Give Us a Break
It may be too early for Congress to start thinking about the Tax Simplification Act of 1989, but common decency demands that it at least reflect in shame on what it wrought when it enacted the Tax Obfuscation Mess of 1986. Those who ask “What mess?” can safely be assumed not to have confronted the mysteries of Form 1040 and similar arcane documents required by the Internal Revenue Service for filing 1987 tax returns. “I think,” says David Pryor (D-Ark.), chairman of the Senate Finance subcommittee on IRS Oversight, “we’ve created a monster here.” I think, said Noah, that a little rain may be falling.
Tax preparation means manipulating numbers, and numbers tell the appalling story of why tax preparation has become a nightmare. Since 1981 Congress has changed more than 6,000 sections of the tax code--more than 2,700 in 1986 alone--plugging loopholes, wiping out most tax shelters, but at the same time making matters enormously more complicated. More complicated and, for anyone who doesn’t get things right, potentially a lot more costly. Last year the penalties assessed for cheating and/or mistakes nearly tripled from the year before, to just under $10 billion. No one can argue that cheaters shouldn’t be penalized. But what about those who get soaked for mistakes due to honest misunderstandings?
Misunderstandings and so mistakes seem fated to increase. The University of Akron’s Center for Taxation Studies says that so difficult has tax preparation become that only about half of the nation’s high school graduates are able to understand Form 1040. What do you do if you run into a problem doing your taxes? Well, you can call the IRS and ask for help, but according to a General Accounting Office study the IRS can be expected to give you a wrong answer 39% of the time. Or you can purchase the services of a professional tax preparer, as more and more taxpayers have been forced to do. Fully 50% of filers now turn to paid help.
That’s made tax preparation a growth industry. A University of Michigan study calculates that the overall cost of filing tax returns is now $27 billion, with the average cost in time and tax-preparers’ fees running to $275. The average number of hours now required to work on income taxes is 22; for those earning $50,000 and up it’s 45.5 hours, or nearly two full days. The good news in all this is that the majority of taxpayers at every income level should find themselves paying less this year than they would have before tax reform. That assurance comes from no less a source than the Congressional Joint Committee on Taxation. For anyone who has forgotten, they’re the folks who were mainly responsible for writing the new code that almost no one can understand.
