Like millions of Americans at this time of year, I find myself staring in exasperation once again at the hopelessly confusing instructions the Internal Revenue Service sends with its income tax forms.
There are forms for this and forms for that, and pages of incomprehensible directions that supposedly explain how to figure out the tax I should pay if I don't want to go to prison. Though I fancy myself as functionally literate and reasonably intelligent, the IRS instructions frankly leave me bewildered. Like one out of every four Americans who file income tax returns, I throw in the towel and pay a professional tax expert to guide me through the arcane rules and regulations.
No one but a lawyer or accountant who has devoted his life to the tax laws can feel even remotely confident that he has mastered all the rules. Even these career experts frequently run afoul of the government clerks in their cubicles, who may interpret an exemption or deduction differently.
Under the present complex system, the rich get loopholes, the poor get exemptions and the middle-class get stuck.
Clearly, there is something terribly wrong. Congress pays lip service to the sanctity of family life, for example, but passes legislation that makes married couples pay more income tax than those who choose to live together out of wedlock. And a government that supposedly offers equal opportunity to poor and rich alike still countenances a system that gives tax breaks to those with enough money to buy a home. They take deductions on their mortgage interest and property taxes that are not available to those who rent their homes.
Critics of the tax system include conservative fiscal experts who recognize that the long-term effect on the nation's economy is counterproductive.
"It is a system that encourages consumption more than saving and discourages investment and enterprise," former Treasury secretary William Simon told my reporter Deborah Latish.
Incentive has always been the basis of the free enterprise system. But with our cockamamie tax setup, the investor who makes money finds he is penalized by confiscatory taxes, instead of being rewarded for his initiative. A laborer who sweats more than his fellow workers suddenly realizes that his efforts have simply put him in a higher tax bracket.
So instead of plunging into enterprises that might increase productivity, the rich put their money into tax shelters that don't do a thing for the stagnant economy. The working class has little incentive to climb up the economic ladder when taxes are going to push them back one step for every two they climb.
The resulting lack of productivity and lack of productive investment lead to the remoresless march of inflation. When savings or investment are penalized by the government, everyone spends, giving inflation another nudge. Surely there must be a better way.
And there is. By eliminating all the loopholes and exemptions for rich and poor alike, and instituting a straight across-the-board tax rate on everyone, Treasury experts estimate that the same amount of revenue could be raised as under the present insane system. Their guess is that the tax rate could be reduced to 14 percent or 15 percent, still letting the poor avoid taxation they obviously cannot afford. Some of the tax-sheltered wealthy would lose under such a program -- but not very much. And the rest of us would save a bundle of money and an inestimable amount of aggravation.
Instead of taking hours to prepare your tax return, the job could be done in a matter of minutes. Taxpayers who would lose deductions would more than make up their loss through the lower rate they paid. And a flat rate, applicable to everyone, would do what Reagan promised to do -- get the government off our backs.
Perhaps more important, the IRS would no longer feel compelled to poke into every aspect of taxpayers' lives -- religion, marital status, education, home ownership -- to decide which deductions; are valid and which are not.
Would such a system work? A version of the flat-rate tax system is in use in Hong Kong. After a basic exemption of about $2,200, the tax rate goes from 5 percent to 15 percent. The government provides many assistance programs for the needy and the elderly, as well as the usual public services like education and public works -- all paid for out of the simplified tax structure.
The only opposition to a simple tithe would come from those who benefit most by the present incredibly complex system -- tax lawyers, accountants and the tax-sheltered rich.
But for the rest of us, it would be a relief almost beyond imagining.