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Get your Easter, Secretaries Day and Mother's Day gifts at the Galleria! Add your comments on this week's "What is the Deal?" column at Uncle Hiram's Bulletin Board. April 13, 2003 What is the deal with Income Taxes? By Jan A. Larson If you're reading this, you've probably completed your 2002 tax return. How much time did you devote to preparing your federal income tax return this year? Ten minutes? Ten hours? Ten days? More? How much did that time really cost you? If you work at a job that pays $50,000 per year, your work time is worth roughly $25 per hour. Your free time should be worth at least as much, right? If you spent just 10 hours working on your tax return, you "spent" $250 for the privilege of paying a very large portion of your $50,000 to our government. This, of course, does not count the time you spent all year keeping track of records, the tax software you bought or tax preparation fee you might have paid. Multiply this by approximately 100 million tax returns and you will see that the time spent on tax preparation amounts to a significant amount of time and money. Income tax preparation doesn't apply just to individual taxpayers. Every business in the United States, from the sole proprietorship to the multi-national corporation has to prepare and maintain detailed records of every financial transaction in order to comply with the tax laws. Often large staffs of accountants are employed just to manage tax matters, obviously at a great expense to the company. The U.S. Tax code, when stored electronically, requires over 23 megabytes of storage. When printed requires over 7500 pages. (See http://uscode.house.gov/title_26.htm). This begs the question, why? Why in the world is it even remotely necessary to require 7500 pages of rules and regulations to describe how to collect the funds needed to operate the government? The tax code is just another of the most absolutely stupid, ludicrous and ridiculous examples of government bureaucracy run amok. There is absolutely no logical reason that it should take 7500 pages, armies of accountants, CDs full of tax software and millions of dollars in order for the government to collect taxes. There have been various ideas floated from time to time to simplify the tax code. These efforts have never gotten off the ground. Again, given the evidence, the question that comes to mind is, why? Why would it not be a good idea to do away with those 7500 pages of rules and regulations? Why would it not be a great idea to simplify the tax code so the average American could complete his/her tax return in a few minutes? Why would it not be a good idea to simplify the tax code so armies of accountants are no longer needed, draining the resources of American business? There are two very good reasons why; Congress and the people that make their living off the complexity of the tax code. Congress uses the tax code to engineer American society and to grant favors. Congress constantly engineers society via the tax code. It rewards having children, but penalizes marriage. It rewards homeownership and penalizes renters. Congress can encourage or discourage investment and savings via the tax code. Congress can grant favors to special interests via the tax code. A simplified tax code would take away many of the "powers" of Congress. There are also a lot of people whose livelihood is based on the complexity of the tax code. Intuit, the makers of the popular tax preparation software, TurboTax, earned revenues of over $1 billion in 2002. The tax preparation firm, H&R Block, reported service revenues of over $2.3 billion for fiscal year 2002. The people that make their living from the tax code and the only people that can change the tax code, Congress, have no reason to simplify the process of paying income taxes. The process of collecting taxes could be greatly simplified. The tax code could be made more fair with fewer tax breaks for some but not others. The drain on American business being substantially reduced thereby boosting productivity and thus the overall economy. However don't look for tax simplification to occur any time soon. There are too many powerful people that benefit from the status quo. In the meantime, you and I will spend every April using our "spare" time to pour over paperwork and worry that we'll be audited. -- Send feedback to the author. The "What is the Deal?" column will appears weekly on the Pie of Knowledge website. Guest submissions are welcome and encouraged. To submit an article to "What is the Deal?" click here. To subscribe to the "What is the Deal?" mailing list and receive early notification when a new column is available, click here. The Pie of Knowledge will never, ever divulge email addresses to any third party for any reason unless so ordered by a court of law. Contributions to the Pie of Knowledge are greatly appreciated. 
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