Who is Really to Blame for Bewildering Tax Rules?

March 12, 2010

A bill is slowing making its way through Congress that would try to make government documents released to the public easier to understand. Specifically, H.R. 946 requires the use of "language that the intended audience can readily understand and use because that language is clear, concise, well-organized, and follows other best practices of plain language writing."

Whatever that means.

One huge target of this legislation is of course the IRS, a government agency notorious for its use of dense impenetrable language. But who is really to blame for that? Is it those hardhearted IRS technical writers? No. It is Congress.

Congress is responsible for our immensely complicated tax laws. Politicians have long used the tax code to win political points by rewarding certain activities, life choices, and financial decisions and punishing others. But all these policies necessarily complicate the tax code. The funny thing is that lawmakers don't really even understand the scale of the monster they have created. Searching for an answer to how long the tax code is, I stumbled upon this list of alleged quotes from politicians. My favorite is this one attributed to former Rep. Dave Hobson of Ohio: "the current tax code, which at 1.3 million pages is twice the length of Tolstoy's War and Peace." I actually picked up a copy of War and Peace in a bookstore a few weeks ago. It was long, but I don't think it was over 600,000 pages. But what are a couple orders of magnitude here or there?

According to Nina Olson, the National Taxpayer Advocate at the IRS, "the tax code has grown so long that it's challenging even to figure out its length." A study of the tax code conducted in preparation for her 2008 report to Congress pegged the code at around 3.7 million words.

Anyway, the point is that as tax laws become more complex, so necessarily does the language needed to describe them to the public. For example, there are at least 5 different definitions of who qualifies as your child for tax purposes, and all these definitions are required by the laws that Congress has passed over the years. Congress cannot craft a 3.7 million word document and expect the results to be "clear and concise." The IRS is not at fault here, lawmakers are. Trying to force the IRS to use "plain language" would probably just result in vague and ambiguous descriptions. And lest we shrug our shoulders and accept complexity as a minor price to pay, remember that tax complexity has real and substantial costs and contributes substantially to non-compliance. In Special Report on tax complexity we found that

In 2005 individuals, businesses and nonprofits will spend an estimated 6 billion hours complying with the federal income tax code, with an estimated compliance cost of over $265.1 billion. This amounts to imposing a 22-cent tax compliance surcharge for every dollar the income tax system collects. Projections show that by 2015 the compliance cost will grow to $482.7 billion.

If lawmakers want to make tax laws more understandable and less burdensome for Americans, how about starting with some massive simplification?


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