Current Tax Code Called ‘Incomprehensible’

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In a prepared statement concerning statements made by the current Treasury Secretary before a U.S. Senate subcommittee, Dr. Lawrence A. Hunter, Institute for Policy Innovation (IPI) Economist and Senior Research Fellow, said that, “Treasury Secretary John Snow finally admitted to the Congress what every American taxpayer has known for years: the Internal Revenue Code is incomprehensive and unintellible even to the experts who prepare the tax returns, enforce the law and collect the taxes.” Secretary Snow continued, “The problem we are talking about is the bewildering complexity of the code itself.”

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Hunter wrote, “Senator Patty Murray of Washington State, apparently more concerned about the federal government's ability to collect revenue than about the tremendous burden the tax code places on the American people, hammered the Secretary to enforce the code and collect federal taxes despite its bewildering complexity.”

Hunter continued, “When Murray insisted it is still necessary to enforce the law no matter how impossible the code is to understand, Snow responded by quoting his wife as saying: ‘How do you expect people to comply with the tax code when I, a reasonably intelligent person who had a course in the taxes, can hardly figure it out myself?' Yes, Senator Murray, how do you expect people to comply with your handiwork? Rather than scape-goating the firms that prepare our taxes, shouldn't you be working to fix the mess you and your congressional colleagues created?”

“President Ronald Reagan said it best in 1983: ‘Our federal tax system is, in short, utterly impossible, utterly unjust and completely counterproductive...(it) reeks with injustice and is fundamentally un-American... it has earned a rebellion and it's time we rebelled,'” wrote Hunter.

Hunter finished, “Secretary Snow's candid admission is courageous and laudable in a town where frankness and honesty are in short supply, but it hardly constitutes the ‘rebellion' Ronald Reagan called for. The question now, Mr. Secretary, is what are you going to do about it? Are you simply going to complain about it and continue to fine and penalize taxpayers and the tax preparers who make honest mistakes, or are you and the President going to send the Congress a tax reform plan to remedy this unconscionable situation? The voters await your answer with anticipation as they prepare to go to the polls in November.”

We can thank the Bush administration for increasing the tax code, currently at 66,498 pages, by more than 20,000 pages, according to USA Today. Bush also commissioned a bipartisan panel to search for and offer proposals for the simplification of our tax system. Their plan would end the Alternative Minimum Tax (AMT), while enacting safeguards to ensure those with higher incomes would not avoid paying their share of taxes.

A tax rebellion may occur sometime in the future, but Bloomberg reports that the Congress departed Washington for the Easter holiday without agreeing on the budget. Their lack of work ethic may leave some 20 million taxpayers to handle the AMT this weekend with an effective marginal tax rate up to 35 percent. USA Today reports that AMT will entangle 3.5 million taxpayers.

Joseph Barr created AMT back in the winter of 1968-69 as the Johnson administration was on its way out. Barr was chosen to serve until the incoming President Nixon selected his own Treasury Secretary. Bloomberg reports the AMT as a perverse use of the tax code to benefit one group over another group.

At the center of the original motivation for the AMT were 155 rich Americans, of which 21 still had incomes over $1 million, that were paying no taxes at all after taking advantage of tax loopholes of the time, according to Bloomberg. These “extreme cases” were wronging those taxpayers earning lower wages and the Congress created a separate minimum tax system to include those escaping taxes.

Revenge was the initial motivation instead of revenues because the federal budget at the time was in surplus. Congress hasn't reindexed the AMT for inflation since that time. Americans were also improving their economic levels. Bloomberg reports that the Tax Foundation, a research group, has released a report showing that more Americans are finding themselves moving up the tax schedule and experiencing “real bracket creep.”

Without any changes to the law, the Congressional Budget Office recently extimated that the additional revenue generated by AMT in 2007 will amount to $51 billion. Bloomberg reports that Brookings Institution economist William Gale has stated that AMT will bring in more revenue than the traditional income tax.

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