Tax simplification is climbing the domestic priority list. It represents either a shift away from or a complement to the Social Security drive (I suspect that the former applies, but opinion varies). It also has a chance to garner bipartisan support, if Greg Anrig’s post is any indication, though Republicans and Democrats obviously differ on the details.
But it’s a major issue, as this Washington Post report makes clear (emphasis added):
Attention Shifts Toward Simplification of Tax Code
[Y]esterday’s hearing made it clear how difficult simplifying the tax code will be. Five economists, conservative and liberal, laid out the problems with a tax code that one of them, Joel B. Slemrod of the University of Michigan, said costs $125 billion and 3.2 billion hours a year to comply with. They pleaded for dramatic changes that would strip out targeted tax incentives, bewildering tax rate changes and quirks that distort economic behavior.
Slemrod breaks the numbers down further in his presentation to the President’s Advisory Panel on Federal Tax Reform:
And, of course, these are just the accounting costs. A comprehensive economic cost estimate would also consider how the current tax structure affects individuals’ work effort, risk assumption, and other such factors that are admittedly difficult to calculate but nonetheless exist. So the total is even higher than Slemrod’s estimate.
For additional background information, see Hal Varian’s recent New York Times article on Toward Fundamental Tax Reform, a collection of papers released by the American Enterprise Institute.
