Why the Tax Code is a Mess, Graphically

By :: September 12th, 2011

I just came across this bar chart, which illustrates graphically why the tax code is such a mess.  The Joint Committee on Taxation (JCT) is the official scorekeeper for all tax legislation passed by the Congress.  The chart shows the number of requests for estimates and other analysis that they've received from Congressional offices since 1986. Most of the requests are for estimates, which are necessary if a member wants to get a piece of tax legislation seriously considered.  The chart doesn't say how many are for new credits, deductions, or other tax breaks (although a quick perusal of the Congressional record suggests that proposals for tax breaks far outnumber proposals for new taxes or tax increases). It doesn't say how many came from members of the Ways and Means Committee and Senate Finance Committee, which are actually responsible for tax legislation, or from other members whose efforts in the tax arena are purely symbolic unless they find a cosponsor on a tax-writing committee.

But the growth in the number of requests is astonishing--1,373 percent between 1986 and 2009.  And the 6,983 requests in 2009 was not even the record.  The all-time peak was 2007 with 7,786 requests.  What's remarkable about the growth is that 1986 was the year that the Tax Reform Act of 1986 passed.  The JCT was really busy that year.  There were 474 requests.  But since then, the trend has been almost exponentially upward.

Here are the same data grouped by Congressional term.  (Most of the requests are made early in each two-year Congress as members try to get their great new ideas on the agenda.)

It would be nice to think that our legislators are working hard trying to find ways to make our tax code simpler, fairer, and more conducive to economic growth. (One member, Senator Ron Wyden of Oregon, has worked tirelessly to try to advance the cause of tax reform, but he has few allies in this quest.)  Maybe some are even pondering how to raise enough revenue to pay for the government. But I doubt that's the prime driver.  The tax code has now become the tool of choice to give away goodies.

It is the 21st century pork barrel.

Fortunately, the JCT only has time to look at a fraction of the great tax ideas coming out of Congressional offices. Nonetheless, some real doozies still squeak through.  And that's one reason why our tax code is such a mess.

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Corrections: An earlier draft referred to Congressional sessions when I really meant Congresses--the two-year term that includes two Congressional sessions. We are currently in the first session of the 112th Congress. The second chart shows data for each Congress from the 100th Congress (1987-88) to the 111th (2009-10). I also removed the modifier "tiny" before the fraction of requests JCT could handle. As far as I know, the actual number of requests that JCT responds to is not made public. I know from conversations with JCT staff and Hill staff who request estimates in vain that JCT can only satisfy some of its requests, but don't know how small the fraction is.

10Comments

  1. Michael Bindner  ::  11:28 am on September 12th, 2011:

    Nice pictures. The counter arguement, however, is that democracy was meant to be messy – although the 17th Amendment made it messier.

  2. Len Burman  ::  4:59 pm on September 12th, 2011:

    Since the founders hadn’t anticipated an income tax, it’s hard to imagine that they foresaw thousands of proposals for new tax expenditures.

  3. AMTbuff  ::  11:12 pm on September 12th, 2011:

    I believe that the progressive (in the ordinary sense of the word) shift to a permanently temporary tax code is responsible for most of the JCT estimate churning. The code contains so many time bombs that leaving it alone is politically infeasible. New tax law is required, with new JCT estimates, every year just to retain current tax policy, let alone change anything.

    If current tax law contained nothing but a projection of current policy into future years, this problem might not exist.

  4. Vivian Darkbloom  ::  2:14 am on September 13th, 2011:

    This reminds me of the controversy arising from Paul Ryan’s inability to get an estimate from the JCT on his “Roadmap”. He was roundly and wrongly accused by Paul Krugman of intentionally refusing to get an estimate when, in fact, Ryan had asked for one and had not been able to get one. Ryan maintained that the JCT was not able to do an estimate beyond 10 years and when asked to do the 10 year estimate the JCT said they were “too busy”. The whole thing is well summarized in an August 2010 column by Megan McCardle in the Atlantic. (I’ll post a link in a subsequent post). This was a dispute, by the way, in which the TPC was indirectly involved because they did their own 10-year estimate of the Plan apparently at the behest of Ryan^.

    It is sad that when some important piece of proposed policy actually should get JCT review, it doesn’t. The JCT has a staff of about 65, I think, and that includes computer specialists, lawyers who review large refund requests, etc. Obviously, the ratio of scoring requests to the number of answers the JCT can provide is very high. I guess this puts the JCT in a very awkward position of having to make political decisions on who gets served and who doesn’t. I would suggest a possible solution might be to formally restrict each Senator or Congressman a certain quota of annual requests. Such quota could be higher or even unlimited to those on tax writing committees. This would cut down on frivolous requests, make the JCT’s job of managing its workload and deciding which requests to answer easier, and would be a better use of taxpayer money.

    As regards “taxpayers’ money, the principle might well be expanded to other areas of government. Congressmen and women really are not held very accountable for the costs they incur in placing demands on government agencies. I think this has the effect not only of increasing the size of the government bureaucracy and our fiscal deficits, but also has the effect of diffusing our focus on policy issues. “User fees” and quotas are used to good effect outside government. It’s time we put the same sensible controls on those who have a blank check inside government, too. This is why the graph says as much about how big a mess our government is as it does about our tax code.

  5. David Shreve  ::  12:18 pm on September 13th, 2011:

    While it’s true that the founders did not envision the modern income tax, with its critical payroll withholding feature, and often saw a property tax as a suitable proxy (since virtually all property in that era produced income), the following quotations do indicate a preference for something resembling the structure we implemented in 1942-3:

    “The subjects of every state ought to contribute towards the support of government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.”

    —Adam Smith, The Wealth of Nations, Book V* (1776)

    “Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions of property in geometrical progression as they rise.”

    —Thomas Jefferson to James Madison, 1785

    “That as far as there may be any real difficulty in the exercise of the power of internal taxation, it will impose a disposition to greater care in the choice and arrangement of the means; and must naturally tend to make it a fixed point of policy in the national administration, to go as far as may be practicable in making the luxury of the rich tributary to the public treasury, in order to diminish the necessity of those impositions, which might create dissatisfaction in the poorer and most numerous classes of the society.”

    —Alexander Hamilton, Federalist Number 36, 8 January 1788

    *In many current publications of Smith’s Wealth of Nations (including Knopf’s Everyman’s Library edition!), Book V, from which this quotation is drawn, is omitted.

  6. Estate Tax Gulf Deeper Than Dispute Over Rates, Exclusions – Bloomberg | Dallas Estate Attorney .com  ::  1:19 pm on September 16th, 2011:

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  7. Breaking the Pattern on Tax Breaks « Choosing the Nation's Fiscal Future  ::  1:55 pm on September 16th, 2011:

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  8. Steven J Fromm  ::  9:09 pm on October 27th, 2011:

    Hey I have been a tax attorney for over 30 years and this has always been the problem with the tax code. There is no overall cohesiveness but a hodge podge of deductions and credits to either appease special interest groups or to jump start the economy. It is so unwieldy now that no one can get their arms around it all. From a tax attorney perspective, it is now too vast for full comprehension, command and understanding. It is simply impossible to keep up with the annual changes in tax laws. In the estate tax area for instance, practitioners have had to tell clients that the laws are uncertain and drafting a will and trust to provide for all the possible law changes and the transitional rules is daunting to say the least. And, there is still no certainty as to what the law will look like after 2013 when it was supposed to be determined finally as of the end of 2010. Really a total mess.

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