Lessons from a Long Tax Run

Lessons from a Long Tax Run
March 16 11:28 2018 Print This Article

Nearly 40 years ago, as a recent college graduate, I made a painful discovery: I couldn’t figure out how to do my own federal income-tax return.

That was embarrassing, and it made me wonder what other Americans do. So, I wrote my first major tax story: I asked five different tax-preparation services in the Atlanta area to prepare returns for a family of four with fairly typical finances. The results: At one extreme, a tax expert said the family was entitled to a federal income-tax refund of $652.04. But another said the family owed $141 — a difference of $793.04.

That experience made me feel somewhat less dumb, but the article didn’t have much impact: Since then, our tax system has evolved from a mess to a nightmare. The pace of change has accelerated in recent decades as lawmakers increasingly have tried to use tax laws to reward or punish conduct. The number of pages in the CCH Standard Federal Tax Reporter, which records tax law, regulations and related material, has soared to 70,320 from 26,300 in 1984.
More than 60% of all individual returns are signed by professional preparers, up from 46% in the mid-1980s. Joel Slemrod, an economics professor at the University of Michigan, estimates that the time and money individuals spend on tax compliance now comes to about $90 billion a year.

I am subjecting you to this semi-rant because this will be my final Tax Report as a full-time staffer for The Wall Street Journal, which I joined after graduating from college in 1968. After well over 1,000 articles on the tax beat since 1993, I have decided to retire, although I probably will write occasional pieces on taxes and other personal-finance subjects. I also plan to do more teaching at the college and graduate-school levels.

I leave with enormous respect and affection for the many talented lawyers, accountants, enrolled agents, Treasury and IRS officials and others who have taken pity on me over the years, supplying me with ideas and background for this column. I leave with special respect and admiration for my colleagues at this great newspaper, the only place I’ve worked since college. And I leave with high regard for our readers, whose questions and comments have helped and inspired me. As my friend and former colleague Glynn Mapes once said, it’s not what you do. It’s who you do it with. On that score, I have truly been blessed.

But I also leave with a growing sense that our tax system is in shaky condition and needs a major overhaul. We need a system that is much simpler and less burdensome. That won’t happen with mere tinkering around the edges. Many people who have held top jobs at the IRS and Treasury agree. Our federal tax system is “so shot through with deductions, credits, exclusions, loopholes and outright noncompliance that it fails in its essential job of raising revenues efficiently,” says Charles Rossotti, a former IRS Commissioner.

As Will Rogers once observed about tax forms: “Even when you make one out on the level, you don’t know when it’s through if you are a crook or a martyr.”

Here are a few thoughts about what may lie ahead:

IRS crackdowns: President Barack Obama is asking Congress to give the IRS more money, especially for “enforcement.” The message: Prepare for more audits, especially if you make $100,000 or more. Increasing the IRS audit rate is comparable to putting more police cars on the highways. When you see more patrol cars, you’re more likely to stay within the speed limit.

For more information please visit our website, www.cashlendupfast.com (Daniela Gherghe)

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Dominic Ortiz
Dominic Ortiz

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