The Tax Code Ain’t Nearly So Big as Often Claimed
by Linda Beale
The Tax Code Ain’t Nearly So Big as Often Claimed
I can’t resist pointing readers to tax professor Jim Maule’s excellent post chastising everybody–from those obviously slanted propaganda-tank tax gurus Chris Edwards (you all know him as the purported tax expert from the right-wing pseudo-libertarian Cato Institute, whose other associate, Dan Mitchell, makes similar ridiculous claims in touting the purported “Laffer Theory” about how tax cuts restore tax revenues–I should note that I debated Chris in the run-up to the 2012 elections on Herman Cain‘s ridiculous tax “plan”) and Steve Malanga (you all know him as the purported tax expert from the right-wing Manhattan Institute) to generally reasonable Taxpayer Advocate Nina Olson–about their ridiculous claims of a tax code that runs to the tens of thousands of pages. See James Maule, Code-Size Ignorance Knows No Bounds, MauledAgain (June 5, 2013).
Many of those claims about a giganormous Code that is pressing down on taxpayers from the sheer weight of its pages stem from three facts: (i) that the CCH looseleaf service itself notes that the service (in 20-odd volumes, with extensive and often duplicative annotations to cases, private letter rulings, notices, and various legislative history and rev.proc and rev.rul. items as well as the actual current Code provisions and regulations promulgated thereunder) runs more than 70,000 pages; (ii) that it is very useful to propaganda tanks and others bent on painting a negative picture of IRS tax enforcement and collection and taxes in general to portray the rules as so complex and lengthy that no one in their right mind could think it appropriate; and (iii) people without those bad propaganda intentions frequently serve as shilling boom-boxes for those (false) claims, because they don’t stop and think or do their own homework. So the claims are repeated, over and over, and –as psychologists have shown–once something is repeated often enough, it gets to be accepted as fact even by those who should know better.
What people need to know –besides the obvious one fact that Congress, not the IRS as often insinuated in those blogposts condemning the length of the “code”, writes the tax laws–is that:
(1) the CCH tax service includes more extra “stuff” that tax practitioners find very useful to help interpret the actual statutory language and the regulations promulgated thereunder than actual Code and Regulations! The tax code itself is relatively short–you can read it quicker than most good novels. (Additionally, the regulations have a lot of specifics applicable to particular types of taxpayers and situations, but even they aren’t tens of thousands of pages long. And the page counts also depend greatly on the size of print on the page, folks. Word counts are much more meaningful.)
(2) most of the complexity that actually exists in the Code affects only the 3 in 10 taxpayers who “itemize” their deductions on their tax returns–and then, mostly the ones in the very tip-top of the distribution–the 1 in 10,000 who have lots of complexity in doing that itemization; and
(3) most of that complexity is necessary to prevent abuses by those who can hire very expensive lawyers, accountants and banks to set up schemes to avoid (or even evade) taxes.
crossposted with ataxingmatter
Another point: If your taxes are difficult, the difficulty does not lie in “deductions”, but in calculating your income in the first place. No amount if tinkering will fix this. It is inherently difficult to calculate business, rental, and capital income, and is also inherently difficult to deal with foreign taxes and the surrounding double-taxation treaties.
If you have just W2 income, your tax return – the 1040EZ – is pretty much the mythical “post card” tax return. Almost all of the two pages are you and your family’s IDs and signatures, not calculations. Adding basic itemization (mortgage interest, state and local taxes, etc), some basic deductions, and some outside income like that on a 1099-DIV or a pension is nothing that turbotax and the like can’t chew through in minutes. Unless you have business or foreign income of some sort, doing your taxes is nothing more than a couple hours at most on a Sunday morning. Either that, or you are mathematically inept.
i might have agreed with that at one time. But i have run into IRS complications in my relatively simple life that forced me to hire an accountant who magically charged me exactly what he “saved” me on taxes.
I am reasonably sure that a real business would, and should, have the knowledge, or expect to hire the knowledge, as a business expense, to deal with this. But like a lot of laws… and i am a big fan of laws… the actual weight of the law falls more heavily on simple people just trying to make it through a hard life than it does on the people who are big and rich enough to dance their way through it.
What was your sticking point? The only time I have ever needed an accountant was when I was both living abroad and earning enough to clear the foreign income exemption. I can certainly imagine needing one if I had my own business, or rentals or other similar complexities. I guess this stuff counts as “normal life”, but it is a problem of the top 10%. who can afford to shell out a few hundred bucks once in a while.
How many words are in the IRC? I’ve heard 9,000,000 but I have no idea if that’s true.
Having to deal with state taxes and federal taxes also complicated things a fair bit.
But, yea, back when I was poor-ish and really just had wage income I did my taxes in about 15 minutes on paper.
WIth turbotax and a bunch more money the hardest part, by far, is the short vs long term capital gains issue.
My father runs a small business, and tried to do his business taxes himself once. Ended up running back to his previous tax preparer.
The definition of income for a business is a lot more complicated, but what really got him was that business taxation simply uses a different vocabulary than personal taxation. I assume it grew more directly out of accounting, and uses a lot of jargon while the personal tax system has been translated into more common english.
Most hilarious is those who assert that eliminating the progressive rate structure would simplify tax day.
besides the obvious one fact that Congress, not the IRS …writes the tax laws …
To me this is the entire key to the game of the complaint. If not for those who have the where-for-all to get what they want in the code so as to gain some advantage of some type, the code would not be so complicated. Of course part of getting what you want in the code includes going to court to have it ruled good so that it stay and as you note, that just adds number of words to the code.
Of course unless you are Steven King who thinks being investigated by the IRS is some kind of infringement on his freedom. Hey Steve baby, if you haven’t done anything wrong, then what’s the problem?
i don’t want to go into the personal details, but take it from me i am nowhere near the top 10%. and the IRS is not at all helpful in explaining their rules…. which, as noted by others, are designed to help the rich stay rich. i doubt they are deliberately designed to hurt the poor, but they don’t worry too much about it if they do.
it doesn’t matter if there are 70,000 pages or only seven. but as for Linda’s point, the people yelling about the complexity of the code are not “the poor.” they don’t give a damn about the poor.
and the thing about the top 10% is that they want no rules at all. no taxes and no rules.
which is worth keeping in mind when you are arguing with them.
Linda, Thanks for this. And yes, I have a deep fondness for Mauled Again and, although I don’t know the Prof personally, feel that he is an essential part of my week. (3rd on my Econ etc. favorites).
AB People – who is “The IRS”? As far as I can tell they are just a bunch of government workers/working class people.
According to the IRS the word count in 2010 was 3.6 million. War and Peace has about 580,000 words.
I’ve done many tax returns for relatively poor people. You would think these returns would be easy, but they are not.
So I disagree with all the conclusions of this post. The tax laws are needlessly complex for even relatively poor families. Got kids? Pay for education? Get the EITC? Sold a cow? Rent the broken down trailer? Railroad pension? Tobacco? Mileage records?
Remember Turbo Tax lobbies to keep the code complex.
like practically every other organization in world history, the irs is NOT “just working people.” it is a product of those who manage it… for better or worse…who determine its policies, its culture, and its ability to actually do the job it was intended to do.
i think the IRS could be a whole lot more user friendly than it is, but i don’t expect it to change short of the second coming.