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The Frary Files: Tax code inflicts unconscionable burden on taxpayers

National Taxpayer Advocate Nina Olson

National Taxpayer Advocate Nina Olson

By Prof. John Frary

On January 9 of this year the National Taxpayer Advocate released her Annual Report to Congress. It is intended to identify the most serious problems facing America’s taxpayers and is available to millions of people athttp://www.taxpayeradvocate.irs.gov/2012AnnualReport .

The Advocate, Nina Olson, delivers her report directly to the House Committee on Ways and Means and the Senate Committee on Finance without prior review by the executive branch. Members of those committees will study it carefully and consider its recommendations for reforming America’s income tax system. The media will give it a central place in the national discussion on tax policy. Attentive citizens of all political persuasions will press Congress to deal with the problems it identifies.

Just kidding. None of this will happen. It’s too embarrassing for Congress; too intelligent for our main stream media, and too obscure for the citizens. Check the Advocate’s site for a list of media reactions. It shows responses largely confined to news sources oriented to business. There’s no evidence so far that Maine’s congressional delegation has read the annual report. I predict that The Maine Wire will be the only news source in Maine to take notice.

The Taxpayer Advocate Service (TAS) began as the Office of the Taxpayer Ombudsman in 1979 to serve as the primary advocate within the IRS for taxpayers. This position was codified in the Taxpayer Bill of Rights (TBOR 1), which was included in the Technical and Miscellaneous Revenue Act of 1988. In 1996, Taxpayer Bill of Rights 2 (TBOR 2) replaced the Office of the Taxpayer Ombudsman with the Office of the Taxpayer Advocate. Just to show that it was paying attention Congress renamed the Taxpayer Advocate as the National Taxpayer Advocate in 1998.

The point of this boring legislative history is to make it clear that the TAS is not a front for the dastardly Koch brothers or a nest of right-wing ideologues. It’s an office of the U.S. government with a $210,000,000 budget and 2,000 employees. Its findings are authoritative. Its influence negligible.
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Ms. Olson points out that “the existing tax code inflicts significant, even unconscionable, burden on taxpayers, and Congress could alleviate much of that burden by vastly simplifying the tax code.”

The Report summarizes the benefits of simplification: “A simpler, more transparent tax code will substantially reduce the estimated 6.1 billion hours and $168 billion that taxpayers (individuals and businesses) spend on return preparation; reduce the likelihood that sophisticated taxpayers can exploit arcane provisions to avoid paying their fair share of tax; enable taxpayers to understand how their tax liabilities are computed and prepare their own returns; improve taxpayer morale and tax compliance – and perhaps even the level of connection that taxpayers feel with the government; and enable the IRS to administer the tax system more effectively and better meet taxpayer needs.”

Ms. Olson tells us that “The National Taxpayer Advocate believes fundamental tax reform is essential and urgent” and recommends various means and methods for achieving simplification. These are of no interest. We can expect no effective action. It’s been known for decades that the IRS code is a nightmare of dysfunctional complexity. Yet Congress undermines every attempt at simplification by further legislation. The tax code now contains almost four million words and a new provision is added almost daily.

Altogether the report identifies twenty of the most serious problems facing taxpayers, including the need expand IRS taxpayer services, the mess created by the Alternative Minimum Tax, refund delays, identity theft problems, the cost and burden of correcting past violations, and “draconian offshore penalties” which discourage tax compliance.

We can hope for some legislative response to some of these problems, but we have no hope of tax simplification, even though simplification might in itself provide systemic relief for most of them. Worse, legislative and regulatory responses to the problems identified may very well add another millions words to the tax code.

There are a number of easily identifiable reasons this is so. There’s the tireless pursuit of “fairness,” an undefined and undefinable objective about which there is no common agreement. There are thousand of lobbyists in Washington and the state capitals advocating special tax breaks for industries and corporations; almost none advocating for simplification. The tax code is a happy hunting ground for congressmammals looking to deliver specific benefits to their constituents. Conservatives who favor tax reduction are prone to favor any kind of partial relief, leading to more loopholes, further complexity. Liberals see the tax code as a tool for centralized  direction of the economy.

All agree that taxation is a legitimate function of Congress under the Constitution. It has consistently  shown itself incompetent to perform this function. Why should be expect it to change?

The aphorism of a nineteenth-century pessimists sums it up for us: “Plus ça change, plus c’est la même chose.”  The more things change, the more they remain the same thing.

Professor John Frary of Farmington, Maine is a former US Congress candidate and retired history professor, a Board Member of Maine Taxpayers United and publisher of www.fraryhomecompanion.com and can be reached at:jfrary8070@aol.com.

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