The bottom line is that we have a tax code and a political class that both result in wasteful spending and drags on the economy. In addition, we have proposed many times that we have crossed over the line from heavy taxation to oppressive taxation. When most of the country’s workers have to work well into April, and some into May, to pay for American government at all levels (“Tax Freedom Day“), our freedoms and liberties are also severely damaged by this horrendous and oppressive tax code.
1) Our first discussion today comes from the Tax Foundation, that wonderful organization that tracks how oppressive and onerous our tax situation is, including the annual calculation of Tax Freedom Day. A recent post on their website went into detail about how they arrived at the calculation that the tax code is now over 70,000 pages long.
Their detailed breakdown of the 70,000 pages was in response to Andrew Grossman, the legislation counsel for the Congressional Joint Committee on Taxation that helps write tax laws. Grossman attacked the Tax Foundation in Slate, claiming that the Federal tax code is “only” 2,600 pages long, not 70,000 pages long. Even if he is right, “only 2,600 pages” is still a ridiculous number. But the Tax Foundation attacked back with the following detailed and responsible reply and analysis:
- Statutes: There’s the literal statutes that Congress has passed (Title 26 of the U.S. Code). According to the Government Printing Office, it sells the tax statutes in two volumes. The first volume is 1,404 pages and the second volume is 1,248 pages, for a total of 2,652 pages. The Tax Foundation estimated that at perhaps 450 words per page, that puts statutes alone at well over 1 million words. By way of comparison, according to the Foundation, the King James Bible has 788,280 words; War and Peace runs 560,000 words; and the Harry Potter series is just over 1 million words. And those publications do not change every year, unlike the tax statutes which change constantly, making it more and more difficult to keep track and file accurate taxes based on “only 2,600 pages.”
- Statutes and Regulations: However, a tax expert, accountant, or preparer who relies just on the tax Congressional statutes would likely go to jail, since a lot of Federal tax law is in IRS regulations, revenue rulings, and other clarifications. In reality, Congress will enact a tax law and leave it to the IRS to develop and write all the rules to implement it. And these regulations aren’t short: the National Taxpayer Advocate did a Microsoft Word word count of the tax statutes and IRS regulations in 2012, and came up with roughly 4 million words. Again at roughly 450 words per page, that comes out to around 9,000 pages. The National Taxpayer Advocate also noted that the tax code changed 4,680 times from 2001 to 2012, or an astonishing average of once per day. This gets us way beyond the “only 2,600 pages estimate,” we are now looking at about three and half times more than 2,600 pages.
- Statutes, Regulations, and Caselaw: But, a lawyer or tax professional who relies just on cases and regulations isn’t a very good lawyer or tax pro because most court decisions are made on the basis of previously decided cases. The legal publisher, Commerce Clearing House (CCH), puts out such a compilation, the Standard Federal Tax Reporter which consists of ….70,000 pages, with notations after each statute containing relevant cases and other information. CCH itself considers this volume to be representative of “the tax code,” since an expert needs to know all 70,000 pages to fully understand the tax code in full.
“Only 2,600 pages” would be bad enough but honestly Mr. Grossman, you are grasping at straws. To really be in the know about the U.S. tax code, one would have to know all about the statues, the regulations, and the historical case law, over 70,000 pages, over 3,000,000 words, Insanity, idiocy, and crazy.
2) How fast is the tax code complexity growing? Consider the following chart from the Commerce Clearing House (double click on graph for larger view):

Much like taxes and our national debt, at the complexity of our tax code has been accelerating at a growing rate over the past twenty years or so, making the ability to accurately, quickly and reasonably pay one’s taxes that much more difficult. At this rate we will soon reach the point of “who cares“ since trying to cope with the code is not worth the effort or the risk of jail time, it is just too hard.
3) One famous American has already reached that point of giving up. Former Defense Secretary Donald Rumsfeld sends a letter to the IRS every year along with his tax returns. The essence of the letter is that he basically has no idea if he completed his taxes accurately, that even as an educated man it is nearly impossible to get the tax code right. Excerpts from his current letter include the following:
- “I have sent in our federal income tax and our gift tax returns for 2013. As in prior years, it is important for you to know that I have absolutely no idea whether our tax returns and our tax payments are accurate. I say that despite the fact that I am a college graduate and I try hard to make sure our tax returns are accurate.”
- “The tax code is so complex and the forms so complicated, that I know that I cannot have any confidence that I know what is being requested and therefore I do not know. and I suspect that a great number of Americans cannot know whether or not their tax returns are accurate.”
- “As in past years, I have spent more money than I wanted to hire an accounting firm to prepare our tax returns…”
- And I should add that my wife of 59 years, also a college graduate, has signed our joint return but she also knows that she has no idea whether out tax return payments are accurate.
