Simplified Tax Code, Obama Edition

Between covering breaking news of the First Pup’s television debut and yukking it up on prime time with juvenile teabag jokes, media personalities have been absolutely swamped this month.  Undoubtedly the talking heads would have found an angle that combined the two stories had Bo Obama not already been neutered.

But somehow amidst these concerns of grave national interest, and before swine flu began dominating the news cycle, little coverage was given to the implications of a significant tax day announcement. President Obama revealed that a rewritten federal tax code will soon “make it easier, quicker and less expensive for you to file a return, so that April 15th is not a date that is approached with dread every year.”

A simplified tax code is something most Americans can get behind.  The federal tax code now stands at a whopping 70,000 pages.  85 percent of American adults say the federal tax code is complex, and 82 percent say the tax system needs to be completely overhauled.

So what can we expect from an Obama approved tax code revision?  The first phase of the administration’s plan, conceived during the presidential campaign by economic adviser Austan Goolsbee, aims to eliminate tax returns for 17 million  Americans.

Under the “Simple Return” plan, the Internal Revenue Service would complete tax returns for taxpayers whose sole income comes from one employer and whose interest income comes from one bank. The IRS would then send a copy of the return to the taxpayer. If the first wave of the program worked well, it could be expanded to other taxpayers.

The second and third waves of the Simple Return plan could bring the total to 52 million participating taxpayers.

The good news? Next year you may not have to file a federal tax return.

The bad news?  The IRS will prepare your return for you.

Forgive me for plucking off a bit of low hanging fruit, but it’s hard to overlook that the IRS is overseen by Treasury Secretary Timothy Geithner, a man who failed to pay several several years worth of self-employment taxes until his finances went under the Senate microscope during confirmation hearings. His excuse was something along the lines of “TurboTax made me do it.”  Who better to oversee the team of bureaucrats charged with calculating your tax bill?

But easy targets aside, this “simplification” is a political cop out.  Many of the complexities in our federal tax code are there because some politician, special interest group, or narrow constituency has lobbied for their existence.  Some serve legitimate government interests, but many don’t.  President Obama, like those who preceded him, will not risk alienating powerful voting blocs by ordering a careful review of the tax breaks and incentives that contribute to the corpulence of the code.

Instead, he pretends that the solution to a bloated tax code is a bloated IRS.  The IRS has been serving up spoiled broth, and Barack Obama wants to hire more cooks.  That’s certainly a different way of doing things, but simpler?  I don’t think so.

Proponents of the Simple Return plan boast that it could save taxpayers 225 million hours currently spent on tax compliance, and $2 billion in tax return preparation costs.  But how many additional Internal Revenue Service agents will it take to complete returns on behalf of 52 million taxpayers?  How many millions of taxpayer dollars will it take to implement this program?

And even if Austan Goolsbee’s plan wouldn’t cost taxpayers a dime, should the government encourage people to shift partial responsibility for their finances to the IRS?  What federal interest does it serve when citizens relinquish personal responsibility to become more dependent on the government for tasks they can accomplish themselves?  Shouldn’t we be wary when the federal government offers to permanently shoulder our burdens?

Keep in mind, the vast majority of the tax returns we’re talking about are simple 1040EZ forms.  Even the IRS estimates a 1040EZ takes just a few hours to complete, but for anyone with a pulse and a modicum of aptitude with a calculator, the compliance time is more likely to be minutes, not hours.  The cost for individual taxpayers filing the 1040EZ is virtually nil – perhaps the nuisance of spending an evening in – except when they choose to hire a tax preparer.  Unless the filer is illiterate or disabled, tax preparation fees are completely optional.

Why should compliance costs that are voluntarily incurred by individuals become the collective responsibility of American taxpayers?

For the most conscientious among us, compliance costs will, of course, not change at all.  Even if our tax returns are completed by IRS bureaucrats, we will spend the same amount of time and money checking calculations as we do now.  Only the people willing to put absolute faith in IRS number crunchers will “benefit” from this new type of government dependence.  I’m betting those are the same people who place absolute faith in President Obama.


6 Responses to “Simplified Tax Code, Obama Edition”

  1. Eclectic Radical on April 28th, 2009 2:07 am

    Before I go on, I want to say that I agree that this is a cop-out. Making it possible for working people to receive automatic return service from the IRS may make things simpler for those who qualify for the program, but it is NOT a simplification of the tax code it is only simplification of the tax return /process/. I don’t possess the same loaded cynicism about the idea itself, but calling this a simplification of the tax /code/ is a little bit ridiculous.

