Another Cause of Economic Slowdown
I almost look forward to doing my taxes for 2000, my first full year as a regular employee since 1995. I avoided earning any self-employment income, so the dreaded Schedule C wont be necessary.
But the time required to render unto Caesar is still outrageous. Ten years ago, it took an average of nine hours to complete a 1040; today, it takes 13 hours, according to the IRS. Investors spent three and a half hours reporting capital gains and losses in 1990; this year, theyll take twice that.
Oh, for the good old days of feudalism, when tax collectors made house calls. Just grab some sheep and potatoes and let me get back to work!
Our meddlesome Congress critters and their lobbyist sugar daddies are to blame for all of that wasted tax time (sic). Every new tax "break" is accompanied by exceptions, exclusions and limitations that cost more to figure out than the tax savings are worth.
"The cost of complying with the tax system totals about $200 billion annually, or $700 for every man, woman and child" in the U.S., according to House Majority Leader Dick Armey (R.-Texas). The corporate income tax costs more in lost productivity than it raises for the Treasury, says the Congressional Research Service. The working poor are hit hardest by tax complexity. Even the IRS says the earned income credit is "too difficult to compute." Thats one reason a disproportionate percentage of audits fall upon people earning less than $25,000.
The tax preparation industry itself is a booming boondoggle. In 1998, 54.3 percent of tax returns were signed by hired preparers, vs. 47.9 percent in 1990. Again, the poor are hit hardest by that "hidden tax." A billiards buddy of mine earned $12,000 last year. H&R Block charged him $247 to calculate his $756 refund. Just because a guys only as sharp as a cue ball is no reason to rip him off.
Armeys flat tax proposal looks better every year (www.flattax.house.gov). "Flat" is an unfortunate misnomer that draws fire from proponents of "progressive" (a.k.a. "Robin Hood") taxation. Under Armeys proposed 17 percent tax rate, a family of four earning $25,000 would pay no tax. The same family earning $50,000 would pay 6 percent, or 14 percent at $200,000.
The flat tax return fits on a postcard and consists of just 10 questions that even my pool pal could answer.
Business taxes would be equally simple: 17 percent of the difference between revenues and expenses, with expenses defined as "purchases of goods and services, capital equipment, structures, land, wages and contributions to employee retirement plans." How many bean counters would you need to figure that out?
Armeys system would be easier to enforce. The cost of compliance would drop by 94 percent, and wed spare more than 300,000 trees that the IRS turns into tax forms each year.
Isnt this a little too obvious?
Lets also simplify car insurance. Thats a tax by my reckoning because in most cases the government requires it, many of us never see commensurate benefits, and a lot of people evade it. A pay-at-the-pump insurance tax might add 50 cents to the price of a gallon of gas, but on an annual basis that works out to half of my insurance premium.