Wednesday, June 29, 2011

Congress Discovers That the Sun Rises in the East: GAO Finds Link Between Tax Complexity and "Tax Gap"

The Government Accountability Office recently released a study which indicated that the voluminous amount of content in the U. S. Tax Code and Regulations can lead to errors and understated taxes. While the GAO said that some of the complexity could lead to properly measuring income or identifying risk areas for noncompliance; they also said that compliance costs were in excess of $100 billion per year, that economic efficiency was doubtlessly damaged by tax complexity; that errors on the IRA deduction ALONE probably led to over $6 billion in underreported income and that, as Senator Hatch pointed out, complexity probably undercuts willingnes to comply. It should be noted that Senator Max Baucus deserves some credit for pointing out the potential kick-start to the economy that a less complex tax system might produce.

Ya think?! Numerous tax bloggers have already discussed tax complexity and its economic and compliance costs; perhaps (or am I being too optimistic again) Congress can be shaken to its senses by the possibilty that tax revenues might be "sitting on the table" while the U.S. reaches devastating levels of debt and deficit. I think that Mike Huckabee's and Neal Boortz' FAIR tax is politically a step too far (though probably not a bad idea theoretically) but certainly the GAO recommendations of eliminating some tax expenditures and standardizing IRS definitions are politically possible (though not necessarily sufficient).


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