April 14, 2009

IRS Gives GOP a Lifeline, If It Wants to Grab It

As we near the annual exercise in national insanity that accompanies the Ides of April, that was indeed a plaintive cry for help from the ranks of the IRS in the Wall Street Journal last week: “Stop us before we (over)bill again.”

National Taxpayer Advocate Nina Olson, who penned an opinion piece published there, is part of one bad agency. And I don’t mean in its urban slang iteration . . . how did Michael Jackson once put it?

“I’m bad, I’m bad, you know it.”

We know the IRS is bad, all right. As in incompetent. As in overwhelmed. As in as bad as a constantly tinkering Congress wants it to be.

But don’t take my word for it. Ms. Olson, whose job was created by a Republican majority in 1998 to stick up for put-upon taxpayers, does enough venting for all of us.

Like lamenting how tax compliance chews up the equivalent of 3.8 million full-time workers (at least four times the employment of the auto industry we’re all so hot and bothered about.) Or that filing costs run to a “staggering 14 percent of aggregate income tax receipts.” Translation: We already overburdened citizens are essentially coughing up a double-digit surtax in blood, sweat, toil and tears. Or that much of that cost for reckoning our annual pound of flesh comes from the more than 80 percent of individual taxpayers who pay either for preparers or software. A stat all the more outrageous when you consider that some 40 percent of all taxpayers file the shorter “1040EZ” – the instructions for which are 41 pages in length. (EZ? How about Alpha 2 Omega?)

But who could blame taxpayers who run screaming for assistance when, as Ms. Olson admits, “it's challenging even to figure out (the tax code’s) length.” If the IRS isn’t even sure how long the code is, how can they know what’s in it?

Hint: They don’t. Ms. Olson points out that the IRS has reversed 43 percent of determinations of ineligibility for the Earned Income Tax Credit. She lets on that the IRS is so confused it can’t even figure out what taxpayers really owe or answer our questions.

Ms. Olson dutifully applauds the President Obama’s formation of a tax simplification task force, but she can’t really expect much from an administration bent on using taxation as a form of torture for rich folks and other villains even as it shields Gitmo killers. No, her call for truly EZ should be understood for what it is – an SOS to the GOP.

Read between the lines: Without mentioning Republican icon Ronald Reagan, she holds up the 1986 reform – his singular achievement, if you don’t count little stuff like the overthrow of communism – as a model of tax change you can believe in.

Ms. Olson offers up six “core principles” to guide reform. I can do her five better: Just say “go.” Ditch the current monstrosity in favor of some combination of consumption taxes. (I favor a major energy tax plus a sales tax, but there’s room for discussion.)

After all, Sleek Barry is bringing us ever closer to an electoral majority whose members will owe nothing in income taxes – but to prove it, will still need to keep voluminous records even as they keep ponying up for assistance. That opens a window of opportunity wide enough for tax-cut-obsessed Republicans to drive a Hummer through (if the president weren’t banning them).

A consumption tax means, for both taxpayers and non-taxpayers, no forms, no figgerin’, no fear of the feds and no frustration come April 15. For businesses, it means one simple computation – percentage of sales – and minimal compliance costs. For everyone, it means true transparency, simplicity and clarity.

And for ostensibly flag-waving, freedom-loving Republicans, it means a perfect banner to raise in the battle to retake Congress. That’s not just an SOS but an “SSS” to the GOP: Summon Some Sense.