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Sunday, January 10, 2010

Politicians and the Tax Code

The Internal Revenue Service has announced that it will register and regulate all paid tax preparers who are not attorney's, CPAs or Enrolled Agents.

The IRS misses the point.

However, since its job is to enforce rather than reform the tax laws, it does not have the authority to solve the underlying problem. If the tax code was not so complicated, many more of us would be willing to prepare our own tax returns. Instead, we engage experts, at significant expense, to ensure that we neither overpay our taxes nor incur serious penalties just because we misunderstood the law.

The sole objective of any tax law should be to collect the money that is needed to operate the government. It should be done in as fair, efficient, transparent, and simple a manner as possible. Admittedly, achieving all of those objectives simultaneously is not easy but the economic impact of even partial success would be massively positive.

Congress, unfortunately but perhaps predictably, has invented a system that rewards special interest groups, attempts to dictate personal and economic behavior, and manages to create a myriad of perverse incentives while wasting vast amounts of taxpayers' time and money. The Tax Reform Act of 1986, a collaboration between a conservative President Reagan and two very liberal legislators - Rep. Richard Gephardt (D-MO) and Senator Bill Bradley (D-NJ), was a good start but a generation of politicians, of both parties, has largely returned the law to its previous dysfunctional state.

Are the Congress and the President listening to those who believe in real reform?

I doubt it.

Today's politicians should keep in mind, however, that unfair and unreasonable taxes, imposed by an arrogant and unaccountable ruler, were a major cause of the American Revolution. We don't yet need another revolution but we can start by electing politicians who are more interested in the good of our country than in social engineering or the welfare of the special interests that own them.

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