Whenever anyone talks about tax reform these days, one of the first items to come up almost always is "tax simplification."
The notion of streamlining the nation's complex tax system - and simplifying the returns that tax-payers have to fill out every April - has long been a dream of economists and public officials alike.
Tax experts regularly issue reports urging tax simplification. Congressmen make speeches about it. And President Carter has listed it as a major goal of his coming tax revision package - right along with greater equity and lower tax rates.
There's no doubt the tax system is complex. The latest version of the tax code takes up 2,176 pages - most of it involving definitions and exceptions. Every month it grows a little more.
And anyone who has faced a form 1040 on a long spring weekend knows how complicated life can be. Polls show fewer than a quarter of American taxpyers make out their own returns. About 54 per cent go to outside preparers.
But despite all this weighty evidence, some analysts question whether the tax system can, or even should, be simplified. Maybe we need all those loopholes and exceptions, they say. The complex returns are merely the price.
The arguemnt comes in human terms: The tax code is complex because we need to treat people differently in order their individual circumstances. Reshuffle those shares if you like, but the complexity remains.
People also like the code's complexity because it offers them a chance to wrangle an extra dollar out of Uncle Sam. It's a national game. There's more money in complexity - for those who can find the breaks.
Finally, many of the present exceptions and exclusions were put there to influence social behavior or promote national goals. The deduction for charitable contribution is one example. Take that away, and many worthy organizations would be left in a lurch.
As a result, some tax experts believe there's an inherent conflict between trying to simplify the tax system and making it more fair and equitable.The rub is in the present code: The tax volume begins simply, with the flat-out concept that all income, from whatever source, is taxable. The next 2,175 pages are spent outlining exceptions to that rule.
These same difficulties are evident in President Carter's new tax package. Carter pledged last autumn that tax simplification would be a key element in his new program. And Laurence N. Woodworth, the President's chief tax writer, spent most of a press conference last spring emphasizing that commitment.
But tax experts say the package the President is planning - at least, the version that has been recommended by his Treasury advisers - falls far short of that goal.
To be sure, the Carter proposal makes some significant moves toward simplification. In a major step, the President is seeking to end the special tax treatment for capital gains - a change tax experts say would in itself abolish almost a third of the present tax code.
He's also proposing to eliminate a spate of deductions and exclusions and to merge the present $750 personal exemption and $35-a-person credit. There's little real doubt that will simplify returns a bit.
But this streamlining is more than offset by other steps the President is considering that, ironically, are designed to make the tax system more equitable. Treasury concedes some could make the tax code more complex:
Thr one-third savings in tax laws from ending the special treatment of capital gains would be pared sharply by a series of exceptions the administration is drafting - for timber, home sales and the effects of inflation.
(The explanation is delightfully perverse. To make these exceptions, the government first must define what a capital gain is. That means continuing the bulk of the existing statue, which deals mostly with the definition.
The Carter proposal for reducing the double taxation of dividends is regarded by tax experts as a nigthmare of complexity. The provision would shield shareholders from most of this, but it complicates corporate law.
The President also is proposing other measures that would add to complexity. A prime example is his plan to provide a special tax credit to reduce the so-called "marriage penalty" for couples. The step would lessen the inequity, but it also would add another computation to preparing your tax return.
The result is that while the new Carter proposals may streamline some portions of the code, they really won't simplify things that much. Their biggest impact may be to enable a few more taxpayers to use the standard deduction, rather than the long form. And Congress most likely would have pushed that for next year on its own.
"The President's package moderates the complexity, but it doesn't really deliver on his promise," said Joseph A. Pechman, the respected Brookings Institution tax expert.
What it all boils down to is that, like other aspects of tax revision, the nation of tax simplification is more complex than it looks.
President Carter conceded last week that "tax reform . . . is, as I have discovered recently, an extremely complicated matter."
No doubt he was referring to tax simplification as well.