Wednesday, April 15, 2009

What would they do all day?

Poor President Obama. He proudly announces that a part of the "stimulus" came in under budget and he is quickly reprimanded by Paul Krugman. Under-budget is a bad thing when Keynesian stimulus is the plan.

And all of this is unfolding as large numbers of dummies are holding tax ("tea parties") protest rallies. (I have not yet found a Keynes for Dummies guide in print.)

Today's WSJ, includes this by Tom Herman:

Nearly 40 years ago, as a recent college graduate, I made a painful discovery: I couldn't figure out how to do my own federal income-tax return.

That was embarrassing, and it made me wonder what other Americans do. So I wrote my first major tax story: I asked five different tax-preparation services in the Atlanta area to prepare returns for a family of four with fairly typical finances. The results: At one extreme, a tax expert said the family was entitled to a federal income-tax refund of $652.04. But another said the family owed $141 -- a difference of $793.04.

That experience made me feel somewhat less dumb, but the article didn't have much impact: Since then, our tax system has evolved from a mess to a nightmare. The pace of change has accelerated in recent decades as lawmakers increasingly have tried to use tax laws to reward or punish conduct. The number of pages in the CCH Standard Federal Tax Reporter, which records tax law, regulations and related material, has soared to 70,320 from 26,300 in 1984.

More than 60% of all individual returns are signed by professional preparers, up from 46% in the mid-1980s. Joel Slemrod, an economics professor at the University of Michigan, estimates that the time and money individuals spend on tax compliance now comes to about $90 billion a year.

Tax simplification has not yet arrived. It may never happen. It is as arcane as why getting projects completed under budget is a bad thing. Besides, if the tax code were to be kept simple and transparent, what would politicians do all day?