NCPA - National Center for Policy Analysis

Tax "Simplification" Seldom Turns Out That Way

August 9, 2001

The word is that the Bush White House is considering overhauling, replacing or simplifying the federal tax code. But those who are familiar with what similar good intentions produced in the past say: "Beware."

Past tax "reforms" and "simplifications" usually resulted in confusion being heaped on chaos.

  • Since Congress in 1986 passed what was heralded as the most comprehensive tax reform and simplification in history, the federal tax code and regulations have grown 58 percent.
  • They now contain nearly 9 million words -- versus 5.7 million words in 1985.
  • In 1987, the year after "reform," 38 federal taxes were raised.
  • In 1988, legislation making "technical corrections" in the 1986 law changed 17 tax provisions to raise more revenue.

Under the 1986 law -- which reduced the number of tax brackets from 14 to two -- businesses, investors and the average taxpayer lost a number of tax preferences. The state sales-tax deduction was eliminated, as were most of the deductions for interest on consumer credit. And the preferential treatment of capital gains income was wiped out.

One problem is that Congress decided to broaden the base of the alternative minimum tax -- with the result that it now takes more time to figure that out than all the eliminated preferences combined, critics charge. Moreover, greater and greater numbers of Americans are becoming subject to the AMT every year, because it wasn't indexed for inflation.

Source: Don Campbell, "Read My Lips: No Simple Taxes," USA Today, August 9, 2001.

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