, Newburyport, MA

April 16, 2014

Our view: Congress should simplify 'Tax Day'

Newburyport Daily News

---- — Yesterday was the day that many Americans had been dreading since the joys of Christmas and the hangovers of New Year’s Eve began to fade. It’s Tax Day in America, the bleakest day of the year.

It’s the day on which many of our fellow citizens realize they are not the financial planning wizards they imagined they were. For some, carefully managed exemptions and itemized deductions still result in the need to write a big check to the U.S. Treasury, or, in Massachusetts, to the Department of Revenue as well.

Those who find themselves due a hefty refund should not pat themselves on the back excessively. They’ve been giving Uncle Sam, the biggest spendthrift in the history of creation, an interest-free loan for the better part of a year. And that nice state refund they’re waiting to spend? Under certain circumstances, the feds may consider that taxable income for next year’s return.

Those who spent Monday night frantically scribbling out figures with pencil and paper before finally giving up in frustration can take comfort — the Internal Revenue Service will kindly grant them a six-month extension to file. But they’re not off the hook for the cash — the IRS expects a check right now for the amount they estimate they’ll owe.

It shouldn’t be this painful or costly.

Income tax reform has been a staple of political discussion for years, but little has been done to simplify the tax code in the past 30 years. The Tax Reform Act of 1986, supported by congressional Democrats with the backing of Republican President Ronald Reagan, reduced the number of tax brackets and eliminated many deductions. But as Dallas Morning News columnist Carl Leubsdorf noted, since that legislation was enacted, new deductions and credits have slipped back into the tax code, making it more complex than ever.

Leubsdorf notes that one promising reform proposal from Republican Congressman Dave Camp of Michigan wilted on the vine. Camp proposed setting three tax rates (15 percent, 25 percent and 35 percent), reducing corporate taxes, placing an excise tax on banks, repealing state and local tax deductions and placing an income ceiling on mortgage interest and charitable contribution deductions.

Bankers and real estate agents lined up in opposition. Democrats and Republicans alike objected to parts of the reform and the status quo was maintained.

Every new line of the tax code is the result of some special interest pleading for some benefit or relief from some perceived burden. The challenge facing any attempt at tax reform is to craft legislation that serves the interest of the nation and the majority of its people, not those of narrow special interests.

Massachusetts has a relatively simple income tax code, with few deductions. Exemptions are in place to protect low-income earners. It is not a perfect system, but it is fairly easy for the average citizen to understand. It could be a model for the type of system that the federal government should adopt.

Americans spend billions of dollars and consume untold hours to prepare their tax returns. All that time and money serves no productive purpose; it is pure waste. It doesn’t have to be that complicated. Taxes for most individual Americans are relatively uncomplicated and could be filed in minutes on a postcard-sized document. Simpler tax calculations for small businesses and corporation would allow those enterprises to focus on their core purposes, not dodging tax liabilities.

Tax reform would stimulate business growth, improve productivity and make the financial lives of individual Americans easier. The only real obstacle is the lack of courage and cooperation among our elected officials in Washington.