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Impossible dream: eliminating the morass of tax rules and regs

The total cost of collecting taxes, observed Adam Smith, is “a great deal more” than the amount of revenue actually collected.

Smith, the Scottish philosopher/logician/economics theorist whose “The Wealth of Nations” has had a profound influence on concepts of economics and personal freedoms to this day, made that observation in 1776.

Were he around these 231 years later, he doubtless would be astounded at how much effort and expense are devoted to the collection of taxes in the U.S. and the great lengths to which our lawmakers have gone to complicate that process.

And it becomes more onerous each year.

In 1995, the total pages of federal tax code, regulations, and Internal Revenue Service rulings were 40,500. In 2006, that had increased to 66,498.

Americans spent an estimated 5.3 billion hours on tax compliance in 1995; in 2005, it was 6.4 billion hours. Costs of compliance for federal income taxes: $112 billion in 1995; $265 billion in 2006.

While the 2008 presidential wannabes are trying to one-up each other on positions for/against the Iraq war, whether to attack Iran, what is or isn't torture, and other issues aimed at garnering media attention, their positions on taxes pretty much center on whether to continue the Bush tax cuts (Republicans) or promptly scuttle them (Democrats).

Quirky billionaire Ross Perot, in his Reform Party presidential run in 1992, advocated tax cuts and policies that stirred public attention (garnering 20 percent of the vote for him) and pretty much set the stage for the whopping tax cuts that were later ramrodded by the Bush administration ($1.3 trillion in 2001 alone).

But the tax rules and regs have only grown more voluminous and complex, pushing more and more people to the use of tax preparer services. And not a year passes that mock tests don't show commercial tax services coming up with widely differing amounts due for the same return. If supposed “experts” can't, with any reliability, negotiate the morass of arcane tax rules, how's the average person expected to do so?

While all the presidential hopefuls address taxation in their campaign policy papers, perhaps two of the most unique have come from Democrat John Edwards and Republican Mike Huckabee.

Edwards suggests cutting out all the middlemen and letting the Internal Revenue Service calculate taxes due. The taxpayer would then receive a form to sign and verify, or take issue with the IRS' calculations.

Understandably, the commercial tax preparation industry is opposed, seeing it as government taking over private business.

Arkansas' Huckabee supports an even more revolutionary approach — adoption of the program developed by the FairTax organization that would, he says, be a “going out of business sale” for the Internal Revenue Service.

It would eliminate the Internal Revenue Code and replace it with a consumption tax. There would be no income taxes, no payroll taxes, no tax forms to fill out. Every worker would get his full pay and would then pay a tax only when he bought something.

There ain't a snowball's chance of either plan happening, of course. But never doing taxes again? What a nice thought!

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