by Mel Griffith
Now that we have all gotten our tax returns sent in it may be a good time to ask why the return is so unnecessarily complicated. It seems that every time Congress "improves" the tax system it gets more complicated. While most of the complications are well intended and meant to help people in unusual circumstances or to encourage people to do things the government wants them to do, such as save money or get an education, the cumulative effect is overwhelming. A recent news report said that more than 60% of taxpayers have someone else prepare their return for them.
The complexity of the tax code has created a huge tax preparation industry and a huge bureaucracy to examine all the complex returns. For example there are twelve different "adjustments to gross income," many of which require the submission of additional forms and most of which save only a small amount for those who qualify. In addition, there is a very complex procedure to determine how much Social Security income is taxable because Congress couldn't really decide whether to tax it or not so they introduced a complicated procedure to tax some of it for some of the people. Wouldn't it be much simpler if they just lowered the tax rate a little for everybody and got rid of most of the complicated exceptions? Granted, some people would pay a little more tax in some years, but probably over a ten year period most people would come out ahead, especially if they could prepare their own tax return instead of paying someone else to do it.
If you have property that needs to be depreciated the regulations are a real nightmare. The idea behind depreciation is quite simple. Since some things last more than a year, their cost is deducted over the approximate life of the property. Leave it to the government to make this simple process quite complicated. They generally allow larger deductions in the first year of the item's life. This makes sense, since things depreciate faster when they are new. But the government provides several ways of doing it, with no clear explanation of which is supposed to apply to what. The government is also afraid of losing some taxes if you didn't own the item for all of the first year, so there are several complicated "conventions," that is procedures for figuring the first year's depreciation with complex requirements to determine who is supposed to use which.
We keep hearing about plans to simplify the tax code and even eliminate the IRS, but nothing ever seems to happen, except for new complications intended to get votes from the special interests they affect. Perhaps we should remind those in Congress that the system needs attention. In the meantime, let's work to make sure that Tennessee doesn't impose its own income tax and double all the present unnecessary problems.