Opinion: What everyone’s missing about the Inflation Reduction Act
The income tax in this country is far too complicated. Fixing that would take real, difficult and bipartisan work that neither side, apparently, wants to do, but it would solve a lot of problems.
The truth can be hard to find in Washington, especially during an election year.
The Biden administration and Democrats in Congress are touting passage of the Inflation Reduction Act, for a variety of reasons, even as many economists and the Wharton School of Business say it won’t reduce inflation.
But they especially tout one of the bill’s main provisions, which is to provide $80 million more to the IRS, much of which, they say, will be used to audit rich people and make sure they pay what they owe.
Republicans, meanwhile, harp on what they say will be the hiring of 87,000 new auditors, who will have no choice but to go after ordinary people because there are only so many billionaires to keep track of. The IRS denies this, saying much of the money will be used to update old equipment and hire more people to actually answer the phone when a taxpayer calls with a question. The IRS says it doesn’t know yet how many agents it will hire, but that it will focus on auditing only the very rich.
But while both sides desperately try to get you to believe one or the other, both are missing the real point.
The income tax in this country is far too complicated. Fixing that would take real, difficult and bipartisan work that neither side, apparently, wants to do, but it would make much of today’s debate moot.
The tax code was 6,871 pages long as of 2020. Add in federal tax regulations and the official tax guidance, and, according to the website irisreading.com, it numbers about 75,000 pages, which would take an average reader somewhere around 14 weeks to devour.
Comprehension and retention rates may vary, but I doubt they would be too high.
The Inflation Reduction Act, meanwhile, adds separate credits for the purchase of new or used electric vehicles and solar panels, plus a complicated alternative minimum corporate tax based on book income.
All of these make the tax code even longer and more complicated. I doubt even tax experts understand all the complexities.
Not only do we need simpler taxes, we need this quest to be a bipartisan one. Both parties represent taxpayers who participate in the yearly ritual of filing returns, many of them hiring experts to help them make sense of it all.
The last real bipartisan simplification effort was in 1986, when a Democratic Congress and Republican president reduced individual tax brackets by 10 — from 15 to five.
A few years ago, Sen. Roy Blunt, R-Mo., said the tax code has “nearly doubled” since 1985, the year before that simplification. The Poynter Institute fact-checked that claim and concluded it wasn’t exactly accurate, saying, “the number of words used in the tax (code) has grown even more than that.”
But while we’re on the subject of political spin, there is a reason Republicans are trying to get people worried about the IRS coming after them. It’s because of a long history of scandals involving just that.
Twenty-five years ago, senators held hearings and listened to a long line of witnesses who, according to CNN, “described Gestapo-like tactics employed by the tax agency.”
The stories are compelling. An IRS agent by the name of Jennifer Long told the committee, “I can personally attest to the use of egregious tactics used by IRS revenue agents which are encouraged by members of the IRS management.” She said these “extract unfairly assessed taxes from taxpayers, literally ruining families lives and businesses, all unnecessarily and sometimes illegally.”
Granted, that was a long time ago, but Reuters has compiled a list of IRS scandals that date to Franklin Roosevelt using the agency to go after political enemies in the 1930s, running through corruption and bribery allegations in the ’40s and ’50s to Nixon’s shenanigans in the ’70s and beyond.
Janet Holtzblatt, a senior fellow at the Tax Policy Center, told vox.com that she thinks the IRS will indeed focus today on wealthy taxpayers and large corporations, but that this depends on the agency’s ability to figure out people’s “actual” incomes.
Actual incomes? If that statement isn’t a testament to how complex the tax code has become, I would be hard pressed to find a better one.
The United States has long been in a delicate position with the IRS. Underfunding it leads to more tax cheats. And yet, it is an unpopular agency with a history of abuses.
A simplified income tax would probably require a smaller IRS to police, solving both these problems. Voters ought to begin demanding it.