... as tax tangle thickens

Navigation: Main page

Author: Unknown

Section: News, Pg. 10a

It doesn't take a rocket scientist (or a tax accountant) to figure out why so many Americans turn to tax preparation services. The code that governs how much people owe is an incoherent mess.

At 66,498 pages, the tax code, along with related regulations and explanations, is twice the size of the Encyclopaedia Britannica. It has grown by more than 20,000 pages in the Bush administration alone as the result of a host of narrow new tax breaks.

By any measure, Americans are paying an additional tax on top of what they pay on their income, capital gains and dividends. Call it the complexity tax. It's paid in kind (for those who prepare their own taxes) and in cash to tax professionals. Either way, they pay through their noses.

Unlike most taxes, this is not one that members of Congress are in a hurry to cut. In fact, it's hard to find any member willing to even posture on behalf of cutting it.

Last fall, a bipartisan panel offered such an opportunity. It proposed a sensible way to simplify the code and to deal with its most immediate problem -- the Alternative Minimum Tax, a parallel code designed for the very wealthy but which ensnares 3.5 million people. The plan was to end the AMT while building safeguards to ensure that millionaires don't avoid taxes. To make up for lost revenue, the panel proposed ending the deductibility of state and local taxes and reducing the amount of mortgage interest that can be deducted. (It now applies to loans of up to $1 million.)

The idea was not perfect. None can be. But it represented a vast improvement over current law. It was, however, ignored by a Congress less interested in producing a sensible code than in preserving a break enjoyed mostly by upper-income homeowners and the real estate interests that cater to them.

To make matters worse, Congress and President Bush have not only made the code complex, they've added uncertainty. Because they chose to make recently enacted tax cuts temporary, as a gimmick to mask the impact on the deficit, it's unclear to taxpayers what their rates will be in a few years, especially with spending and budget deficits out of control. Similarly, each year Congress adjusts -- rather than fixes -- the AMT, making it impossible for most taxpayers to know when it might hit them.

And who benefits most from all this? The very tax preparation services that are doing such a good job mangling people's returns. There's an expression for this: It's adding insult to injury.

(c) USA TODAY, 2006