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Fixing the Tax System: A Fool's Errand?

Fixing the Tax System: A Fool's Errand?

ObamaThe good folks of the Senate Committee on the Budget held a hearing yesterday. Their task? To discuss ways to reform the out-of-control complicated mess that is currently our tax system. A hearing was held yesterday. (Of course, every time Congress tries to simplify the tax code, it only gets more complicated, or so says a tax attorney I used to play squash with. He LOVED calls for tax reform; he got more business, he told me. Perhaps that's why I tend to regard these hearing for reform as a fool's errand.) TheTax Foundation, the non-partisan born in 1937 to keep an eye on the greedy hand, has an excellent summation of the testimony offered to Senate Committee yesterday.

Alex Wood-Doughty of the Foundation writes on the Tax Policy Blog: "The panelists all agreed that the tax code is too complex and were united in calling for a fundamental reform that broadens the base and lowers rates, something the Tax Foundation has supported for a long time (see here,, and Hopefully the Senate Committee on the Budget can come together in a bipartisan way and create a reform that is simple, transparent, neutral, and stable."

Wood-Doughty quotes Donald B. Marron, Director of the Urban-Brookings Tax Policy Center, as coming out strongly against tax expenditures:

"My message is simple: the income tax is riddled with tax preferences. These preferences narrow the tax base, reduce revenues, distort economic activity, complicate the tax system, force tax rates higher than they would otherwise be, and are often unfair."

No doubt your clients agree to all the above. Of more concern to your clients are estate and gift taxes. The Tax Foundation concludes that the various taxes on the transfer of wealth basically choke the economy. It writes, "The federal government taxes transfers of wealth in three ways: through the estate tax, the gift tax and the generation-skipping transfer tax. Together these taxes make up the federal transfer tax system. In addition, many U.S. states impose estate taxes. Estate taxes and generation-skipping transfer taxes are paid on the contents of estates or proceeds of trusts, while transfers of wealth between living persons are subject to gift taxes. The federal government enacted the first estate tax in 1916. Studies routinely find that estate taxes discourage entrepreneurship and lead to large tax compliance costs."


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