Wednesday, January 05, 2005

It Can't Be That Simple, Can It?

One of Dubya's supposed goals in his second term, and a holy grail of the right, is the "simplification" of the federal income tax. I was forced to take a tax law class in law school. The West-published paperback version of the Internal Revenue Code that I had to lug around all semester is rivaled in size and heft only by the West versions of the Federal Criminal Code and Rules and the U.S. Sentencing Guidelines. In other words, tax law really is hugely complex and "simplifying" it probably would not be easy.

But one columnist in USA Today today has an interesting proposal. He would eliminate the IRC as we know it and replace it with a three-section Code: first it declares that all income is taxed, second it defines income, and third is sets the rates. That's it - no exemptions, no write-offs, no loop holes. So such things as the mortgage interest exemption (which I just now qualify for, so hands off!) and deductions for charitable donations would be gone. It would certainly streamline things, but I can't see it happening anytime soon, for reasons set forth in the piece:

It would be tough on CPAs and tax lawyers and charities. The home-building and real estate industries, which depend on the mortgage deduction to fuel demand for ever-bigger houses, would take a hit. Wall Street, which depends on tax preferences to promote investing, would face a period of adjustment, as would many government agencies, which depend on tax-free bonds for capital projects.
I'm sorry, you just can't piss that many people off at one time and be successful.

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