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Beth Garrett, President Obama’s choice to be Assistant Treasury Secretary for Tax Policy, has withdrawn her name from consideration.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.

I still haven’t finished my taxes, probably because it is the civic duty I hate the most. It isn’t the paying that bothers me. It is the process.
I hate that I have to give a private company $49.95 to help me perform a basic act of citizenship. I hate that I must sit in front of a computer for hours mindlessly typing in numbers. I hate that the Tax Code is an incomprehensible black box. The software asks for a number. I type it in. It appears on a form, and I, more or less, assume it is right. Mostly, I hate that the Tax Code is so damn complicated.

The AIG bonuses are an outrage. But the bigger scandal is that a grandstanding Congress wants to use the tax law to punish the companies that paid them and the employees that got them.
If Congress wants to limit bonuses for employees of bailed-out companies, it should just do it. But using the Internal Revenue Code is a truly terrible idea. And dipping into the Code to win political points is worse. Long ago, people were rightly outraged when Richard Nixon tried to turn the IRS into a weapon to punish his enemies. This gotcha tax is another variation on the theme, and nearly as inexcusable. Imagine, for instance, if a GOP Congress retroactively barred people from deducting charitable gifts to Planned Parenthood. Or Democrats imposed a 50 percent surtax on companies that that do security work in Iraq.

Not everyone, it seems, agrees with my assessment of the failure of the Obama Three to properly pay their taxes. I argued that they were among millions of us who got their returns wrong. Others, however, feel they should have known better.
From Paul Caron, the esteemed blogger at TaxProf:
“These are not rocket-science kinds of tax issues. I take them at their word, but on the other hand, these were not cases of something really esoteric.”