Why tax reform still hasn't come to America

Liberty Tax Service tax preparer Ronn Seely works on tax returns on April 14, 2011 in San Francisco, Calif. Many people like the idea of tax reform, but once you start talking about getting rid of their exemptions, the tune changes.

Jeremy Hobson: Tax day is a little more than three weeks away. And while you're trying to determine what happens when you subtract line 35 from line 43 on your tax form, you might ask: Why is this so complicated? Isn't it time for some tax reform?

Well Marketplace economics correspondent Chris Farrell has wondered the same thing and he joins us now. Good morning.

Chris Farrell: Good morning, Jeremy.

Hobson: So it seems like whatever happens in the next year politically, that after that point there is going to be some significant tax reform coming down the pike?

Farrell: And everybody loves tax reform -- major tax reform, Jeremy. I mean -- have you done your taxes yet?

Hobson: I did do my taxes, yes.

Farrell: OK, I'm doing mine this weekend. And I konw I'm going to get frustrated with all these deductions and credits and loopholes and phase-ins and phase-outs. So everybody love major tax reform. And so you'll get these discussions. And here is my benchmark for when people talk about major tax reform -- and I've been testing it out: So when I go out for dinner, and I'll be at a table. And well, you know, I'm a lot of fun so I always bring up major tax reform, you know? I'm a good guest, right?

And everyone will go, "Yeah, yeah, we want that major tax reform." And they'll go off about how this is so complicated. And I'll say, you know, we gotta get rid of that mortgage interest deduction, that's just terrible. You know, all that is -- we call it a tax, but it's really government spending to support housing. And you know, this kind of chill comes over the dinner party.

Hobson: They don't like that idea...

Farrell: They don't like that. Charitable deduction? Let's get rid of that -- that's a big loophole. And you know this employer exclusion that supports the healthcare benefit? Yeah, that's gotta go too. And all of a sudden, people don't like tax reform that much.

And this is the issue: everybody loves major tax reform in the abstract. So when a politician, a legislature, a think-tank -- anybody says, "We have to have major tax reform," you come back and say OK, what are you going to get rid of? What is going to really going to change? I don't want the verbiage, I want the concrete examples."

Hobson:  Marketplace economics correspondent Chris Farrell. Thanks a lot. 

Farrell: Thanks a lot, Jeremy.

About the author

Chris Farrell is the economics editor of Marketplace Money.

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