you at risk and may compromise your identity or privacy.



      1. This is great. The troll arguing with the bot.

  13. eliminate withholding and then make people write a great big check once a year

    I think a monthly bill might be better; just like phone, electricity, teevee, you write a big fat check to Treasury on the first of each month.

    And you sit there, with throbbing head and trembling hand, asking yourself, “Where the fuck does this money actually go?”

    1. eliminate withholding and then make people write a great big check once a year
      Why don’t you go fuck yourself instead, eh?

  14. I’ve always thought that certain things over certain values should not be business write-offs as costs of doing business, for example meetings at restaurants or golf courses or Mercedes’ as company cars (things of this nature are widely abused and claimed to be business expenses). It would be more fair if there were limits on what you could claim, and at first glance you might think it would get more tax revenue, but I’m thinking it would actually just cause companies to consume less, badly hitting the economy, since consumption of this nature (by businesses as opposed ot individuals) is a sizable chunk of all consumption/commerce.

    1. Fuck off with your contradictions!

    2. 16th admendment

      We’ll get both income and sales taxes.

      1. Fair Taxers want the 16th Amendment repealed. I’ll take the Fair Tax over what we have now, but I’d personally prefer a flatter sales tax or income tax. I’ve heard this suggestion, 10% flat income tax and 15% sales tax…or some combination like that.

        The states paying is another interesting idea. There’s a lot of options better than what we have, though.

        1. Overall our system is relatively flat already. Any of the suggestions from the right are going to result in less progressivity. So even regressivity, and even tax haters can’t justify that.

          1. 1. We don’t care about how progressive the tax code is.

            2. We don’t care how flat it is, we want it flatter.

            3. If possible, we’d like to make it go away entirely.

            4. We aren’t right-wing. Nolan Chart.

          2. Ton-bot writes: “Any of the suggestions from the right are going to result in less progressivity…regressivity, and even tax haters can’t justify that.”

            Sure I can. What’s inherent about “profressivity”?

            1. Taxes should pay for the things we buy without burdening anyone. It’s as simple as that. The rich can pay more without it being a burden on their lives. Also, they benefit more from the government so they should have a higher stake in it.

              1. “Taxes should pay for the things we buy without burdening anyone.”

                So, I’m the government. I’ll decide what we buy, I’ll decide how much benefit you get from what I decide we’ll buy, and then I’ll decide how much you should pay before it becomes a “burden” on whatever lifestyle I determine you should be permitted to enjoy. Because all of those decisions are obviously mine to make and enforce.

                Why, that’s pure simplicity and fairness in action.

  15. I confess that I’d like to see tax simplification just so that I can watch the statists shit themselves.

  16. Why don’t you go fuck yourself instead, eh?

    Tax attorney? Or H&R Block drone?

    1. Criminal or just a statist…

      But I repeat myself…

      1. You’re calling us out on being statist…?

        Any replies will go ignored.

        1. Knock yourself out…

  17. since consumption of this nature (by businesses as opposed ot individuals) is a sizable chunk of all consumption/commerce.

    Hence the reference to “distortionary” effects of the tax code.

  18. I really prefer changing to a “line function” tax system.

    Currently, we have a “step function” tax code, where at certain income levels, your rate jumps. These steps cause a lot of economic damage as people feel the pain and not the gain, so they quit trying harder, and a lot of jobs that are really 1.2 FTE suddenly don’t get done as the person holding the job knows that once they go over 1.1 FTE, the tax man takes everything else.

    If you look at the cash value of full boat welfare, its about $24K in my city. I would set a bar at $30K and collect taxes from there. I would roll all the social security taxes into a single federal rate, and then let everyone pay a single percentage of their income (Gross from all sources-retirement savings-30K = taxable income) as tax for the fed.

    Y = mx + b. If B = 0, and X = income as above, then your tax rate = m, and Y = your tax bill.

    Relatively simple calculations and auditability. Makes for a nice neat tax system and frees us from being forced at the point of a gun to help pay for other people’s lifestyle choices.

    This is a big deal. People smart enough to live in economically affordable cities, pay more in taxes because similar people who live in very expensive real estate markets get fatter deductions. People who can’t afford a home get the worst of it, they pay through the nose to support both of the other groups.

    Want 6 kids? OK, have a great life. Want 2 kids? OK, have a great life. The person who wants 6 kids has no right to expect that the person who has none should pay more in taxes so that they don’t have to, just because they had more kids.

