It’s comforting to know that tax reform is proceeding apace on several different fronts.
Since last year, numerous official, semi-official, and private groups have advanced their ideas about tax reform. These include a presidential advisory panel, a presidential advisory board, assorted commissions, executive committees, think tanks, advocacy groups and the National Taxpayer Advocate. Recent hearings in both the Senate and the House have added to the mix.
While the exact conclusions differ slightly, common themes running through the thoughts of each group seem to be simplification, compliance and fairness.
Opening remarks by ranking member Senator Orrin Hatch, R-Utah, at last week’s Senate Finance Committee hearing revealed some of the current thinking about reform.
“Tax reform is greatly, desperately needed by our nation, and these hearings are a necessary first step in the reform process,” he said.
However, he went on to explain his take on the title of the hearing, which was “Exploring the Tax Code’s Impact on Economic Growth & Job Creation.”
“I want to make it clear that the tax system supports job creation … for CPAs and tax attorneys,” he said. “And I’m also confident that the tax system leads to broad-based economic growth … in China.”
Should CPAs take umbrage at these remarks? Perhaps, if only because they’re being lumped together with tax attorneys.
But from a practical point of view, they have little to fear from a simplified Tax Code. Although I don’t have exact statistics, the last time that was tried, in 1986, it didn’t put many accountants out of work. In fact, it very likely did more damage to the real estate industry than the accounting industry.
And since then, the code has been laden with layer upon layer of special deductions, credits, ever-changing expensing limitations, phase-ins and phase-outs, and the like, which make it impossible for “ordinary” taxpayers and small businesses to stay current.
The problem is that in addition to raising revenue for the federal government, the Tax Code is seen as a means to engineer certain desired social ends. Whether or not this is a good thing, the particular social goals will keep changing as the members of the legislative bodies, and the society at large, change. This creates winners and losers, with the losers organizing the next legislative cycle for tax relief, which creates more winners and losers. So even if you start with a postcard-sized return for most taxpayers, within a decade it will have similar complexities heaped upon it by well-meaning legislators.
In the meantime, most taxpayers won’t stop using a professional preparer to fill out their returns. After all, I may know how to change my car’s oil, but I’ll gladly pay someone else to do it for me.