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The Great Tax Reformation
| Article
# : |
10579 |
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Section : |
CURRENT ISSUES
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| Issue
Date : |
2 / 1986 |
1,615 Words |
| Author
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Dan Mitchell is a doctoral candidate in the field of economics
at George Mason University, Fairfax, Virginia. |
The United States tax system is imperfect. Some would say it is fatally flawed. The current tax code is over 5,100 pages long. An additional 10,000 pages of IRS interpretation are needed to explain the law. It has undergone nine major revisions since 1954, and the most recent bill, the Rosetenkowski namesake, represents another effort to change the system.
The complexity of the current system is undeniable. A 1977 Treasury Department study estimated that the American public spent 613 million hours filling out over 260 different forms. More recent estimates estimate that two billion hours are spent yearly just to pay taxes.
The cost of this is almost impossible to calculate. The average taxpayer no longer fills out his return. Over 52 percent of taxpayers have to get professional help to fill out their tax returns up from 18 percent in 1954. The Internal Revenue Service (IRS) found that its own employees could not compute the right tax 72 percent of the time. The IRS's $3 billion budget is insignificant when compared to the costs the tax system imposes on the economy.
The desire of tax reform motivated President Reagan to propose a complete overhaul of the tax system. The president campaigned on a platform that called for tax simplification and movement towards a flat tax. The major characteristic of a flat tax is elimination of different tax rates for different incomes. Instead of penalizing higher income people, a flat tax would require equality of rates. For instance, a true flat tax might tax all income at 20 percent. Therefore, if a wage earner's income was $25,000, he would pay $5,000 excluding any exemptions. Someone earning
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