Who knew that so many TaxVox readers would stand up in favor of tax complexity?
The other day, I posted on the fact than nearly 90 percent of individual taxpayers have to either pay a professional preparer or buy software to help file their income tax returns. I argued that this was, in effect, a government mandate nearly as onerous as the new, much-reviled, requirement that Americans buy health insurance.

Where, as they say, is the outrage? For all of the indignation over the new health insurance mandate, I am amazed at the serenity at which we accept another (near) mandate: That we must pay somebody to help us do our taxes.
The government does not specifically require us to hire paid tax preparers or buy commercial software, of course. But it has, in effect, left millions of taxpayers with no real choice. Congress has created a tax code that makes it nearly impossible for many Americans to file returns without paid help. And even those who could (most non-itemizers for instance) are so intimidated by the whole process that they pay people to help them anyway.

Should the Joint Committee on Taxation cede its key role as scorekeeper for tax bills to the Congressional Budget Office? A former boss of JCT suggests that maybe it should, at least for a big chunk of the tax code.
To outsiders, these arbiters of the budget implications of tax and spending bills are something of a mystery. CBO tracks the costs of spending bills and, as we've seen in the debate over health reform, its influence can be enormous. At the same time, JCT performs a parallel task by doing revenue estimates of tax bills (JCT also has a staff of lawyers who provide lawmakers with technical tax-writing advice) . But behind the scenes, the two offices have been rivals for many years.

Nice to hear the IRS is finally going to regulate tax preparers. For years, fly-by-night tax prep outfits have been doing, how shall we say, a less-than-stellar job filling out returns for the confused and vulnerable. But cracking down on those seasonal shysters who abuse the system is only attacking a symptom of the real disease, which is our insanely complex tax code.

Many people who have failed to pay taxes on funds stashed in overseas bank accounts will likely toss and turn during coming nights, worried that the tax man will soon come knocking at the door. Will they be among the nearly 4,500 account holders whose names Swiss bank UBS has agreed to give to the IRS? And even if their names aren’t on the list, will the IRS learn about them from others seeking amnesty? Should they apply for amnesty themselves, paying large tax bills but at least staying out of jail? Or lie low for fear the IRS will find other problems if they draw attention to their returns?

Beth Garrett, President Obama’s choice to be Assistant Treasury Secretary for Tax Policy, has withdrawn her name from consideration. Beth didn’t say why, except for the usual boilerplate about her “personal family situation.” However, the Bloomberg story on her announcement quotes a friend, lobbyist Jeff Trinca, as saying she pulled out because she was unwilling to put her family through what has become a “harsh” confirmation process.

A basic tenet of public finance holds that people tend to do less of something when it is taxed. Raise income tax rates and some people will work less. Boost the gas tax and people will drive less. Hike the cigarette tax and people will smoke less.
That inexorable law of demand poses two problems for the taxman. First, taxes distort behavior as people move from taxed activities to those that are taxed less or not at all. Sometimes, as in the case of cigarette taxes, we want to discourage the taxed activity. In other cases, the tax only makes the economy less efficient. Second, tax avoidance may reduce the revenue gained from a tax increase—or even negate it entirely. For example, if gasoline sales plummet when gas taxes rise, we get less revenue to build and maintain roads.

For years, lawmakers have been looking longingly at “the tax gap” as a way to help close the budget deficit. Each year Americans owe as much as $350 billion more in federal taxes than they pay. So, goes the argument, if we can only find ways to collect those dollars, we’d be a long way towards getting the fiscal house back in order.

A new package of anti-swine flu tax incentives was introduced in the House today.
The three-pronged package would provide a new tax credit for businesses that purchase liquid hand sanitizers, make it easier for state and local governments to sell tax-exempt bonds to finance swine flu first-response teams, and provide a new deduction for automobile air handlers.

As a bike freak and a tax geek, you’d think that I’d be thrilled about the new tax break for qualified bicycle-commuting reimbursement. I’ve been riding my bike to work for 30 years, so this new tax expenditure has my name written all over it. The biker in me wants to cry out, “It’s about time!” But the tax geek just groans.