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This piece originally ran in Heraldnet.com on Saturday, April 15, 2006.
Another dreaded April 15 - Tax Day - is upon us. Our annual tax ritual requires more than 26 hours from the average person filing a standard 1040, and more than 60 percent of Americans will seek professional help. The reason: the U.S. tax code now exceeds 60,000 pages, and those pages often give conflicting advice.
No wonder, back in 1976, Jimmy Carter declared, "Our income tax system is a disgrace to the human race."
In many ways, things are worse today than they were then. Our tax code is truly irrational, and Tax Day has become an embarrassing national symbol of waste and abuse.
Every year, Congress adds, extends and changes the deductions, credits and other special preferences in our tax law. Because of these loopholes, compliance is a nightmare and the overall complexity is mind-numbing. Worse, the final result is often unfair: taxpayers with similar incomes can game the system and pay vastly different amounts in taxes.
In fact, the U.S. Treasury Department now estimates the total cost of complying with the income tax at $125 billion a year. That is a staggering and complete waste of resources. This $125 billion in tax code costs is investment capital we do not have for the U.S. economy or for priority government spending. Unless Congress acts, over the next eight years, tax complexity will waste around $1 trillion.
IRS audits are up 21 percent over the past year, which only compounds the nation's misery on Tax Day 2006. The IRS sends out 8 billion pages of forms and instructions each year which, if laid end to end, would circle the earth 28 times. The blame lies with Congress, and the complicated mess our elected officials have foisted on the American people.
The current tax code is the leading driver of political corruption in Washington, D.C. Since 1998, 483 companies have lobbied the IRS alone, hiring 2,884 tax lobbyists, including 277 former federal government employees. While thousands of lobbyists in Washington, D.C., are prospering under the current complicated tax code, the typical taxpayer clearly is not.
It is clearly time for reform. In a report to Congress earlier this year, Nina Olson, the national taxpayer advocate, called for "a sanity check" of regular reviews of the tax code. That would be a good start, but what we really need to do is completely scrap the code and start over. The current tax code cannot be repaired by any tinkering. It must be completely repealed and replaced with a tax code that is simple, fair, honest and flat. Average Americans should be able to complete their taxes without professional help and using just a single form.
Under a flat tax, all income would be taxed only once and at one rate. All deductions and credits would be eliminated, lowering the overall tax rate. The only income not subject to tax would be a generous personal exemption for every American, allowing families to afford to cover their needs before paying the government. This idea is so popular with the American people because it embraces the core belief that all Americans, rich or poor, should be treated equally before the law. No more favoritism toward some citizens and harassment of others. It's just a simple tax system that allows Americans to file their taxes without frustration and without costing the economy billions of dollars.
On Tax Day 2006, as America's workers try to pay their taxes, we should also demand that Congress scrap the code and pass fundamental tax reform that will free our economy from the wasteful cost of the tax code.
Jamie Daniels is the Washington state director of FreedomWorks, a national grassroots advocacy organization.