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April 12, 2009
Obama's Poster Children for Tax Reform
If, as Oliver Wendell Holmes claimed, taxes are what we pay for a civilized society, we have become very civilized indeed.
A difficulty is that tax laws are so complicated, so convoluted, so loaded with preferences and exceptions that it’s next to impossible to understand them, let alone apply them fairly.
President Barack Obama must be acutely aware of this problem by now. Tom Daschle, his first nominee to run Health and Human Services, withdrew after the disclosure Daschle hadn't paid $146,000 in back taxes. The same day, chief performance officer designee Nancy Killefer withdrew her name from consideration because of tax issues.
In his role as Treasury secretary, Timothy Geithner runs the Internal Revenue Service. This is ironic because it was disclosed, during his confirmation hearings, that Geithner had failed to pay almost $40,000 in taxes since 2001. Moreover, he took a dependent-care credit on his returns even after an accountant advised Geithner he didn’t qualify. Obama asserted Geithner’s errors were “an honest mistake.”
During the confirmation process for Health and Services secretary, Kathleen Sebelius paid the IRS more than $7,800 for “unintentional errors” of previous tax returns. Obama’s nominee for U.S. trade representative, Ron Kirk, was sworn in last month after paying $9,975 for amended tax returns. Labor secretary designee Hilda Soltis’s husband settled over $6,000 in tax liens in February.
If people who qualify for appointment at the highest levels of government can’t accurately complete their taxes even with extensive professional assistance, what chance does an average Joe or Jane have of navigating a tax code that’s out of control?
In 1913, the Form 1040 was four pages long. And that included the instructions. This year’s Form 1040 with instructions and selected schedules checks in at 161 pages.
In January, National Taxpayer Advocate Nina Olson made her annual report to Congress. She noted that one estimate of the number of words in the current tax code is 3.7 million and that there were more than 500 tax code changes in just the one year of 2008. About six in ten taxpayers hire a preparer to complete their return.
Calling the IRS for help is often an exercise in futility. One analysis
found staff gave correct answers to only 57 percent of the questions asked by investigators pretending to be taxpayers.
So flawed is the tax system that practically anything, including a consumption tax or a flat tax, would be preferable. Ending withholding taxes from employees would be beneficial. Withholding conceals the real cost of government by taking the money from the worker before the taxpayer ever sees it. Paying in an annual lump sum would drive home what the taxpayer’s genuine share of the cost of government is.
Another recommended change would involve moving tax day from April 15th to October 31st. This would make Halloween even scarier. It also would place the process of tax filing only days before voters have a say on the miscreants who’ve so grotesquely expanded the scope and expense of government.
We need to change our tax system and make it simple and equitable. So simple and equitable that even Barack Obama’s appointees would have no excuse for not paying their fair share.