Albert Einstein is purported to have once complained that the most confusing force in the universe is the U.S. income tax. What's really depressing is that back when Einstein sat down with pencil, eraser and slide rule, the IRS tax code was only one-eighth the size of the 66,000 pages of special-interest rules, regulations, loopholes, credits and carve-outs it is today. More than half of all Americans now have to hire a professional tax preparer to do their taxes.
And it's got so complicated that even the professionals foul up. Earlier this year H&R Block -- the one company in America that is supposed to be able to decipher the tax code's microscopic intricacies -- famously goofed on its own tax return and under-reported its tax liability by $32 million. (Let us also note for the record that H&R Block, which makes its money from other people's tax miseries, has long opposed tax simplification.)
The U.S. Government Accountability Office recently audited a sample of tax returns filed by real Americans who had hired a tax preparer. More than half of those tax forms contained what the GAO described as "a significant level of errors." The GAO then traveled to tax-preparation chain stores in random towns across the country and posed as ordinary taxpayers, such as plumbers, single working mothers, and the like. Only two of the 19 accountants could fill out even routine tax returns mistake-free.
This sure sounds like incontrovertible evidence that the IRS tax code is unfixable. A rational conclusion on Capitol Hill would be to scrap the code for something that actually approaches common sense. Instead, Chuck Grassley and Max Baucus, the leading Republican and Democrat on the Senate's tax-writing Finance Committee, say that what is needed is more training requirements for tax preparers.
Great. More regulation. You know what that is going to do? Raise the cost of tax preparation. After all, additional training costs these tax preparation companies money, and they aren't about to let that cut into their bottom line. Meaning that, on top of what Americans already pay in taxes, they would have to pay even more to get somebody who supposedly knows that they're doing to fill out the paperwork.
I guess it would just make too much sense to simplify the tax code so that more Americans could pay their taxes without having to hire a professional.