Tuesday, August 08, 2006

The Tax Code Debate, Volume 4

I'm enjoying the debate I've been having with Joe from the Tax Update Blog over the past week concerning tax policy. If you've missed it so far, check out the following:

Volume 1: Where Joe, with the help of the Tax Foundation, argues that tax complexity leads to tax cheating.

Volume 2: Where I argue that both tax cheating and the hiring of tax professionals are largely based on the desire to make the minimum possible monetary contribution to one's government.

Volume 3: Where Joe lays out alternate reasons for hiring a tax professional.

In case you're not following links today, here are Joe's reasons for hiring a tax professional:

Sometimes it just makes for the best use of your time.
Many people just fear the IRS.
To the extent that the tax law is a policy tool, the tax professional inevitably becomes a sort of free-lance bureaucrat, helping to implement the will of Congress.

I'm curious at this point about how simplifying the tax code would fix any of the above problems. I've certainly written at length about the Fair Tax, as advocated for by former US Sen. Mike Gravel and the good folks at FairTax.org. Certainly, eliminating the federal income tax and replacing it with a sales tax of 23-30% would drastically reduce the complexity of the system and the need for tax professionals, but my guess is that neither of us are advocating for that.

Beyond that, even a moderately large-scale overhaul of the tax code would not eliminate fear of the IRS or the average citizen's inability to work at the speed of a tax professional. And regardless of the tax system, the "free-lance bureaucrat" system will almost certainly always be in place, as the government decides what behavior it would like to encourage and tax professionals help their clients find the best way to fit said encouraged behavior into their plans for fiscal benefit.

So I guess my question, going forward, is this: How does one go about fixing this problem?


1 comment:

noneed4thneed said...

The main advantage given when people are talking about the Fair Tax is that it is simpler. However, a sliding scale that progressively taxes people at higher incomes is just as simple. I am reading Hostile Takeover by David Sirota and the first chapter is about taxes. The thing that makes our tax system so complicated is all of the tax breaks and special-interest tax loopholes.