Why the Revenue Code Will Never Be Simplified

May 16, 2012 by  Filed under: Taxes 

As of this writing, the U.S. Revenue Code has a total of somewhere in the neighborhood of 72,500 pages and counting. This is truly an incredible figure when you think about it. The instruction manual that is supposed to assist the citizens of the United States with “putting together” their income tax return is over 72,000 pages long. Most people cannot even assemble a bookshelf with a 3 page instruction manual, how are they to be expected to follow 72,000 pages of instructions when putting together their tax return?

And to make matters worse, there is one minor difference between following an instruction manual for a bookshelf and following the instruction manual for paying income taxes: if you do not follow the instructions for the bookshelf the only consequence is you end up with a crummy bookshelf, but if you fail to follow the instructions for income taxes you end up locked in a cage.

But the citizens of the United States should not feel too bad about not being able to understand the Revenue Code, the Secretary of the Treasury and the former chairman of the House Ways & Means committee cannot even figure it out. That is simply stunning when you think about it. The man in charge of the finances of the national government, and the man who was the chairman of the committee that writes the tax law both improperly underpaid their taxes. Now, a cynic might say that these two bureaucrats were just taking advantage of their positions of power, and they believed they were above the law. However, I will take no such a stance, and I will give them both the benefit of the doubt and just say that they are incompetent and leave it at that.

There are several very simple explanations for why the Revenue Code continues to expand, and no one seems very eager to do anything about it.

  1. Those with the capability of actually bringing about substantive change to the Revenue Code are the very people who benefit the most from its complexity.
  2. No politician has ever won an election by running on a platform of simplifying the Revenue Code, or eliminating the IRS all together.
  3. The Revenue Code is a major tool used by those in Congress to engage in social engineering and egalitarianism.

Let us begin with the first point. The Revenue Code will not change because it benefits those who could change it the most. One perfect example of this is the income limitation placed on Social Security taxes. I know most people have never even noticed that employees and employers only pay Social Security tax on earnings up to $110,100 for 2012. Does anyone think it is a coincidence that the very wealthy do not have to pay tax on the high-end of their income? Does it surprise anyone that major corporations, you know the ones who give the biggest campaign contributions, always seem to end up paying little to no federal income taxes. It shouldn’t. Why would the people who benefit most purposefully hurt themselves and their financial situation?

Here is a question to ask yourself: If you controlled the Revenue Code would you change it so that you were paying more taxes, or would you write the code in such a way as to allow yourself to keep as much of your money as possible? All you have to do is look at human nature and it is obvious that the latter statement is the one almost everyone would choose.

Next, the Revenue Code will not ever be simplified because it is not politically expedient to do so. This is really quite amazing to me. A politician can tell people that he wants to make it easier for you to pay your tribute, or the “crazy” ones may even be so bold as to say that we do not need an income tax, both propositions sound fantastic to me, but instead of being celebrated he is usually called a nut-job and completely dismissed. People will actually denounce a person for saying that there should not be an income tax, it is lunacy. So, because of this, most politicians shy away from any talk of real reform, and instead just offer platitudes about lowering people’s tax burden and all the rest.

Finally, we have come to the third and final point, and it could be argued that it the most important. The Revenue Code will never be simplified because it is the main tool that the political class uses for social engineering and egalitarianism. President John F. Kennedy said in 1963, “The present tax codes… inhibit the mobility and formation of capital, add complexities and inequities which undermine the morale of the taxpayer, and make tax avoidance rather than market factors a prime consideration in too many economic decisions.” (Emphasis mine) This was in 1963, it is hard to imagine how much the Revenue Code has expanded and how much more complex it is today compared to then.

However, if you stop and think about it, the fact that The State uses the Revenue Code for social engineering purposes becomes incredibly obvious. When the government wants people to buy green cars they offer a tax credit. When the government thinks more people should purchase a home, they offer a first-time home buyers credit. And on and on. Those in power use the Revenue Code to push whatever agenda they deem to be best for the citizenry at that particular time, rather than allowing people to decide what is best for themselves and spending their money in the way they choose. There are innumerable instances of this practice that have occurred in the last decade alone.

The other main reason the Revenue Code will never be simplified is that it is used for egalitarian purposes. The major theme of the progressive income tax, which we have in the United States, is to use government to take wealth from those who are rich and redistribute it to those who are poor. Sort of like Robin Hood, only replace the tights and bows and arrows with bullet-proof vests and machine guns. As an aside, the progressive income tax was a major tenant of Karl Marx’s communist manifesto. But the worst thing about this idea of wealth redistribution using the Revenue Code is that it does not work. The well-off are able shield their wealth from taxes, and the poor and middle-class are left holding the bag.

If you would like to learn more about the U.S. Revenue Code you can visit my website at http://www.accountingstudentsguide.com or http://www.rothbardinstitute.org.

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