When Holmes first expressed that sentiment about taxes and civilization in a 1904 speech, the federal income tax didn't even exist. That had changed by 1927, when Holmes's phrase appears in one of his dissenting opinions. But even then, all of federal tax law -- not just the Sixteenth Amendment and Revenue Act of 1913, but the entire corpus of related regulations, rulings, and forms -- took up fewer than 500 pages. Today, the Standard Federal Tax Reporter runs to 73,608 pages in 25 volumes, and consumes nine feet of shelf space.
Is it any wonder, then, that the paperwork, record-keeping, calculations, form-preparation, and filing procedures required to pay federal taxes have become one of the great soul-crushing time sinks in American life? Or that the National Taxpayer Advocate (the independent ombudsman within the IRS) declared flatly last year that "the most serious problem facing taxpayers – and the IRS – is the complexity of the Internal Revenue Code"? Or that the Tax Foundation concluded in 2005 that income-tax compliance costs amounted to a stunning $265.1 billion -- in effect, "a 22-cent … surcharge for every dollar the income tax system collects"?
By now the great majority of individual tax filers has decided that putting together their tax returns without paying for help isn't feasible. According to a 2011 MarketTools study, only 12 percent of US taxpayers still complete their federal income taxes without hiring an accountant, visiting a tax-preparation firm such as H&R Block, or buying tax-preparation software. I gave up trying to prepare my returns by hand years ago; like tens of millions of other Americans, I now put my fate in the hands of TurboTax.
All of which is terrific for the tax-preparation industry, and perhaps April is anything but the cruelest month for those who make their living as a CPA or own stock in Intuit (which makes TurboTax). For the nation as a whole, however, the labyrinthine tortures of our tax system have serious social consequences.
Our tax code's lack of clarity -- and the flood of special-interest giveaways and preferences that make it so cumbersome -- has turned innumerable taxpayers into cynics. Americans conclude that the whole setup is rigged, and that only a sucker doesn't bend the rules in order to pay less or finagle a bigger refund. How many people who wouldn't think of ripping off a local charity or business don't hesitate to cheat on their taxes? In such an environment, it isn't only compliance rates that suffer. Some of the civic virtue so important to a healthy society is lost as well. Jimmy Carter was right in 1976 when he called the US income tax "a disgrace to the human race." Thirty-six years later, it's more disgraceful -- and maddening -- than ever.