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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.
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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.
Mr Farrell doth protest too much. I would Gladly (Overjoyously!) give up all my deductions if the government would make it truly simple to file. In fact I would rather have them come to my door with a gun and take whatever they want, rather than have to submit to the pain and insult of having to fill out a form in order to have the privilege of being robbed by the government.
Interesting perspective. I enjoy similar discussions with friends when we get together for dinner. It seems that everyone likes to talk about tax reform and government spending but unwilling to put the benefits they receive from government in the category to be reduced/eliminated as a condition to simplify the tax code or cut government spending. I presume that's human nature not to advocate a reduction of their personal economic well being. A wholesale tax reform is unlikely to be successfully instituted unless everyone is willing to accept a reduction and/or elimination of benefits they receive from the government today. There can not be groups of people exempt from this precondition.
