Wednesday, February 06, 2013

The Second Hundred Years of The Federal Individual Income Tax

Numerous commentators have noted the 100th anniversary of the Sixteenth Amendment to the US Constitution and the imposition in 1913 of the individual income tax (Abraham Lincoln actually briefly used an income tax during the Civil War, but it was declared unconstitutional shortly after).  As the second century of the Individual Income Tax starts (the Corporate Income Tax actually started four years earlier in 1909) consider the following:

--there are over 1000 sections to the Internal Revenue Code.  This does not include regulations, court decisions or tax treaties

--an SELECTIVE volume of IRC and Regulations runs close to 2000 pages in length; no small amount of which is small print.  Again, this excludes court decisions and tax treaties.

--Even with the discontinuation of the RTP program, there are three separate licensure programs for tax preparation: enrolled agent exam, CPA exam and bar exam.

-- During the upcoming year, we have the "fiscal cliff" tax changes and "Obamacare" tax regulations to implement--and President Obama has called for more changes as part of avoiding "sequestration."

--Individual income taxes rake in about double what was produced in the 1980s--and the country STILL has run a deficit of over $1 trillion for the past four years (although the CBO has projected slightly less than a $1,000,000,000,000,000 deficit for FY 2013).

Given the monumental appetite for US Government spending by the President and large numbers of Senators and Congressmen/Congresswomen; it is virtually impossible to develop a taxation system that would meet these needs fairly and effectively and my experiences with individual IRS agents have almost always been positive; in my opinion, the IRS is less of the problem than the people we elect.  Nevertheless, for the second decade:

--Please simplify tax law.  I realize that I have made blog posts have been inconsistent with this; but tax simplification ties up fewer person-hours, adds to the perception of horizontal equity and probably would improve tax compliance.

--Build up the not-for-profit sector, both secular and faith-based.  One of the GOOD things that both President Bushes did was to encourage private charity.  While, the not-for-profit sector cannot immediately replace governmental social and entitlement programs, they can be more flexible and often offer more actual compassion than a faceless check from the government.

--Re-evaluate what government can actually effective do.  I do not doubt the good intentions of many of those who want the government more involved in the economy; instead I wonder why in the face of past results they expect actual solutions to occur.  The US Government has spent trillions of dollars on anti-poverty programs over the last 50 years--is there any significant evidence that poverty has lessened?


Blogger George Azih said...

Interesting article. It would be a good idea to simplify the tax code, but I frankly do not see it happening. Tax accountants/attorneys make their bread and butter off the fact that it is complicated, and would likely want it to remain that way.

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