A century ago, the income tax had been around only four years, but news stories of the day sound as fresh as this morning’s tweets.
The New York Sun called the tax, “Baffling to the lay mind since its inception …” and noted that in 1917 “new complications beset those having taxable incomes this year by reason of the amendments incorporated in the tariff act last September.”
Little did folks know the complications had only
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begun. But if, like many Americans, you currently are dealing with the annual bean counting, form-filing exercise that Will Rogers said, “has made liars out of more Americans than golf,” you may wonder if it ever will be possible to dial things back.
The answer is probably as you suspect.
Today, “lay minds” spend a combined 8.9 billion hours preparing their returns, according to the Tax Foundation. They spend a combined $409 billion doing so, which means any meaningful tax-simplification effort could wipe out a lucrative industry.
This is a lot of work and energy each year to bring in a sum that doesn’t come close to equaling what the government plans to spend.
And it isn’t comforting to think that the same politicians who are trying to fix health care reform in Washington are the ones promising to turn their attention to the income tax soon. Parents who ask their children to clean their rooms unsupervised have more reason for confidence than we should for good tax reform.
Simplification may be a goal, but the discussions and the politics are so complicated it’s hard to see how a simple plan could emerge, or how your evenings with tax preparation software or an accountant will be any better a year from now.
A lot of experts see a connection between health care and tax reform. A report in the Fiscal Times this week quoted sources who said an inability to pass one could make the other that much harder. For one thing, as budget expert Stan Collender said, losing on health care could make opponents “feel that if they beat them once, they can beat them a second time.”
That’s not good news. It does, however, neatly encapsulate the problem.
The last major tax reform effort, more than 30 years ago, came about because President Ronald Reagan did not see victory for his side as necessarily a loss for the other. He worked with Democrats. He met regularly with Democratic House Speaker Tip O’Neill while both sides hammered out a compromise acceptable to each.
That seems almost impossible to imagine in today’s Washington, where even the connection between a Republican Congress and a Republican White House is contentious.
But even the 1986 tax reform, which reduced tax brackets and eliminated deductions, didn’t make things that much easier for taxpayers, nor did it keep deductions and brackets from growing again.
The 1917 New York Sun report I quoted at the start of this column was headlined “A guide for income tax payers.” It tried to simplify matters by using the “concrete example” of a taxpayer named John Doe, a married man who earned $10,000 a year (about $190,000 in today’s dollars), and who had about $9,000 more in income through rental properties, bonds, an uncle’s will and his own dabbling in the stock market.
The paper then launched into a long and detailed explanation of the forms needed and the deductions (he had lost a considerable amount in stocks) that would reduce his taxable income to $11,000, which would result in a $220 tax bill.
It then promised John Doe, “He will have less difficulty next year” because the “machinery” of tax collection would be “well oiled” to conform to recent changes in the law.
You have to feel for good ol’ John Doe. He hadn’t yet learned, as people today should have, that promises of simpler tax procedures next year were the original fake news.