Well, it’s finally happened. The tax code has become so arcane that even the IRS can no longer keep up with it. An article released Wednesday on Politico reports that the IRS is struggling to stay on top of an ever increasing workload—the result of a constantly changing and expanding tax code that has long since passed beyond the understanding of the average American.
On average, more than one change to the tax code is made every day. At present, this gargantuan document contains more than 72,000 pages, complete with over 9,000 sections. Is it any wonder than even government experts are starting to buckle under the strain? And yet, every effort to simplify, to reduce, to cut the tax code down to a more manageable size is met with howls of outrage from politicians, lobbyists and special interest groups, unwilling to even consider any change that might cut into the loopholes and provisions specially carved out for their constituencies. And that’s just for minor changes.
When, as happens on occasion, someone in Washington summons the courage to propose the kind of dramatic reform the tax code needs, they are insulted, browbeaten and generally mocked until it becomes impossible to take them seriously any longer. It happened to Steve Forbes when he proposed a flat tax during his ill-fated presidential run in 2000. It happened to Herman Cain when he introduced his ultra-simple 9-9-9 plan, and a number of presidential candidates, including Mike Huckabee and Gary Johnson have been hindered by their outspoken support for the Fair Tax.
The tax code is inherently biased towards being complex. A special interest group can save billions by introducing a special deduction, and hence they are willing to spend billions to insure such deductions are put in place. Multiply this by the innumerable lobbying factions spread across a $15 trillion economy, and the problem becomes obvious.
A simple tax code, on the other hand, benefits everybody, but taken on the level of the individual, that benefit is comparatively small. An individual may spend a few hundred, or even a few thousand dollars in terms of time, money and effort invested in completing an onerously complex tax form, but this is not enough to induce him to launch a multi-billion dollar lobbying campaign for simpler taxes. Therefore, although the economy-wide cost is enormous, no one person has enough of an incentive to try to change things for the better, and the scales are forever tipping in the opposite direction.
But now, the problem has become so great that the IRS itself can no longer ignore it. In this situation, there are two possible solutions:
1) Marshal the will of the American people and demand a radically new tax code that is both simple and sane, or
2) Increase the funding and staffing for the IRS indefinitely, devoting an ever larger share of our economy to an activity that produces nothing but waste and fraud.
I’ll give you three guesses as to which one our current president is likely to choose.