May 6, 2017 5 min read

The spring brings warmer weather, which most people look forward to, and tax filing, which most people don’t. While few people enjoy paying taxes, most are willing to do so – the United States has one of the highest rates of compliance in the world. In the words of Supreme Court Justice Oliver Wendall Holmes Jr., “Taxes are what we pay for civilized society.”

They just shouldn’t be so complicated.

A simple tax system has many virtues. It takes less effort on the part of taxpayers – the Dutch complain if it takes them more than 15 minutes to complete their tax returns. It is more transparent, which gives people faith that others are paying similar rates, and it provides fewer opportunities for gaming the system. But our system is anything but simple. Since the last serious tax reform effort, in 1986, more than 30,000 changes have been made to the tax code.

Taxpayers spend an estimated 2.6 billion hours filing the 1040 form alone. Those are unproductive, generally unpleasant hours. Fifty-six percent of taxpayers pay for professional help, and another 34 percent buy tax preparation software. For complicated returns, tax preparers can often find ways to lower the bill. And from a purely financial standpoint, using one may make sense. Spending $500 on an accountant who reduces a tax bill by $750 saves the taxpayer $250. On the other hand, the government lost $750, but the taxpayer only benefited by $250. That is only a good outcome if you think all government spending is wasted.

For most people, taxes should be simple enough to complete without assistance. In fact, for most people, government should be able to create their returns; it has all the necessary documents, since employers, banks and other institutions provide that information so it can check the accuracy of the returns. But if it has that information already, why force the taxpayers to fill in the blanks and then penalize them when they’re wrong? Many other countries, including Denmark, Sweden and New Zealand, employ such a system, known as pro forma or return-free filing. It was even tried successfully in California.

Joe Bankman, a Stanford law professor, created a pilot program on that basis with 11,000 taxpayers, and included a survey. Ninety-nine percent of the respondents said they’d use the system again. Bankman likened the absurdity of individuals filing their own taxes to Visa sending its customers a blank form every month, and asking them to record all their transactions, and if what they submitted didn’t match what Visa had from merchants, they’d either pay a fine or go to jail.

After the successful test program, Bankman tried to get the program through the California legislature. While Republican Gov. Arnold Schwarzenegger was for it, Bankman found little Republican support in the legislature. The primary obstacle was lobbying by Intuit, the California company that owns the tax software program Turbo Tax, which recognized simplification as a threat to its business.

Another obstacle was Republican operative Grover Norquist. He’s the leader of the Americans For Tax Reform advocacy group that would like to see the implementation of a flat tax, and the creator of the pledge not to impose new taxes that most Republicans take. Norquist argued because taxpayers would be hesitant to challenge the government’s figures, some would likely overpay, so supporting this bill would be a tax hike, and any Republican who did so would pay a political price.

Additionally, to prevent the government from collecting more revenue, difficulty in paying taxes was a feature, not a bug. The legislation failed to pass by one vote.

Complexity also provides cover for knowledgeable and powerful people to get better deals than the rest of us. Beneficiaries of targeted tax breaks are willing to spend money to get them because the return on such investments is very high, while the reward for preventing others from getting a tax break is diffuse to the point of being invisible. Hiding these breaks in obscure language makes it difficult for opponents to even find them, much less fight them.

For example, the Michigan congressional delegation pushed for a special tax break that was only available to “an automobile manufacturer incorporated in Delaware on Oct. 13, 1916,” which describes only one company: General Motors.

President Trump’s attitude towards taxes is unhelpful. His unwillingness to release his tax returns suggests he has something to hide. Critics speculate he’s not as wealthy as he claims, or he gives very little to charity or he uses loopholes to pay very little in tax. Without seeing his returns, conflicts of interest are also less clear. For example, Trump has just proposed eliminating the Alternative Minimum Tax, which is designed to prevent the very rich from using so many loopholes they pay little tax. Using Trump’s most recent return that was made public, from 2005, eliminating the tax would have saved Trump $31 million that year.

Additionally, Trump’s declaration during a presidential debate that he paid no taxes because he’s smart implies people who do pay taxes are not so smart. This suggests an attitude similar to that of the New York hotel magnate Leona Helmsley, who reportedly said, “We don’t pay taxes, taxes are for little people.” But if this attitude is pervasive, tax cheating becomes rampant and the government struggles to function. One of the reasons Greece got into such financial trouble was many citizens were unwilling to voluntarily pay taxes, because government corruption made it culturally acceptable to avoid them.

Demonizing taxes is a slippery slope. Taxes are necessary for a government to function, but they need to be simple and painless to collect.

Kent James is a resident of East Washington.