The bad news: Federal income tax filing season began Friday. Worse news: The filing season is shorter than normal because of last year’s partial government shutdown. Even worse news: The ever-growing tax code is bigger and more complicated than ever, which means you have a better chance of cashing a 10-team parlay ticket at the sports book than filing an error-free tax return.
The federal income tax code is an abomination more than a century in the making. It is crafted not merely to raise revenue for the treasury, but to incentivize certain behaviors and discourage others, to intrude on your most personal business, to reward some special interests while punishing others, and to redistribute wealth from higher tax brackets to lower ones. It never contracts, and it always changes — there have been about 5,000 modifications to the code in the past 15 years — making it impossible for average citizens to fully understand how it affects them year after year.
It is the perfect embodiment of Washington’s political process, which requires corporations and organizations to employ ever more lobbyists to call for ever more laws that protect their own interests. Enforcing more laws inevitably requires more changes to the tax code in the form of more and higher taxes.
This complexity has huge costs for the public. The Internal Revenue Service estimates that Americans spend 6 billion hours and $168 billion every year to prepare and file their tax returns. According to Jason Fichtner, a senior research fellow at the Mercatus Center at George Washington University, 6 billion hours is “enough to create an annual workforce of 3.4 million people. If that workforce was a city, it would be the third-largest city in the United States. If that workforce was a company, it would employ more individuals than Wal-Mart, IBM and McDonald’s combined.”
Talk about a drain on productivity. Meanwhile, all that wasted time and confusion inevitably sends Americans scrambling for help. And in her recently submitted annual report to Congress, Nina Olsen, the IRS’ national taxpayer advocate, said the agency can’t provide that help to everyone who needs it. In 2013, she reports, the agency received more than 100 million calls. Because of long hold times, almost 20 percent of those calls weren’t answered. That’s nearly 20 million hang-ups or disconnections.
The correct response to that problem is not to hire more IRS agents, it’s to shrink and simplify the tax code. Fewer, lower rates. Fewer deductions. Fewer credits. Filing a federal income tax return shouldn’t take any American more than 20 or 30 minutes, and it shouldn’t take more than a single sheet of paper (whether real or electronic).
But we’re not headed in that direction. Thanks to the Affordable Care Act, tax preparation soon will get a whole lot worse. No one knows how much chaos the law’s individual mandate — which requires Americans to obtain a minimum level of health insurance coverage in 2014 or pay a penalty tax — will create during filing season next year, or whether the IRS will be capable of verifying such coverage. If the law’s ongoing rollout is any indication, it won’t go well.
The bad news: There is no good news about filing federal income taxes. It’s past time for Congress to change that.