The Heritage Foundation, which commented on Mr. Rumsfeld’s letter, had the following suggestions regarding our 70,000 page tax code:
Since tax reform would make what is taxable—i.e., the tax base—easier to define and would have at most only a few deductions and credits necessary to maintain neutrality, filing taxes annually would be immensely simpler for all families.
There would be no need for pricey software, and only those families with the most complex financial arrangements would require paid tax preparers. Highly skilled lawyers and accountants could put their considerable talents to more productive uses, which would further boost the economy.
But again, do not expect easier, simpler, and inexpensive from the Washington political class. As we have said many times before, they are the clowns that got us to 70,000 pages, it is unreasonable to think that they can get us down to “only 2,600 pages,” never mind a few pages.
4) Former Treasury Secretary William Simon, had a wonderful insight a few decades ago, long before the tax code got close to 70,000 confusing pages: “A nation should have a tax code that looks like someone designed it on purpose.” This is the furthest thing from the truth that we have today.
Today, we have a monstrosity that has been pieced and patched together over many decades, with political class expediency as the overarching strategy, not economic optimization or fairness. But it should not be that hard.
In fact, back in February, 2012 in this blog we came up with a simple set of 12 principles that would be fairer, revenue neutral, and much, much simpler to execute by individuals and businesses in the country. Those simple 12 principles, vs. 70,000 pages, include the following:
1.No tax reform would ever get passed the Democrats if it was not progressive, so any reforms would have to include higher marginal percentages of taxation as income goes up.
2.However, the number of marginal tax rates should be kept to a minimal for simplicity reasons.
3.Every American would receive a tax exemption on the first $15,000 earned. Married couples filing jointly would get a family exemption of $30,000, i.e. no matter marriage penalty or benefit.
4.A dollar earned is a dollar taxed beyond $15,000 regardless of how it is earned. In other words, a wage dollar, a dividend dollar, an interest earned dollar, a domestic dollar earned, a foreign dollar earned, etc. would all count as one dollar from a tax perspective.
5.No more U.S. tax breaks for paying taxes overseas. No more lower tax rates for dividends vs. other types of dollars. This should make investment in the U.S. no better or worse than investing overseas, possibly keeping more investment dollars in this country. No more discriminating against other forms of earnings vs. dividends .
6.Since about 45% of Americans now pay no Federal income tax, even though they get all of the benefits of the Federal government, any tax reform must bring more Americans into the Federal income tax payment process except for the least fortunate (which is handled by exempting the first $15,000 in earnings).
7.The new tax plan would be phased in over ten years in order to minimize and ease the transition to the new, simplified tax code. Every year, the tax owed would move from the current tax code to the new tax code by 10% a year.
8.For example, in the first year, the taxes owed would move 10% closer to the new tax code results from the old tax code results. In the ninth year, the taxes owed would have moved 90% closer to the new tax code results form the old tax code.
9.This would require that taxes be calculated two different ways every year. However, given that almost all tax returns today are calculated by computer programs, the extra work involved should be minimal, let the machines do the work.
10.With two exceptions, the new personal tax code would have no deductions, no exemptions, no credits, no teacher supply accommodations, etc. after ten years, including mortgage deductions. The first exception would be the ability of a taxpayer to contribute to a Health Savings Account (HSA). Long term, this would help take pressure off of the skyrocketing costs of Medicare and Medicaid. The second exemption would be contributions to retirement accounts to make people more accountable for their retirement and take pressure off of the failing Social Security system.
11.The new tax code has to be revenue neutral so that the political class does not get their hands on any more of taxpayer wealth than they get today.
12.The new tax code would have only two marginal tax rates, 11% for earnings up to $100,000 and 28% for earnings over $100,000 for single filers, 11% for earnings up to $200,000 and 28% for earnings over $200,000 for married filers.
Twelve easy steps, a lengthy transition process to ease the confusion and pain, and eventually no need to hire an accountant to do your taxes, saving the household and business time, effort, money, and stress. How much easier could it be? No clarinet deductions, no Fido deductions, etc.
Well, for our politicians, even something this simple is probably beyond their grasp or their desire to cede control of the tax structure to Americans, preferring to keep the tax situation as it is so that they can take care of their donors and their careers.
That wraps our review of tax day, 2014. Depressing and expensive, or, just another day within the confines of the American political class.
Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at:
www.loathemygovernment.com
It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.
Please visit the following sites for freedom:
Term Limits Now: http://www.howmuchworsecoulditget.com
http://www.reason.com
http://www.cato.org
http://www.robertringer.com/
http://www.youtube.com/watch?v=08j0sYUOb5w
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