NCPA - National Center for Policy Analysis

Is Tax Simplification an Impossible Dream?

November 13, 2002

Tax-policy specialists point out that there is no big lobby in Washington, D.C., pushing for tax simplification. But lobbyists for special interest groups seeking this, that or the other exemption or special treatment are so numerous they could sponsor their own traffic jam.

They are also largely responsible -- along with Congress -- for creating a tax code so confusing that a majority of tax payers have to seek professional help of one sort or another.

But scrapping the current code and starting anew will invite the same endless parade of lobbyists with proposals to junk up the code even further. Experts warn that this is the danger of "simplification" attempts.

  • Simplification would require the ditching of an huge array of special credits, getting rid of the alternative minimum tax, and slashing such provisions as retirement, medical and education breaks.
  • As if that task weren't enough, what could be done about the tax-deductibility of home mortgage-interest payments-- America's favorite tax break?
  • Schedule D -- where taxpayers detail their capital gains and losses -- has become one of the code's greatest paperwork nightmares and would have to be dealt with.
  • Experts suggest that simplifying Schedule D might present an opportunity to fix the code's bias against dividends in favor of capital gains.

Congresses past have announced their intentions to simplify taxation. But the result has been longer, more complex, and more confusing tax codes. Will history merely repeat itself if simplification once again becomes the rallying cry?

Source: Jonathan Clements, "Forget Those Tax Deductions: Let's Simplify the 1040 and Regain Our Sanity," Wall Street Journal, November 13, 2002.

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