Departing US Tax Commissioner Wants Reform Of The Tax Code

Tax-News.com, New York

06 November 2002

"The tax system continues to grow in complexity," IRS Commissioner Charles Rossotti told the New York Times this week in a parting interview, "while the resource base of the IRS is not growing and in real terms is shrinking."

The Wall Street Journal says that Mr Rossotti is right to target the increasingly complex IRS code, but thinks that hiring more enquiry agents won't reverse a problem that has its roots in the tax code and in peoples' unwillingness to pay high rates of tax.

'Stretching to 9,500 pages, the tax code is every lawyer's dream,' says the Journal, 'a maze of credits, exemptions, deductions and phase-outs that create all kinds of openings for, well, expert mediation.'

The newspaper also contests Mr Rossotti's assertion that rich people manage to avoid paying taxes, quoting figures released by Congress's Joint Economic Committee: in 2000 the top 1% of earners paid 37.4% of all federal personal income taxes, yet they earned only 20.8% of all adjusted gross income reported to the IRS. And the top 50% of income tax filers (earning more than $27,682) continue to pay 96.1% of all U.S. income taxes.

The Journal points out that reform of the tax code is the surest way of improving tax collections, pointing to Ronald Reagan's reforms in the 1980s, and more recent experience in Russia. In both cases, the introduction of a lower rate of tax accompanied by the removal of complex loopholes led to increases in the amount fo tax collected.

'Since 1990 the US has moved in the opposite direction,' says the Journal, 'raising rates while adding more loopholes and credits. The result is an ever more complex code with ever more openings for evasion and incentives for flight.'

' When even the tax collector endorses reform, you know the moment has arrived,' finishes America's premier business daily.

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