I am amused and cautiously joyed to hear that President Obama will propose to simplify the US Federal Internal Revenue Code in his State of the Union address tomorrow. The jumbled tax tome is so complex that it has spawned a whole industry of tax preparers who rake in billions every year. The Code is an annual gift to lawyers and 'tax professionals,' and generates all manner of lawsuits that go on for years.
You just about need Alan Turing to figure out what you owe, or what the IRS owes you. The Code is so ridiculously complex that most Americans (not just Mitt Romney!) truly don't know how what percentage they pay. Debates swirl over how regressive our Code is, but we can all agree that it is oppressive.
There have been a few stabs at our beastly Code over the years. Perhaps out of sheer desperation, a number of people have proposed replacing it completely with a flat tax. The latest proposals call for something "flatter," whatever that means.
Our lawyerly Congresses have been hell-bent on making the Code even more complex. Democrats want more Federal tax revenue, and they'll grub for it anywhere they can. Republicans work tirelessly to append corporate loopholes or to get little favors for certain constituents.
Obamacare has significantly complicated the Code; you'll hear more about that over the coming months. Democrats have advocated a whole new class of complex taxation -financial transaction taxes- (FTTs) to try to skim revenue off each and every stock trade. Meanwhile, entire corporations migrate abroad just to get out from under the Code. Don't try that trick as an individual, though: the US expects tax revenue from you even if you live and work abroad; yes, even if you don't earn one penny in the US. Only one other country pursues your income to the ends of the Earth: Eritrea. Yeah. Hmm, maybe if we all become individual multinational corporations and use bitcoin...
Our Code is in imminent danger of collapsing under its own weight. The IRS has a fraction of the Code-trained personnel required to thoroughly and fairly inspect all of our tax documents. The Democrats' solution? Add more bureaucrats. The Republicans' solution? Lower taxes. And so ordinary Americans are stuck with poor service from an IRS that is hamstrung with the worst Code in the world. And so, as many Americans know, filing taxes has become a game of chance.
So...call me amused that President Obama will call for a simpler Code in his State of the Union address tomorrow. Good luck, Mr. President. No, I really mean it, good luck...you'll need it. The Code is an enduring gift to the legal profession in America, and ~40% of Congress is composed of lawyers.