I’m not doing my taxes.
I’ll file them eventually, but the pointless complexity of the income tax makes me crazy. You’d think that I’d have an easier time because I kind of understand the tax law. But I also know that it doesn’t have to be this hard.
So two cheers for President Obama, who has put former Fed chairman Paul Volcker to work on tax reform. Volcker’s panel is supposed to come up with a plan by December to overhaul the tax code.
Why not three cheers? Well, to start, the announced panel is very short on tax policy expertise. Volcker would be much better suited to heading a panel on monetary system reform. The only tax expert on the panel is Harvard economist, Martin Feldstein. No matter that Feldstein is a certified genius, it’s hard to imagine that President Obama would want the conservative Republican to lead the charge.
It makes you wonder if the tax reform thing is serious.
Moreover, recent history on tax reform panels is not encouraging. You might recall that President Bush also called for tax reform, and his bipartisan panel produced a pretty good plan. But Bush pretended that some other president had asked for the report and ignored it.
Obama's also not making this easy. For one thing, his tax proposals would further gum up the tax code. For example, his proposal to limit itemized deductions has gotten charities in a tither because they think it would stifle philanthropy. But it’s also really, really complicated. Think “alternative maximum deduction,” cousin to the dreaded Alternative Minimum Tax. Not a good idea.
And Obama would add to the hodge podge of credits and deductions that already mystify the tax system.
Another problem: Obama keeps promising to never, ever raise taxes on 95 percent of Americans. That pretty much rules out meaningful reform because you can't replace an irrational system with a rational one without changing some people's taxes. Unless you're talking about major tax cuts (a bad idea), some people's taxes have to go up.
The president and the country have a unique opportunity to rethink taxes. The stimulus bill passed in January enacted many of Obama's tax campaign promises through 2010, and most of the Bush tax cuts also run through '10. If we’re very lucky and the economy recovers over the next year, the president will have a truckload of political capital that he could use to enact meaningful reform.
Meanwhile, let’s take a “time out” from unnecessary tax changes while we figure out how to make the tax system simpler, fairer, and maybe even capable of raising enough to pay for government.
Who knows? Some day, we might have a tax system so simple that even a Treasury Secretary could figure it out.
