Monday, October 4, 2010

KEEP IT SIMPLE

I am still working away on the GD extensions – and making progress. I actually had time to write this post!

Professor Annette Nellen quotes a 9/29/10 article from The Hill in her post “Tax Reform Discussions in 2011?” at 21st CENTURY TAXATION –

’Rep. Levin seeks early action on tax reform next year’ reports that the House Ways & Means Committee chair wants to have lots of tax reform hearings in 2011. He says: ‘We're serious about looking at our tax code’. The Hill also reports Congressman Levin saying that reform needs to happen in a non-election year.”

I am truly glad to hear this. I have previously posted on several occasions that 2011 is the year that Congress must buckle down and act to make true reforms to the mucking fess that our Tax Code has become and replace it with a much simpler system. Levin is correct when he says that reform needs to happen in a non-election year.

Some people may wonder why a tax professional would call for a simpler tax system. Does not each new tax law, and each complexity added to the Code, put money in my pocket? Is not the more confusing the Tax Code the better it is for business?

As I have said many times in the past – I do not believe that a simpler tax system will hurt my business at all. I sincerely believe that if I did nothing but 1040As all day during the tax season I would make more money, experience less agita, and substantially reduce the number of GD extensions. I also believe that my clients will not decide to do their own returns if the tax system is simplified; they will continue to come to me.

Fellow tax blogger Professor Mary O’Keefe of BED BUFFALOES IN YOUR TAX CODE has, like Professor Nellen, long been a champion for simplifying the Tax Code, and continues her crusade in two recent posts.

In “Pointed Questions--for Bankers AND Tax Policymakers”, which talks about the standards Elizabeth Warren, President Obama's choice to organize the new Bureau of Consumer Protection expects from bankers, Mary says -

Can customers (taxpayers) understand a product (our tax laws)? Do they know the risks? Can they easily figure out what it really costs?

Plumbers and law professors ought to be able to understand the terms of the tax policies our lawmakers are debating.

The evidence is clear that they do not, because the standard of clear and straightforward use of language that Elizabeth Warren wants to demand from the banking industry is sorely lacking in our tax code.

The financial documents produced by the banking industry, opaque and byzantine as they currently may be, are still a model of transparency compared to our convoluted tax code
.”

And in “Is It Reasonable for Congress to Demand 'Plain Talk' From the IRS?”, which discusses the Plain Language Act of 2010 that recently passed in the Senate, she says –

Bottom line: if we Americans want a tax code that we can understand, we need to demand it directly from Congress.

So far, Congress has written a convoluted and constantly changing tax code with bed buffaloes hidden in every nook and cranny, and this bill gives the IRS the Sisyphean task of doing their best to help Americans to understand their tax obligations.

Before Congress can expect the IRS to describe our tax obligations in 'plain talk', they need to clean out the Augean stables they have created in our tax code
.”

The IRS is hoping that the new regulation regime for tax preparers will reduce tax fraud, 1040 errors, and the “Tax Gap”. While the regime is a positive move, and I have been a vocal supporter sine the beginning, it will not reduce tax fraud, 1040 errors, or the Tax Gap. As many of my fellow tax bloggers have joined me in saying over and over again – the best way to reduce tax fraud, 1040 errors, and the Tax Gap is to simplify the Tax Code!

The recent report of the President’s Economic Recovery Advisory Board attested to the fact that “the Tax Code is complex”. See my post “Some Facts and Figures About the Federal Tax System”. Let us hope that this report will be used as a starting point for the Congressional hearings and discussions – and not simply sent off to gather dust in the archives (as the report of Dubya’s tax reform panel was).

The Hill article unfortunately points out –

However, if Levin keeps the chairmanship remains an open question.
.
Some Democratic panelists would like to challenge him for the position."

Let’s hope that (1) Levin does keep the chair and follows through with his promise and that (2) if he does not his successor will also see the great need for serious tax reform discussions early in 2011.

Based on past history it is difficult to believe that the cafones in Congress will ever do anything positive to substantially fix the Tax Code mess (or any other serious problem, for that matter) – but I can dream, can’t I.

TTFN

2 comments:

Riles said...

Unless some sort of discipline is imposed simplification will be followed by compexification (to coin a term). I think it would be better to freeze the Code (maybe after one more bout of "reform"). Also a lot of complexity comes from attempts to combat gaming the system.

Robert D Flach said...

Riles-

I think "freezing" the Tax Code for a period of time - or at least requiring a large majority of votes for any changes - after a major reform is a good idea.

TWTP