The Skyrocketing Tax Complexity Bill of 2005

It appears that House and Senate negotiators last night ironed out a final energy bill chock-full of complicating tax preferences. The final tally? $14.6 billion in tax subsidies for oil, natural gas, and alternative energy production.

As we’ve written before, the “The Energy Policy Tax Incentives Act of 2005” ought to be renamed “The Skyrocketing Tax Complexity Bill of 2005”. It threatens to dramatically complicate the federal tax code at precisely the time when the President’s Advisory Panel on Federal Tax Reform is set to recommend ways to simplify the code.

One Member of Congress defended the tax-complicating bill saying, “This is a darned good bill and this is going to help this country… The sooner we get it implemented, the better.” Yet on his very own website he simultaneously advocates for tax simplification:

Ninety years have passed since the ratification of the Sixteenth Amendment, and during this time, the tax code has undergone significant change and become increasingly complicated…

[E]ach tax cut or adjustment signed into law also creates more chaos within the code and makes compliance more burdensome.

I think an appropriate solution would be to abolish our current code and adopt a straight-forward, simple system of taxation.

From an economist’s standpoint, the bill is a disappointing abandonment of any attempt at economically sound tax policy. It’s hard to see how Members of Congress can support tax simplification while simultaneously signing onto a bill that seems designed to complicate the tax code in the name of tax subsidies for politically favored activities.