The U.S. tax code is overly complex, with multiple sets of rules and programs that make taxpaying confusing and time‐consuming, costing Americans tens of billions of dollars annually. Wholesale structural reforms are needed, but smaller changes can also make taxpaying easier for millions of Americans.
Politicians on both sides of the aisle often get carried away with designing new or expanded tax programs without considering what is already in the tax code and how the whole system works when families file their taxes. As a result, the United States has at least six different sets of rules on how a child might qualify a family for tax benefits, 15 different tax programs targeted at higher education, 18 different tax‐advantaged savings accounts, and 14 different deductions for people who itemize. The task of merely describing how these tax programs work is the subject of hundreds of pages of IRS instructions and countless inscrutable forms and worksheets.
Republicans are rightly worried about the $80 billion Congress has authorized for increased IRS enforcement and modernization. However, the IRS funding conversation misses the critical fact that the inscrutability of the U.S. tax code is the fault of Congress, not the IRS. In a recent Cato policy analysis, Joseph Bishop‐Henchman has 10 recommendations to reform the IRS and protect taxpayers from aggressive IRS enforcement. His most important recommendation is to “dramatically simplify federal tax laws.”
Toward this end, my new Cato Brief highlights four areas where the tax code can get particularly complicated for many families.
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