NCPA - National Center for Policy Analysis

A Political Tug-of-war Has Made Tax Forms Incomprehensible

April 7, 2000

Federal tax forms have become so complex that 55 percent of Americans pay professional tax preparers to fill them out. Moreover, substantial numbers of Americans are missing out on credits and deductions due to the complexities.

Blame it on the continual tug-of-war between Republicans intent on tax cuts and the Clinton administration which is intent on targeting specific programs and satisfying certain constituencies, say analysts.

  • Since 1993, Clinton and Congress have negotiated eight different credits and deductions centering on college costs.
  • But USA Today researchers found that claiming the credits is so complex that two of the most generous -- the $1,500 Hope and $1,000 Lifetime learning credits -- are often ignored by those taxpayers who qualify for them.
  • So, nationally, they miss out on $3.2 billion -- about half the benefit the administration originally promised.

Then there are the complexities of the child tax credit and the Earned Income Tax Credit.

  • Because the $500 child tax credit phases out for higher income parents, there are 20 different income levels involved -- creating a disincentive to doing the necessary calculations.
  • As for the Earned Income Tax Credit, families reporting $2,350 in interest earned lose out.
  • Filers with a child must submit the more complex 1040A tax form with its 65 pages of instructions -- rather than the 1040EZ with 32 pages.

Every time policy makers engage in targeting various taxpayer groups, tax forms become more complex -- increasing the proportion of Americans who must seek professional help, tax reformers point out.

Source: Editorial, "Looking for a Tax Break? You'll Need a Trained Guide," USA Today, April 7, 2000.


Browse more articles on Tax and Spending Issues