Posted on 03/04/2005 8:50:45 AM PST by ex-Texan
Greenspan Calls for Simpler Tax Code
Calling the existing U.S. tax code overly complex with an "overlapping web of deductions and exemptions, " Federal Reserve Chairman Alan Greenspan suggested a consumption tax could spur more personal savings and economic growth.
Greenspan spoke Thursday before an advisory panel on tax reform appointed by President Bush. He referred to the last tax code overhaul in 1986.
"Changes since the 1986 act have been largely incremental without the appropriate all-encompassing context that broad reform brings to the table," Greenspan told the group, according to The New York Times. "It is perhaps inevitable that, every couple of decades, drift needs to be addressed and reversed."
He said many economists would support a consumption tax, "particularly if one were designing a tax system from scratch." Since the United States is not starting from scratch, he said, enacting a consumption tax "raises a challenging set of transition issues.” He noted taxpayers have long planned their financial future based on the existing rules.
"Don't try for purity," Greenspan said, suggesting that some combination of a consumption tax and other levies might be appropriate. A consumption tax, which would be based on spending, not earnings, may encourage Americans to save more money, he said.
Democrats have expressed concern that a consumption tax, such as a sales tax, is regressive, hurting the poor. "But I would say let's go to the table," said U.S. Rep. Nancy Pelosi (D-Calif.), the House Democratic leader. "Democrats stand ready to sit down with the president to talk about a simplification and fairness in our tax code."
The panel, led by ex-senators Connie Mack III, a Florida Republican and John B. Breaux, a Democrat from Louisiana, was given six months to come up with a reform proposal.
President Bush's chief spokesman, Scott McClellan, would not comment on how Bush feels about a consumption tax. But he did say, “"Our tax code is a complicated mess."
How many volumes of THICK tax code books rest on law firm library shelves today? Hundreds! There are actually hundreds of volumes of tax code books, rulings from tribunals, tax court rulings, federal court rulings, interpretations of rulings and loose leaf tax encyclopedias. All of these books need to be periodically reviwed and their pages replaced and updated. There are weekly, monthly and quarterly pages of updates that are circulated to tax attorneys.
Over 20 years ago when I studied the IRC in some depth the shear volume of conflicting material was obvious. What is most frustrating for me personally was my knowledge that the I.R.S. has adopted a formal policy of 'non-acquiescence' to federal court rulings it finds adverse. The I.R.S. will ignore a major written opinion from the Fifth Circuit Court of Appeals and force taxpayers in other states to litigate the same matters endlessly over and over again. Which means there are different tax rules for California, New York, Texas and Kentucky.
The U.S. tax code was written by lawyers, for lawyers, to benefit lawyers. Its obvious intention was and is to make tax lawyers rich. 'Nuff said.
It does serve one other key purpose. Its very complexity creates the need to lobby elected officials and ply them with campaign contributions.
In addition to the lawyers we need also to blame Congress for using the tax code as social engineering. Many of the loopholes, special deductions and favorable tax treatments for certain groups are the result Congress pandering to special interests. The cost to business and the general public of having their taxes prepared is staggering. Even a simple filling of a 1040 form for an individual or couple can easily cost several hundred dollars.
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