The Current Federal Tax Code

Our current federal tax laws are a national disgrace.    The federal tax code and the accompanying regulations consist of some 67,500 pages.   Billions of dollars are spent each year by businesses and individuals who are required to employ lawyers, accountants and other tax experts to help them comply with the ever-changing tax laws.    Politicians for years have run for office on the promise they would simplify the tax code, but each year the tax laws get longer and more complicated.  

Our federal tax laws are so complicated that even tax experts cannot comply with them.   Numerous studies have shown that different tax experts come up with different answers to common tax questions.   The Treasury Inspector General for Tax Administration, an independent oversight arm of the Internal Revenue Service, recently conducted a study and found that nearly two out of three commercial tax preparers who are not registered with the IRS—the majority of all tax preparers—failed to fill out accurate federal returns for their clients. 

Our tax laws are overly complicated for a simple reason.  Politicians use the tax laws as a tool to reward their favorite constituents by giving them special tax breaks.   The favorite constituents are usually those who make the largest contributions to the politicians.   It is legalized bribery.  A lobbyist for a special interest group gives money to a politician who in turn sponsors legislation to give tax breaks to the interest group. 

Although we live in a society that frowns on almost any type of discrimination, we have been willing for years to tolerate tax laws that are full of provisions specifically designed to discriminate in favor of one group of taxpayers and against another group of taxpayers.   A taxpayer who owns his own home, for example, gets to deduct the interest paid on his or her mortgage whereas a taxpayer who cannot afford to own a home, or who does not wish to own a home, does not get a corresponding tax break for the rent he or she pays to lease a home.    Another example relates to health insurance.    A taxpayer who receives health insurance as a benefit of employment generally does not have to pay taxes on the value of the health insurance benefit.    On the other hand, taxpayers who are unemployed or retired or do not have employer-provided health insurance are required to pay for their own health insurance with after-tax dollars. 

The tax laws are frequently used to benefit a very narrow class of taxpayers.   The class may be so narrow that it includes only one taxpayer.   A splendid example occurred when Congress recently approved the highly publicized $700 billion bailout—excuse me rescue—package in an effort to alleviate the financial crisis facing the country.    In order to get the votes necessary to approve the bailout package, a number of special provisions were inserted at the request of various lawmakers.    One such provision granted an exemption from a federal excise tax on children’s wooden arrows manufactured by a company in Myrtle Point, Oregon called Rose City Archery.     

In my opinion, the existing tax laws need to be abolished in their entirety, and we need to start all over with a new simplified and much fairer tax system.   Many alternative tax systems have been proposed, including the fair tax, a flat tax, a consumption tax, and a national sales tax.   I have not studied these alternative systems enough to have an intelligent opinion regarding which one would be best.    All I know for sure is that an entirely new system is desperately needed.   I also know that politicians would lose a lot of power—and a lot of campaign contributions—if they gave up their ability to grant special tax breaks to favored individuals or groups. 

Unfortunately, neither John McCain nor Barak Obama has promised to overhaul the current tax system if elected President.    McCain has promised a simpler and fairer tax system without being very specific about what he means.   Obama has also promised a fairer tax system by which he means more of the same with new and different tax breaks for the groups that he favors.   I would prefer a candidate who would agree to abolish the current system in its entirety and implement a new system that would eliminate the ability of politicians to use the tax laws to reward some citizens and punish others. 

When I filed my last federal tax returns this past spring, I wrote separate but identical letters to the two U.S. Senators from Georgia and to the Congressman who represents the district where I live.   Here is what my letter said: 

Dear _________________:   

Happy Tax Day.    As I write this letter, I am wondering if you are working hard to complete your tax returns in order to meet today’s deadline.   My guess is that you are not.   I suspect there are few, if any, members of Congress who prepare their own tax returns.   I further suspect that few members of Congress are even capable of doing so. 

I have read that our tax code now consists of 67,500 pages, and it is continuing to grow.  This is outrageous.   This is absurd.   This is ridiculous.    

After spending many hours working on my own tax returns, I finally reached the point where it was time for me to calculate my tax liability.   I am enclosing a copy of the tax liability worksheet.    After completing this worksheet, I then had to start all over and do another calculation in order to comply with the rules for the alternative minimum tax.    I am enclosing a copy of Form 6251, which is required for this purpose.  My guess is that most members of Congress have never even read the tax liability worksheet or Form 6251.  This is why I am sending copies of these forms to you.  Please study these forms and give me your opinion regarding how many members of Congress could complete them without assistance. 

Our tax system is a disgrace.   Because you are [one of my representatives in the United States Senate] [my representative], I am requesting that you do something to simplify our tax system.     Here is my proposal.   Start by introducing legislation (i) requiring all members of Congress to prepare their own tax returns and to certify under penalty of perjury that they have done so, and (ii) imposing penalties, including imprisonment, upon any member of Congress who makes a mistake in preparing his or her returns.        

Sincerely, Walter M. Grant