    Simplify the tax code and relieve it of it’s lifestyle and other entanglements and you also achieve “fairness”. This is what liberals always seem to want, so why should they oppose such change?

    1. I consider myself a bit more of a math person, but I seriously need some graphs here. Can we see a webpage with this on it?

      1. No webpage as this is my own idea. Basically imagine a line graph that has a Y intercept of 0 at X=30,000 (if tax is Y and Income is X). The slope of the line depends on the rate you propose, I think that 20-25% would be more than enough to cover current taxes that it would replace.

        The outcome of this is that the working poor and lower middle class will get a huge cut in their net tax rates as SS tax is now 7.5% and it would go to 0, and you wouldn’t pay tax on anything below 30K. The rich would pay more, but only as compared to the loop-hole ridden system we currently have. Compared to others in this system, they would pay the same rate.

        This would have the economically salutory effect of eliminating step functions in the economy at income points where you can’t move up enough to avoid the situation where the higher tax rate eats all the extra income you made.

  19. some percentage of rent needs to be a write-off to make things fair versus the homeowners’ mortgage interest write-off, to help avoid bubble situations in the future. The write off could be small but if it’s permanent it would stop making homeownership so artificially attractive

    1. Or the moronic mortgage deduction could be eliminated.

    2. Your lifestyle choices are your choices. You want freedom, well you can have it, but with freedom to make a choice, comes the responsibility to be adult enough to live with the consequences of your choices and not look to the guy next to you to help fund your lifestyle by paying extra taxes so you can get a deduction.

      Otherwise, accept your place at the childrens’ table with the other big-government liberal statists.

      1. uhhhh… what?

        1. You know what I mean. A person’s lifestyle is their business and they should pay for it. Their choice in housing should not be a factor in what anyone else pays in taxes.

          1. again, what?

            i dunno what your sayin but what im sayin is that renters should also get some sort of write off too, but permanent (since you’re always paying rent)

  20. What could possibly be more un-American then the government rewarding certain life styles and punishing others? Land of the free my ass.

  21. I take it back. I think Ancap is one of those guys I used to see on streetcorners dressed as “Lady Liberty” advertising cheap tax preparation.

    1. You’re right, I remember that time with fondness…

      Say, but weren’t you at the time, also standing in the back alley, and selling your ass as well?

    2. Sounds more like a recent convert.

      1. Re: Ancap

        1. Not by a long shot…

  22. Just finshed my taxes last night with pen and paper like I do every year. I am a landlord, royltey holder, small business owner, stock trader and land speculator. Everyone of the required schedules and forms is pretty straight forward, if complicated, except the AMT. I have no idea if I have ever done my AMT correctly. Does anyone? I really don’t think it can be done simply with pen and paper.

  23. Just finshed my taxes last night with pen and paper like I do every year. I am a landlord, royltey holder, small business owner, stock trader and land speculator. Everyone of the required schedules and forms is pretty straight forward, if complicated, except the AMT. I have no idea if I have ever done my AMT correctly. Does anyone? I really don’t think it can be done simply with pen and paper.

    1. Did you file your return twice as well?

    2. Just finshed my taxes last night with pen and paper like I do every year.


      There’s nothing like an oblivious serf’s confession…

      And then they wonder, why they suffer…

      Blame it on the Boogie!

      1. I am so clever!

        And new!

        And difficult to comprehend!

        1. Don’t you go highjacking my handle sonny…

          Lest you displease the gods of war…

          Be nice now…

          1. I’m a wizard and killed 203 orcs last night!

            1. Settle down kid, you’re hyperventilating…

              And drop my handle, before your hard drive fries…

              1. Internet tuff gai is tuff.

                1. Well that’s a bit rough.

            2. I’ll bet that email address is taken. It has to be…

      2. If you are a genuine AnCap and not just here to be a pain in the ass troll, you might enjoy the commenting here if you stop being a reflexive dick all the time. There are several commenters on here regularly who manage to make the points you are making without making everyone hate them.

        1. I shall now reflexively reflect upon your reflections…

          Still reflecting…

          Nah, I’m compelled to reject your unjust mischaracterization… so no sale!

  24. “If tax compliance were an industry,” she writes, “it would be one of the largest in the United States.”

    What do you mean, if?

