The National Taxpayers Union has released its annual study of tax complexity, “A Taxing Trend” by NTU Senior Counselor David Keating. This year, in light of the debate over the individual mandate for health coverage, new laws like the Foreign Account Tax Compliance Act (FATCA), and efforts to demonize those who already pay the largest tax burden, one warning from the study stood out…
“Mixing such broad powers with a vague and complex law is a recipe for a civil liberty catastrophe,” Keating wrote in his conclusion.
Think about it. Particularly after the full implementation of all these new rules (or not, if repeal of the 2010 health law or Supreme Court overrule occurs), you are on the hook to provide countless financial details to the government just by virtue of making a living.
As NTU’s Taxing Trend report reveals, the Tax Code cost the economy $228.4 billion this year and 6.38 billion hours lost. That type of complexity is all but impossible for a citizen to manage.
The instructions for the myriad tax forms are obtuse and never ending. Tax compliance software may help, but can disagree when comparison tested, and does not protect you from IRS inquiries. Tax professional costs are going up, and similar comparison tests expose the limits of their ability to navigate our byzantine Tax Code.
If you have a spouse, their records are also owed to the IRS. If your spouse receives foreign income you could be liable to expose every financial record you have to the IRS or face a $100,000 penalty or five years in jail, as Reason writes in this piece on the pain inflicted by the IRS.
NTU has worked to put an end to the double-taxation of foreign income, which is one major factor in the record number of Americans renouncing their citizenship that Reuters reported on this Tax Day.
Small businesses will likely be the most grievously wounded casualties thanks to Obamacare’s intrusive measures. Let’s take one example: A small business owner with 50 or more employees could face tens of thousands in penalties for not providing “adequate” coverage. That is just one particularly egregious measure explained in this great piece by the CATO Institute.
The solution to these problems is not to demonize those paying the lion’s share of taxes (as NTU reports, the top 5% of income earners pays nearly 60% of taxes in the U.S.). Our Tax Code’s complexity problem demonstrates this in a unique way, by reminding us that everyone who earns a livable income is in some manner subject to the Code’s 3,939,937 words, and the loss of privacy and liberty that comes with it. Many would say that is a much more valuable gift than any wage.
The solution is to finally scrap the old tax code and create simple system that is fair, not in the ‘economic justice’ sense, but in that everyone can understand it and comply with it, without the help of high-priced accountants. Right now, we have a tax code that is so scary and intrusive, it's causing individuals and businesses to flee or be crushed under its mass of regulations.