Tipsheet

Tax Simplification Leads to Higher Government Revenues

Tax simplification is a major issue in many quarters of the conservative movement. Taxes are, and should be, regarded as a necessary evil. And now, in tax season, they're at the forefront of everyone's minds. Filling out the necessary IRS forms can be an incredibly painful process. Wouldn't it be nice if everything could fit on one nice, easy, simple and clean form?

Well, yes. But the thing about tax simplification is that it would allow for governments to collect a higher share of taxes from the populace. Ryan Sager has a must-read op-ed describing this conflict.

Dating back to John Stuart Mill’s 1848 Principles of Political Economy, there has been an understanding that a less visible tax system may have a tendency to fuel the growth of government. The less the goose feels the plucking, after all, the more feathers the pluckers can collect.

Government officials know this quite well. In 1942, discussing proposed changes to how the federal government collected taxes at a Senate hearing, treasury official Randolph Paul wondered aloud, regarding income tax withholding, whether “if we cut down the squawking under this method we could raise the individual tax rates?” Withholding was instituted, the squawking was cut down, and taxes indeed have risen as a share of GDP.

Sager goes on to examine the EZ-Pass system and California's ReturnReady program while warning about the possible dangers of tax simplification. While tax simplification is and should be a major issue within the conservative movement, those advocating for it should be prepared for the ability of governments to collect higher revenues, possibly fueling bigger government.