  25. Shirley Jackson Peel was just let out of prison. This brave lady worked for the IRS, and knows how they operate. Let her show you the scam…it is not easy fighting the tax man, but if everyone simply stopped paying, what could they do? The income tax is a trillion dollar scam, a fraud on the constitution and due process of law…

    1. The income tax is a trillion dollar scam…



    2. Oy vey, income tax deniers…

    3. “it is not easy fighting the tax man, but if everyone simply stopped paying, what could they do?”

      Steal our property. Kill us. Take us to jail/work camps.

      It would have to be an organize, armed protest for it to work.

  26. How can Olson say tax compliance isn’t an industry? It’s probably a heavily lobbied one at that. Trying to have a rational discussion with an accountant about a flat income tax or national sales tax will go nowhere as quickly as you can say “school choice” to a public school teacher.

    1. kda, it is funny. When I worked for one of the big CPA firms, I used my colleagues that we should have a flat tax. Invariably, they would come back with the question – what would be do if there was a flat tax. My response – something productive.

    2. I talked school choice with public school teachers before (not too seriously, though). Their arguments are so so, largely because they don’t think about education as a business. Competition would drive most of their troubles away.

  27. a simpler, fairer, more efficient tax code

    The word “fair” has no place in a discussion of mere reform of the existing confiscatory regime. The only fair tax system is one which is completely voluntary — you pay what you think the government is worth.

    1. Wonder if John Kerry would chip in!

    2. The word “fair” has no place in a discussion of mere reform of the existing confiscatory regime


      Amen to that!

  28. “If tax compliance were an industry…”?!! It is an industry, just one that is (with the exception o H&R Block, etc.) always hidden within law and accounting firms. It is amazing to me that our economy is losing $163bb per year to compliance (does that figure include tax planning as well?). Imagine the economic activity that could motivate if it were freed up.
    For a great visual of just how outrageous the Code is, visit a law library. While any other matter gets a few shelves – maybe an entire row – tax law almost always gets an entire room. I’d bet that the annual updates are a big part of any librarian’s budget.

    1. But think of how many jobs it would cost! We need to make the tax code MORE complicated so that we can create jobs during these tough economic times.

      1. And break more windows!

        1. Or kill convenience store clerks. (Or both.)

  29. Somebody should ask Jeffy Immelt how much money GE spent to *not* pay taxes.

  30. Sounds more like a recent convert.


      1. A recent convert, or a convert at all?

        1. Any replies will go ignored.

  31. Like they give two fucks about legislating outside of their enumerated powers anyway.

    1. Oops, that was supposed to be a response to sarcasmic|4.13.11 @ 9:15AM

  32. A simpler tax code would be fairer, more efficient, less intrusive, and less infuriating.


  33. Now that I’ve learned to scam the system you puds want it changed! Learn the system and stfu.

    I never realized my full potential for fiction until I started filing a Farm Schedule every year. Just last night I visited my bass pond (immediately adjacent to my deer food plots) riding on my free electric golf cart. Recently added beekeeping to my “industry” and opened another entire world of deductions to advantage myself of.

    Thanks so much to you all.

  34. I would like to see the sources for Olson’s estimate of “6.1 billion hours”‘ which equals 79 hours of preparation per family of four; and for “$163 billion” in costs, which equals $2100 in costs per family of four. I suspect a level of hyperbole or are things really that bad.

    1. Just FYI, the country is not made up only of families of four. I’d suspect that the figure also includes the cost of corporate tax filing, which would skew the numbers upward.

      1. Or they just accept the IRS’s numbers, which always seem very high. I think it usually takes me about 2 hours to do my taxes (full 1040, Sch a&b) by hand. The estimates in the instruction book say it should take like 30 hours or something.

  35. How about a tiny, flat sales tax? Fund the true constitutional government that protects liberty, and fuck everything else.

    1. Fund the true constitutional government that protects liberty

      That’s a lovely fairy tale.

      1. For a long time, so was democracy. And flying.

        Just because it’s never happened doesn’t necessarily mean it can’t. Maybe not in the way you thought, but it probably can.

  36. US taxes got nothing on NY’s for complexity.

    1. Yeah, but nothing makes sense in places like NY and California. You’re just mistakenly trying to apply logic and reason to the land of invisible florescent opaque unicorns and tall short stocky slim matt-black transparent leprechauns.

    2. Amen, Robert. On the other coast, CA is actually not very complicated.

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  38. One Tax: A 20% sales tax. Even illegals would have to pay it.

  39. ty rights, etc. seem like a more accurate measure of freedom than democracy.

  40. This plan has no merit

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