A taxing process

If President Barack Obama and Congress wanted to do the public a favor, they'd make cleaning up the tax code a high priority.

Monday — April 15 — was one of those red-letter days in the life of America, the deadline by which citizens are required to file their federal and state taxes or, for the real procrastinators, requests for extensions thereof.

Gov. Pat Quinn spoke for millions when he acknowledged to reporters that he is among those who wait until the last minute.

"You can file early on and if people want to do that I commend them, but those of us who often do our term papers at the last minute oftentimes do our taxes at the last minute. But as long as you get in on the deadline you're OK and that's what I plan to do," he said.

Quinn has lots of company. The IRS indicates that a quarter of the nearly 150 million returns it expects to process are filed in the three-week period before April 15. An estimated 10 million were filed from Friday to Monday.

With many people's minds focused on taxes, it's a good time to reflect on the intolerable complexity of the tax code.

Taxes in this country are paid on the semi-honor system. People report their income and compute what they owe. Considering the fact that the system leaves many people opportunities to exploit, it's a wonder the government collects as much in tax revenue as it does.

The gap between what people actually owe and what they pay is significant — an estimated $345 billion for 2006, the most recent year for which the IRS has figures.

It is, of course, fair to ask how the IRS can know what is owed but not paid.

If it really knows, why can't it track down the tax scofflaws and make them pay up? The answer probably lies in a risk/reward scenario.

Is collecting what's owed worth the cost of collecting what's owed? Perhaps that's why only 1 percent of tax returns are subjected to an IRS audit, the vast majority of them selected by sophisticated computer programs that target individuals and businesses as likely sources of additional revenue.

But there's more to this issue than fraud.

Does anyone doubt that, even with computer programs like TurboTax and paid preparers, millions of returns include errors? Does anyone doubt that our complicated tax laws make the whole process far more difficult, even painful, than it ought to be?

That's why tax reform is a subject on the minds of many — even though different people have different ideas about what it means.

The most common understanding, however, is something along the lines of the tax reform bill that President Ronald Reagan, working with congressional Democrats and Republicans, passed in 1986. It simultaneously eliminated many tax deductions while lowering tax rates, and it was a legislative triumph.

But almost as soon as it was passed, Congress, prodded by lobbyists from dozens of special interest groups, began making changes. More than 25 years later, the nation's tax laws are pretty much what they were before Reagan signed the new law — an incomprehensible morass.

The Simpson/Bowles deficit-reduction commission, appointed by President Obama, contended that one key to cutting federal deficits includes drafting new legislation along the lines of the Reagan tax reform.

So far, it hasn't happened, and, given current political realities, it appears to be a long shot that it will. President Obama wants tax legislation, but he's focused mostly on raising tax rates above the tax increase he won in January. Meanwhile, Republicans pay lip service to the idea of a bipartisan bargain but still carry water for the special interests who helped make current tax law the mess it is.

The key to the 1986 reform was the extraordinary dedication of three men — Reagan, House Ways and Means Committee Chairman Dan Rostenkowski and Senate Finance Committee Chairman Robert Packwood.

They could bring doubters along and people together. It would be nice if a new troika could work similar magic, and some suggest they just may do so. But don't hold your breath. Next years's tax returns will probably be as complicated as this year's.

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GeneralLeePeeved wrote on April 18, 2013 at 1:04 pm

Rostenkowski and Packwood, huh.....well now, there's a couple of guys to be admired!