    The complexities of the tax code exist for two reasons, the original being the reason for their institution and the second being the reason for their longevity: the politically motivated slough of deductions, exceptions, and exemptions which blatantly favor those who can afford professional tax accountants and the lobbying strength of professional tax accountants made wealthy by the complicated tax code. :)

    Real tax code simplification requires actual substantive changes to the tax code. The elimination of deductions, exceptions and exemptions would not play well with the tax cut crowd: even with Reagan’s elimination of quite a few deductions, the 35% tax bracket pays (on average) a 27% rate after deductions. People don’t want to just start paying that 8% difference. It’s these deductions that make it complicated enough that even professional tax accountants can make serious tax return errors on behalf of public figures. ;)

    No one in Washington wants to eliminate deductions; in fact, both major political parties want to add more. There is strong chance at least some of President Obama’s tax credits may be implemented and, if they are, that will make things that tiny bit more complicated. Pretending the code will be in anyway simplified is silly.

    As you know, Jenn, I strongly advocate raising the minimum for the EIA, cutting the rates for the remaining tax brackets significantly, ending the distinction between corporate and personal income taxes, ending the distinction between capital gains taxes and income taxes, and closing all tax loopholes. /That/ would simplify the tax code dramatically. It would also send most of your fellow fiscal conservatives AND my fellow liberals screaming for the hills while tax accountants started a suicide bombing campaign against the government. ;)

  2. Jenn Q. Public on April 29th, 2009 3:50 am

    Yes, I’ve been known to engage in a little cynicism, particularly when someone tries to, ahem, put lipstick on a pig.

    I’m not much of a tax reform wonk, but I am fond of getting rid of any loopholes that only benefit people with the money to keep accountants on retainer. I won’t be so happy when Congress approves funding to send the unemployed accountants to nursing school so we have adequately staffed medical centers when universal health care kicks in, but something like that is bound to happen anyway. ;)

  3. Eclectic Radical on April 29th, 2009 9:50 am

    As an amusing note of trivia, I live very close to where the reference you so subtly reference was first made. Knowing what was said, in its proper context, I shall somehow manage not to be baited. As much as part of me wants to be baited. ;)

    I am a policy wonk on a massive level, for good or ill. Since Congress is never going to come close to anything like universal health care in our lifetimes, you have very little to worry about. :)

  4. Jenn Q. Public on April 29th, 2009 12:07 pm

    No baiting intended, and I’m fully aware of the context. It’s just the first metaphor that popped into my head, a metaphor that unfortunately demands to be used tongue in cheek after that one memorable incident.

    Eclectic Radical said:

    I am a policy wonk on a massive level, for good or ill.

    You don’t say. :) I really ought to wade into tax reform a bit deeper, but there’s always something else grinding my gears.

    Eclectic Radical also said:

    Since Congress is never going to come close to anything like universal health care in our lifetimes, you have very little to worry about. :)

    We shall see. Your pessimism fuels my faltering optimism on this issue.

  5. Eclectic Radical on April 30th, 2009 3:10 am

    There’s been so much grinding my gears lately that I think I have posted a whole two policy pieces in April and a slough of polemical pieces, so I understand entirely. Some things just create a reaction that demands some sort of written response. Tax reform is a great place to start one’s wonkery, because it’s something that affects everything else one way or another. There are lots of simpler systems that would make fiscal conservatives or liberals far happier than the current system, and there are even a few that have the potential to make both sides a lot happier. This is an area where both sides have done too much pandering and not enough constructive thinking on how to really make things better.

    As for public health-care… it should be noted first and foremost that the advocates of the single-payer system that is scaring you so much are being excluded from the process as busily as the advocates of the totally free market system that irks me so much. What we are probably going to see is Romneycare: an unfunded mandate that everyone have ‘basic health coverage’ combined with a flooding of the market with cheap health coverage that doesn’t really guarantee access to care, on the model most states use for auto insurance. It will be a huge corporate welfare windfall for insurance companies, who will be free to sell lots of worthless plans to customers who need to buy them to meet the legal requirements.

    Max Baucus, who is the point man on health care in the Senate, is a longtime fan of some plan along these lines and he has Republican support. Several other key health care wonks have other plans along these lines, also with Republican support. With lots of similar plans, each one with some measure of Republican support, and no serious supporters of either single-payer or free-market plans, it’s not hard to see all parties compromising on one plan that best pools the Republican support for all of them.

    Whether that is something we should be optimistic about is another question entirely. No reform at all might genuinely be better than flooding the market with worthless insurance and legally forcing people to buy it, and the merits of this approach (from a liberal point of view) are not sufficiently ‘better’ than Economic Darwinist conservative health plans, to my way of thinking.

  6. on July 26th, 2014 7:57 am

    Right now it sounds like Expression Engine is the preferred blogging platform out there right now.

    (from what I’ve read) Is that what you are using on your blog?

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