FORMS FILING AND OTHER PERILS OF TAX SEASON

Around this time of year, you may feel a little like the man who, when he claimed the federal government as a dependent on his tax return, was disappointed when they disallowed the claim because he wasnâ??t contributing more than half his income to support it. In April, taxes can seem particularly onerous. With the tax cuts of 2001, 2003 and 2004 still in effect, 75 percent of federal taxpayers fall in tax brackets of 10 to 25 percent. While these cuts have contributed to significant economic growth in recent years, marginal tax rates are still too high. To make matters worse, compliance costs are truly out of hand: itâ??s projected that this year, individuals, businesses and non-profits will spend six billion hours complying with the federal income tax code at a cost of over $265 billion. Cumulative costs for compliance by individual taxpayers alone will total $111 billion. This is a hefty, but not surprising compliance cost considering the outrageous growth in tax law over the past 50 years. In 1954, income tax regulations comprised 55 percent of the tax code. Now, income tax regulations make up 83 percent. In fifty years, income tax code sections have increased from 103 to 736. On average, there has been a significant federal tax enactment every 18 months. When you change things that often, the inevitable results are confusion, mistakes and compliance problems. Iâ??ve written before about the Presidentâ??s Advisory Panel on Federal Tax Reform, created in January, 2005, and its recommendations at the end of last year for simplification of the tax code. There is no better time than tax filing season to highlight some of their findings:-We have lost sight of the fact that the fundamental purpose of our tax system is to raise revenues to fund government.-The current tax system distorts economic decisions of families and businesses, leading to an inefficient allocation of resources and hindering economic growth. -The tax system is unstable and unpredictable. This volatility is harmful to the economy and creates additional compliance costs.-Meaningful reform can deliver a system that is simpler, fairer and more growth-oriented than our existing tax code. The Panel forwarded its findings and subsequent recommendations to the Secretary of the Treasury. Recommendations included:-Simplifying the entire tax system and streamlining filing for families and businesses;-Lowering tax rates for families and businesses while retaining the progressive nature of our current tax system;-Extending important tax benefits for home ownership and charitable giving to all taxpayers;-Removing impediments to saving and investment; and,-Eliminating the Alternative Minimum Tax (AMT), projected to raise the taxes of more than 21 million taxpayers this year and 52 million by 2015. Although the Senate has a full calendar, I remain hopeful that we on the Finance Committee will schedule a review of these important findings and recommendations. Even though tax filing season is almost over, it will rear its ugly head in less than a year, and something needs to be done. In the meantime, itâ??s important that Congress remains committed to making the tax cuts of 2001, 2003, and 2004 permanent, particularly those on capital gains and dividends. These cuts promote the Panelâ??s recommendation that impediments to savings and investment be eliminated. The system can be changed for the better, if we have the will to make it happen. WORD COUNT: 565