4 Reasons Taxes Are So Complicated and Why They Won’t Be Made Simpler
Written by
Vance Cariaga
Edited by
Chris Cluff
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If you’re looking for a simple tax return, move to Estonia. Residents there can file taxes in less than five minutes and not pay a dime, according to a Tax Foundation report cited by Yahoo Finance. In contrast, taxpayers in the U.S. spend an average of 13 hours preparing their tax returns and pay an average of $240 for tax prep services.
The U.S. doesn’t have the most complicated tax system, ranking 21st out of 38 countries surveyed by the Tax Foundation in terms of tax preparation ease. But Americans who have had to file anything more complicated than a basic 1040 know that it’s no walk in the park, either.
Why are taxes so complicated in the United States? Much of it has to do with the U.S. economy, according to Marilynn Grossman, professor of taxation and editor-in-chief of the Tax Law Review.
“We’re a very sophisticated, complex economy and that requires a very sophisticated tax system,” Grossman told NPR in an interview.
Here are four other reasons taxes are so complicated in the U.S. — and why you are not likely to see the tax system simplified anytime soon.
Competing Goals
In a recent column for the Wall Street Journal, reporter Laura Saunders noted that “what one filer or industry sees as as a well-deserved tax incentive advancing the public good…often seems a stupid or wasteful tax break to others. The rock-bottom reality is that no matter how much taxpayers decry tax complexity, few object to it when they benefit.” Because a complex tax code benefits important constituents, lawmakers are hesitant to change it.
Special Interest Influence
Powerful interest groups often support tax subsidies that can complicate the tax system by “creating distinctions among taxpayers with different sources and uses of income,” according to the Tax Policy Center. And because these interest groups have so much influence in Washington, D.C., they are often successful in adding extra layers to the tax system
Political Gridlock
As the Wall Street Journal noted, “bitter partisanship” in Congress makes it hard to simplify the tax code. “Simplicity advocates typically aim to broaden the income-tax base by eliminating targeted tax breaks and lowering rates–but that provokes a storm of opposition from those affected,” Saunders wrote.
Tax Incentives
Thanks!
According to Grossman, Congress “loves to provide incentives to the Tax Code — any problem we want to solve, let’s use the Tax Code.” One result is that every year the tax system gets more complex, but it’s extremely difficult to convince people to give up their tax incentives.
