The list of folks supporting a major overhaul of the U.S. tax system got a little longer this week.
In her annual report to Congress, National Taxpayer Advocate Nina E. Olson cited tax reform as the number one priority in tax administration.
Research by the Taxpayer Advocate Service found that individual taxpayers and businesses spend 6.1 billion hours a year complying with tax-filing requirements. Put into dollar terms, the financial burden on the typical taxpayer comes to $258 annually.
"There has been near universal agreement for years that the tax code is broken and needs to be fixed," Olson said in releasing the report. "Yet no broad-based attempt to reform the tax code has been made. This report documents the burdens the tax code imposes on taxpayers and explores why many taxpayers may nevertheless feel wedded to key aspects of the current system, undermining efforts at reform."
More calling for tax reform: Olson is the latest public figure to come out for tax reform. In December, Obama's hand-picked National Commission on Fiscal Responsibility and Reform, aka the deficit reduction panel, suggested several ways to remake our tax system.
The method preferred by the panel's two chairmen is the Zero Plan. It would dramatically lower individual and corporate tax rates, but to do so would mean the end of popular and entrenched tax breaks, such as the deduction for mortgage interest.
Predictably, the reaction to the panel's proposal was quick and fervent opposition from industry groups and lawmakers alike. That negativity, plus the year-end focus on expiring tax cuts, pushed tax reform talk off the legislative agenda.
However, Obama reportedly is still interested in overhauling the U.S. Internal Revenue Code.
Olson's report, along with a new group of not-yet-so-beholden to lobbyists legislators in the new 112th Congress, just might jump start the discussions.
We have met the special interests and they are us: Olson acknowledges that tax reform will be difficult, in large part because, despite my jab at special interest peddlers who stalk Capitol Hill, all of us individual taxpayers have our own tax axes to grind.
"The dirty little secret is that the largest special interests are us, the vast majority of U.S. taxpayers," said Olson. "Virtually all of us benefit from certain exclusions from income, deductions from income or tax credits."
She concurs with the deficit panel's finding that the only realistic way to substantially lower tax rates is to eliminate existing tax breaks, some immediately and others phased out over time.
"But I believe most taxpayers will conclude this is a worthwhile trade-off," said Olson. "If tax reform proceeds on a revenue-neutral basis, the average taxpayer's liability will not change, and we will end up with a tax system that is simpler, more transparent, and easier and cheaper for taxpayers to navigate."
A lot of folks say they want just what Olson is talking about. But walking the walk is a lot harder than talking the tax reform talk, especially if one of your preferred tax breaks is on the immediate chopping block.
Talk to the Taxpayer Advocate: In conjunction with the release of the annual report, the National Taxpayer Advocate's office also launched a website seeking taxpayer suggestions on tax reform.
"What would taxpayers be willing to give up if they knew that others are giving up their breaks and the end result would be a much simpler system?" Olson asked. "What particular provisions of the existing tax system are especially burdensome or seem particularly unfair?"
Tell Olson and her staff your thoughts on tax reform at the special tax reform comment page. The Taxpayer Advocate Service promises to periodically post tax reform results.
And feel free to leave your tax reform comments here at the ol' blog, too.
- Up next for Obama: Tax system overhaul
- Debt panel suggests major tax changes
- Deficit commission tax overhaul, take 2
- Taxpayer Advocate mid-year to-do list (2009)
- Improve the IRS!
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