Simpler Tax Code Will Help IRS Combat Tax Evasion Says CSE

by Mike Godfrey, Tax-News,com, Washington

24 September 2003

As the Internal Revenue Service heralded a new information sharing agreement with state tax authorities, the organization Citizens for a Sound Economy say the government should be concentrating its effort on simplifying the tax code if it wants to improve tax collection and combat tax evasion.

"The Treasury Department’s Assistant Secretary for Tax Policy, Pam Olson, views the new program as a way to restore the public’s faith in the tax system," observes professor Wayne T. Brough, chief economist at the CSE. "Yet a tax code that treats neighbors making the same income differently based on particular circumstances is not likely to garner public confidence."

Professor Brough paints a picture of a labyrinthine and bloated tax collection system that is an argument in itself for a simpler tax code. "The Internal Revenue Service has a budget of roughly $10 billion for 2003, with over 100,000 employees. It handles more than 100 million individual income tax returns every year, and imposes a paperwork burden of 6.7 billion hours on the economy. Of this, 25 percent falls on individuals — 1.6 billion hours. The tax code itself has more than 1,395,000 words, 693 sections applicable to individuals and 1,501 sections applicable to businesses, and, as of June 2000, the IRS has issued 20,000 pages of regulations, according to the Congress’s Joint Committee on Taxation."

Brough continues: "The tax code’s complexity is symptomatic of tax policy driven by politics rather than common sense. The solution to these problems lies with a simplified tax code, not an expanded IRS."

"A simple, fair, and flat tax code would ease the burden of compliance tremendously, and with it, the need for a larger IRS," declared Brough. "The Treasury Department has acknowledged the need for a simplified tax code, but until reform becomes a reality, it seeks to expand and 'modernize' the IRS in order to keep pace with the changes in tax law."

"Unfortunately this means greater scrutiny by the government of all taxpayers, and an increasing bureaucracy that may prove difficult to dismantle in the wake of fundamental tax reform. A simple and fair tax code would be a far more pleasing option for the American taxpayer," concluded the CSE economist.

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