Friday, September 10, 2010

Is Tax Overhaul Possible?

I think we can all agree that our tax system is a mess. The rules, regulations, requirements, and loopholes involved in taxes are overwhelming. So much so, the head of the IRS has admitted that he does not do his own taxes, stating the rules are simply too complex. If Doug Shulman can’t figure it all out, what hope do the rest of us have?

Which leads us to tax reform. The way our system is set up, any tax reform must be introduced as a bill through Congress – to refresh your memory . Unfortunately, in an increasingly partisan, polarized political climate, getting Democrats and Republicans to agree on anything is nearly impossible.

That being said, members of Congress are still trying, and I think we can applaud the effort. Democratic Senator Ron Wyden and Republican Senator Judd Gregg have let slip that they are working on a sweeping tax reform bill. Reports indicate that the bill would reduce the standard Form 1040 from 76 lines to a more reasonable 30 lines, and would do away with a large number of tax loopholes that make our tax system so confusing.

Of course, while we all complain about tax complexity, we still clamber after our representatives to provide more tax breaks – via deductions and credits. Add lobbyists and corporate interests into the mix, pushing politicians to create more tax breaks that benefit various industries - for example the housing industry and the First Time Home Buyer’s Credit - and you can see how difficult this can be.

While regular people like you and me know that our tax system is unbelievably complicated and leading lawmakers agree that the tax code is unfair and obsolete, large changes can be incredibly difficult to push through the legislative process. Are our political leaders willing to risk alienating corporate donors and voters in order to fix our tax system? Backing up a step, would a tax simplification bill be effective?

What would you do to simplify the tax code? Leave me a Facebook message, or Tweet your ideas #taxreform.

(hat tip: NPR)

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