TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Wednesday, May 9, 2018

Cauble: Superficial Proxies For Simplicity In Tax Law

Emily Cauble (DePaul), Superficial Proxies for Simplicity in Tax Law:

Simplification of tax law is complicated. Yet, political rhetoric surrounding tax simplification often focuses on simplistic, superficial indicators of complexity in tax law such as word counts, page counts, number of regulations, and similar quantitative metrics. This preoccupation with the volume of enacted law often results in law that is more complex in a real sense. Achieving genuine simplification — a reduction in costs faced by taxpayers at various stages in the tax planning, tax compliance, and tax enforcement process — often requires enacting more law not less. In addition, conceptualizing simplicity in simplistic terms can leave the public vulnerable to policies advanced under the guise of simplification that have real aims that are less innocuous. A perennial example involves lawmakers proposing a reduction in the number of tax brackets under the heading of simplifying tax law. In reality, this change does very little, if anything, to simplify law in a meaningful sense, and its truer aim is to reduce progressivity in the tax code.

Although the tax legislation ultimately enacted in December 2017 did not change the number of brackets applicable to individual taxpayers, political discourse preceding its enactment once again touted a reduction in the number of tax brackets as a simplifying measure.

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Simplification of individual tax is easy. One, get rid of everything below AGI. Everything on page two of Form 1040 increases complexity. Two, tax capital gains as ordinary income and allow a full deduction for capital losses. Allowing a 20%+ tax differential for a submerged tax system within the ordinary tax system pushes complexity through the roof.

Do these two things and adjust the rates to be revenue neutral, and commercial tax prep for individuals will die.

Posted by: Dale Spradling | May 10, 2018 5:39:54 AM

Tax simplification should have the base requirement that instructions are clear and that all calculations and returns are straightforward enough to be completed manually by a reasonably competent taxpayer. When tax professionals say that they'll wait to see how a tax program treats transactions, then it's too complicated.

Posted by: Woody | May 10, 2018 11:30:45 AM