Wednesday, January 14, 2009

The Case for Overhauling a U.S. Tax System

Yes, yes, the U.S. Tax System is hopelessly complicated and as a tax return preparer I have a certain interest in hoping it stays that way. Sam Dealey has a good enough piece piece about it and trots out these statistics:

Americans spend 7.6 billion hours annually trying to figure out their federal taxes. Working eight-hour days, five days a week, 50 weeks a year, that's the equivalent of 3.8 million full-time workers.

At the average hourly wage of $27.54, that tax-preparation time amounts to $193 billion, or 14 percent of aggregate income tax receipts.

A staggering 60 percent of individual taxpayers are so bewildered by the tax code that they hire outside preparers. An additional 22 percent buy computer software.

Hey, he makes that last point about hiring a preparer as if it's a bad thing!

Which is my point. In all of this talk about how figuring out the Tax Code burns up everyone's time, no one makes the obvious point that it keeps me a busy, productive member of society. No one complains about how complicated it is to work on cars yet no one makes the point how taking a car in for repairs to a professional mechanic and paying him to make the repairs somehow takes away economic productivity.

Actually, I'm all for simplifying the tax code. Few transactions with the government require the help of a professional - when's the last time you hired someone to assist you to buy a car tag? As a CPA, I'd keep myself busy with other accounting chores besides tax preparation, thank you very much. But we sometimes fail to realize how the Tax Code has been used as a tool of societal encouragement: we believe marriage is an institution that civilizes us and so married couples enjoy a lower tax rate. That's where the complications lie. And simplifying Code will be no easy task with unknown consequences.

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