On April 15, headaches and unpleasant surprises
Yahoo! News - On April 15, headaches and unpleasant surprises
In 1986, President Ronald Reagan signed into law the last significant simplification of the tax code. Since then, succeeding presidents and Congresses have messed it up again with layers of complexity.
Anyone who saw this coming could have made killing. A $5,000 investment in the stock of tax-return preparer H&R Block in the fall of 1986 would (with dividends reinvested) be worth more than $170,000 today.
But for those not inclined to put their money where their cynicism is, the increasing complexity of the tax code has made for nothing but misery. The code has become so complicated that it is best seen as a tax in itself. Call it the complexity tax.
On top of the tax paid on income and capital gains, we pay a cost - in dollars or in hours - because lawmakers like to accommodate lobbyists seeking deductions, exemptions and credits. Some of the ways the public pays:
• Help! Help! Sixty-one percent of taxpayers have been driven into the clutches of tax-preparation services, according to the National Taxpayers Union. That’s up from 38% in 1980 and 46% in 1986.
•Are we done yet? Taxpayers and their accountants will spend an average of 13 hours on their Form 1040s this year, up from nine hours 15 years ago. They will spend almost four hours on 1040EZs, up from one hour in 1990.
• The cost of compliance. Individuals and companies spend about 6.5 billion hours filing their taxes, according to the Government Accountability Office. Estimates of the cost to the economy run from $125 billion to $140 billion.
What makes all of this anguish and expense more remarkable is that it comes despite the arrival of user-friendly tax preparation software such as Turbo Tax. Even these tools are no match for a monster code.
Now comes a new reform plan. President Bush has appointed former senators Connie Mack, R-Fla., and John Breaux, D-La., to chair a commission on simplifying the tax code. It’s set to hold its seventh hearing on Monday.
Taxpayers would be well served if the commission could persuade Congress to fix the code. But given the track record of tax reform, they might want to hedge their enthusiasm. In fact, perhaps they should go out and buy shares of H&R Block.
