Tax reform could stimulate economy

A new report on poor taxpayer service at the IRS sheds the same old light on the same old problem: The tax code is so complicated even the experts can’t seem to figure it out.
Remember a few years ago when the heads of the tax collection bureaucracy tried to convince us of a new and improved IRS that would provide better “customer” service? The IRS still isn’t the place for tax-challenged Americans to turn.
U.S. Treasury Department investigators posing as taxpayers discovered that IRS representatives either gave them the wrong answers to tax questions or had no answer at all 43 percent of the time, according to The Associated Press. The undercover operation was conducted between July and December 2002.
The IRS disputed the findings and said when its representatives actually gave taxpayers an answer the right response was given 67 percent of the time. An IRS official admitted that even that rate was unacceptable. How comforting.
Treasury officials conducted another anonymous operation for two months during tax-filing season this year and discovered that incorrect answers “only” occurred about one-in-four times, an improvement. The IRS said its goal is to improve the track record to 80 percent this year and 85 percent next year.
If an error rate of 15-20 percent is still a good day for the IRS, then something’s wrong. If the supposed experts can’t figure out the tax law with any greater certainty, what are the rest of us mortals supposed to do?
It’s easy to attack the IRS, but blame Congress. The real problem lies with the tax code itself, which contains 45,662 pages of complex tax rules that make our tax structure too cumbersome and complicated, too burdensome for the economy, too inconsistent and too uncertain with endless tinkering from Congress.
According to Citizens for a Sound Economy, a public policy group, the President’s Council of Economic Advisers estimates the IRS spends $8.9 billion just to administer the income tax. Consumers spend around 3 billion hours to comply with the tax code and 72 million taxpayers need professional tax help. At the typical Fortune 500 company, $4 million a year is spent complying with the tax code.
Imagine what it would mean to the economy if that kind of financial and human capital were at work instead of being wasted on deciphering American tax law.
Whenever Congress plays with the tax law, even with sound proposals for reform, budget watchers ignore economic reasoning and claim a “deficit” impact. But too much is at stake to continue to play the same game.
We need a strong debate in this country about the need to reform our tax code. Should we have a flat tax? A national sales tax? A hybrid? It’s time for a serious national discussion on the kind of tax reform that will ensure long-term economic stability.
Continuing to treat the IRS as a punching dummy is futile and ignores the real problem.