Taxes: Time to Reinvent the Wheel
By Congressman Joe Pitts
How long did it take you to do your taxes this year? Ten years ago, the IRS said it took the average person 9-½ hours to complete the 1040. Today's average? Thirteen hours.
Altogether, Americans spent an estimated 6.4 billion hours complying with the tax code. In 2003, it cost all taxpayers an estimated $203.4 billion just to comply with the tax code. In 2002, businesses spent an estimated 2.75 billion hours complying with the federal tax system-that's the equivalent of 1000 employees working 40-hour weeks for more than 132 years.
There's just no way around it: our tax code is a mess. The resources it takes to fill out forms and comply with this quagmire of regulations siphons billions out of our economy every year.
As of 2001, the Internal Revenue Code contained 1,685,000 words - nearly 380 times the number of words in the U.S. Constitution. There are 733 separate sections of the federal income tax code - a 612% increase over 1954. IRS publications providing guidance to taxpayers alone totaled about 13,400 pages.
In 1784 Thomas Jefferson wrote to James Madison saying, "Would it not be better to simplify the system of taxation rather than to spread it over such a variety of subjects and pass through so many new hands?" More than two hundred years ago, Thomas Jefferson anticipated the headaches of a complicated tax code.
In 2003, the IRS spent $9.4 billion - more than the FBI and the Federal Prison System combined. During that same year, the IRS employed an average of 98,824 people-more than the number of employees (as of September 2003) at the Departments of State, Labor, Energy, Housing & Urban Development, and Education, plus the Environmental Protection Agency combined.
Yet, with all these resources, in 2001 the IRS answered fewer than 60% of the phone calls they received requesting information or assistance. When the IRS does answer, twenty percent of those answers are either incomplete or incorrect.
This just doesn't make sense. The government needs revenue. But the immense overhead costs of collecting that revenue prevent money from getting where it's needed. The return on our investment in this form of taxation is just too low. Our tax code doesn't work anymore.
In his new book, "Speaker: Lessons From Forty Years in Coaching And Politics," House Speaker Dennis Hastert says that over the next four years Congress over should trade in our tax code for a simpler model.
"Pushing reform legislation will be difficult. Change of any sort seldom comes easy. But these changes are critical to our economic vitality and our economic security abroad," Mr. Hastert writes.
I couldn't agree more. We must work to bring true reform to the tax code and make sure that money earned by families is money spent by and for families, not wasted by the government.
As Benjamin Franklin warned us, taxes are as inevitable as death itself. We can, however improve the way we collect them. Simplifying the tax code by establishing a flat tax or national sales tax would save taxpayers' money and cut back the need for armies of IRS agents to process tax returns.
A flat tax would replace graduated income tax rates with two rates - one for businesses, one for individual and family filers. Proposals currently before Congress would allow families with an income under a certain level to avoid paying any income taxes. A national sales tax would scrap the income tax altogether in favor of a federal sales tax on consumer goods. Instead of relying on one's income, the government would rely on consumption of goods.
Apart from relief on families and small business, the most positive effect of these ideas is the elimination of corporate and individual tax loopholes, which allow millionaires and CEOs to escape much of their tax liability.
These are just two of the proposals on the table. Several others warrant examination as well.
In the long run, I believe that our economy will not sustain the tax code as it is currently structured. While I support targeted tax relief, and making that tax relief permanent, this is only a temporary fix. Fundamental reform is necessary if our economy is to thrive in the 21st Century.