So April 15 is coming and going, in the process giving Congress lots of opportunities to highlight issues of interest to taxpayers. From making the Bush tax cuts permanent, to widening availability of low-income tax clinics, to railing about uncollected taxes, this seems an ideal day to take political advantage of Americans’ focus on how much they pay to keep government fat and happy.

Yet, one topic seems to remain underrepresented. Not only is the burden of paying taxes getting worse for some and no better for others, but the burden of filing taxes has become costly in its own right. Consider the 10th annual study the National Taxpayers Union released today on the complexity of the federal income tax system. Using government and private-sector data, we determined that:

Individual taxpayers will spend about 3.55 billion hours complying with income tax laws this year — up from 3.18 billion hours last year. The value of this time is worth $92.6 billion.

Americans filing a Form 1040 with common schedules this year will confront 155 pages of instructions, nearly quadruple the number in 1975 and nearly triple the number in 1985, the year before taxes were “simplified.”

As of March 15, the average per-client fee of H&R Block (which prepares one in seven tax returns filed by all Americans) was $169.15 — a 5.5 percent jump from the same time last year.

Corporations spend about $170.4 billion on tax compliance — equivalent to 43 percent of corporate income taxes collected in FY 2007.

Treasury Department paperwork, which consists almost entirely of tax forms, imposed a burden of 6.97 billion hours on Americans in 2006 and a projected 7.2 billion hours in 2007. The latter figure is the equivalent of some 3.5 million employees working 40-hour weeks year-round without any vacation. The Treasury paperwork burden has risen by more than 1.5 billion hours over the space of a decade – a pretty sad indictment of the bipartisan failure to resist the habit of tinkering with the tax laws.

A new study from the accounting firm PricewaterhouseCoopers and the World Bank found that the U.S. ranks 122nd worldwide (out of 175 studied) in ease of corporate tax filing compliance; an American company would spend 325 hours filing taxes, compared to companies in Hong Kong (80), the U.K. (105), and Germany (196).

We don’t suppose that a fast-dwindling election year in which Congress already confronts major fiscal policy tasks is a perfect time to begin the process of tax simplification. Maybe, instead, lawmakers can take some preliminary steps.

In late 2006, Senator Ron Wyden (D-OR) reached out to liberal and conservative organizations with a long history of involvement in tax issues to help form the Cleanse the Code coalition. Some of these groups participated in the 1986 tax reform campaign that broadened the base of the income tax while lowering and simplifying rates. The signatories ranged from the Progressive Policy Institute to the American Conservative Union, from the National Taxpayers Union to Citizens for Tax Justice, from Taxpayers for Common Sense to the Center on Budget and Policy Priorities.

All of the groups rallied around three principles that will “provide guidance for debate as we move forward with a substantial revision to the U.S. Tax Code.” Those were:

•Simplification, Transparency, and Certainty;
•The Opportunity for All Americans to Get Ahead; and
•Fiscal Responsibility.

One way to get the ball rolling would be to pick up on a recommendation from 1997’s National Commission on Restructuring the IRS (on which NTU served) that Congress and the President establish a quadrennial tax simplification process. The 1998 IRS Restructuring and Reform Act requires Congress to at least consider complexity before passing tax legislation, but that has not provided enough incentive for lawmakers to avoid additional complexity or encourage simplification.

During hearings of the 1997 restructuring panel, we found that many members of the private sector tax community were willing to volunteer substantial time to make suggestions for simplification. A quadrennial process would do a more thorough job of harnessing such activity and give a broad group of people on the inside and outside of government much more of a stake in working for the adoption of simplification rules. This quadrennial commission would also give the Joint Committee on Taxation and the Treasury Department more incentive to suggest an overhaul of the law.

No, tax reform won’t happen tomorrow. But on a day filled with so many nightmares for average taxpayers, Americans can at least dream, can’t they?

This entry was posted on Tuesday, April 15th, 2008 at 3:56 pm and is filed under Politics, Economy/Budget .