Wednesday, January 5, 2011

The ballooning tax code

Nina E. Olson, the national tax advocate who acts as an ombudsman for the I.R.S., issued a sweeping criticism of federal tax policy in her annual report to Congress. Ms. Olson found that the volume of the tax code had nearly tripled in size during the last decade — to 3.8 million words in February 2010 from 1.4 million in 2001. She estimated that Americans spent 6.1 billion hours preparing their returns each year — the equivalent of 3 million employees working full time. By comparison, the federal payroll has 2.1 million full-time workers. ...

“The time for tax reform and tax simplification is now,” Ms. Olson said. ...

[T]he fact that the I.R.S.’s own internal watchdog concedes that the federal tax system has become unmanageable underscores the severity of the problem. ...

Like the deficit commission set up by Mr. Obama, the National Tax Advocate’s office suggests that the tax system could be simplified and rates lowered if the federal government eliminated most of the $1.1 billion in write-offs, loopholes and deductions known as “tax expenditures.” ...

[The report] points out that some of the most expensive tax expenditures are collected by tens of millions of lower- and middle-class Americans who receive tax breaks on home mortgage interest, employer-provided health care plans, 401(k)’s and state and local taxes.

“The dirty little secret is that the largest special interests are us — the vast majority of U.S. taxpayers,” the report said. “Virtually all of us benefit from certain exclusions from income, deductions from income or tax credits.”
--David Kocieniewski, NYT, on a time to prune

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