The best way to look at the U.S. tax code is like it's a three legged mule. It's ugly, deformed, and doesn't do much good for anybody.
Fixing the tax code should be the first item on the domestic agenda and fundamental tax reform should be a critical part of the 2008 presidential campaign, especially tomorrow’s CNN/YouTube Republican debate in Tampa.
As it stands today, our country's tax code is an unmitigated disaster: confusing and complex, costly and burdensome, a bloated bureaucratic mess that perfectly—and frighteningly—symbolizes all that can and will go wrong when the government decides to take control of the lives of individuals. Right now the country is in the mood for change in Washington, and one of the best places we can start is with fundamental tax reform.
Pretty much everyone agrees that taxes are a problem. Even Democratic Congressman Charlie Rangel's got a plan to reform the tax code (though it can be summed up with three words: soak the rich). Back in the 1800s, when taxes were much lower than they are now, poet Ralph Waldo Emerson said that taxes were a satire on government. But if this is comedy, I don't think it's very funny.
Part of the problem is that it is such a confusing, time-consuming process. The tax code is so complex that no one—not even the tax masters at the IRS—can figure it out. This means loopholes, special exemptions for special interests, and plenty of frustration for everyone.
The confusion and complexity of the tax code also results in tremendous hidden costs. The IRS collected 168 million tax returns last year, including 133 million from individuals, and each one represented a tremendous investment of time and effort that could have been spent elsewhere. When you and your employer pay taxes, it doesn't just cost the money you pay, it also costs time, effort and expertise, or what economists call "compliance costs."
When you add them up, those costs are pretty staggering. America collectively spends 6.6 billion hours filling out tax forms each year. In 2004, compliance costs totaled almost $250 billion dollars, an amount equal to nearly a quarter of total federal revenue. This country isn't just paying taxes; it's paying to pay taxes—and it isn't cheap.
Americans sent a man to the moon, figured out nuclear fission, and invented the automobile and the iPod. You'd think that something as ancient and simple as collecting taxes wouldn't be so much trouble.