The tax system has become another emblem of the government’s seemingly insatiable desire to make things complicated. In the culture of Washington never use one word when ten will do the trick, never hire one bureaucrat when five can do the same amount of work. It is little wonder then that the income tax code stretches to 3.4 million words, filling more than 7,500 letter size pages. A taxpayers nightmare and H&R Block’s dream. But as Tax Day approaches the whispers to simplify the bureaucratic behemoth turn into shouts. Hopefully the government will listen.
In the Wealth of Nations, Adam Smith famously noted that complexity makes taxes “more burdensome to the people than they are beneficial to the sovereign.” To this end the government has traditionally done some Spring cleaning on the code every 15 years. The government initiated major tax reform efforts in 1954, 1969, 1976, and 1986. But in the intervening 24 years we have done nothing.
The result has been a steady build up of loopholes, deductions, alternate tax schemes, and ways to game the system. The ever-multiplying deductions will mean that 47% of Americans will not pay a dime in federal income tax this year. Congratulations if you’re in that half, terribly sorry if you’re part of the remaining 53% left holding the bill.
The tax code has grown unwieldy in other ways as well. As Ezra Klein writes in the Washington Post,
We’ve begun running more of our social policy through the tax code. Rather than creating programs, we create tax credits. “It’s easier politically,” says Roberton Williams, a senior fellow at the Tax Policy Center, “because it’s easier for a congressman to say that I cut your taxes rather than that I started a new program to spend your money.”
We’re left with an outdated mess that is costing taxpayers a fortune. A 2006 report by the Tax Foundation found that taxpayers spend an estimated $265.1 billion to comply with the tax code. That means for every one dollar paid in taxes, 22 cents goes toward compliance costs. Eliminate, or reduce, the complexity of the tax code and we could cut taxes and give the government the same amount of money. The definition of a win-win.
The problem is not unique to the tax code. It is merely a reflection of the larger federal government which has seen its ranks steadily grow to just over 2 million federal workers. Since 2008, while the private sector was contracting due to the recession, the government has hired an additional 25,000 employees. Turns out Ronald Reagan was correct when he said,
“No government ever voluntarily reduces itself in size. Government programs – once launched – never disappear. Actually a government bureaucrat is the nearest thing to eternal life we’ll ever see on this Earth.”
The problem is that the government rarely cleans house. Obviously it is much harder than the tax code. Fixing the code takes cutting out some words. Fixing the bureaucracy takes cutting out some cushy government jobs. People fight harder for their position than words. Nevertheless, our current path is simply unsustainable.
A recent editorial to the Chicago Tribune lamented the growth of the Illinois bureaucracy,
“Our governance infrastructure has become overgrown and overpriced. We have 7,000 often redundant governments, far more than any other state. We populate those governments with armies of employees, and give them duties — some essential, some make-work. Many politicians of both parties enlist these workers as their allies in a cozy paradigm: If you help us win re-election, we will reward you with adequate salaries today — and fabulous retirement benefits tomorrow.”
This is not merely Illinois’ problem, this is the United States’ problem. Our bureaucracy is swelling beyond the point of private citizens to pay for it. Public sector jobs do not create a profitable product and thus must be paid for on the backs of a private citizen. Any growth in the government’s ranks, especially during a time of a contracting private sector work force, requires a greater burden to be placed on fewer people.
We speak of tax code reform but we must also speak of federal bureaucracy reform. The same waste, fraud, and redundancy can be found in both. It is costing taxpayers a fortune. We should be working to identify and eliminate the overlaps. Simplify and streamline the remaining system. And pass the savings along to the taxpayers. With careful decisions the federal government could accomplish the same workload but using up far fewer tax dollars.
It’s time for some Spring cleaning but the tax code shouldn’t be the only place we scrub.
by Brandon Greife, Political Director of the College Republican National Committee
Read more: www.collegerepublicans.org