THE TAX CODE: TIME TO START OVER?

SENATOR TIM HUTCHINSON 

I've heard it said that a tax form is a lot like a laundry list - either way you are going to lose your shirt, and a lot of folks have lost their shirts dealing with our current code. Senator Sam Brownback (R-KS) and I have introduced the Tax Code Termination Act (S. 1673) to sunset the current tax code after December 31, 2001. The tax code needs to be terminated, giving us a clean slate to start over again.

Today's laundry list of tax provisions now comprises 480 separate tax forms, requiring an additional 280 supplemental, explanatory pamphlets.

The American people are troubled that mere compliance with tax laws is costing the economy more than $157 billion a year, and they find it absolutely incredible that the federal government itself spends $13.7 billion per year enforcing this code. Yet, in spite of the fact that we are spending $13.7 billion on the federal level to enforce the tax laws, one out of every four calls to the IRS will get a wrong answer. The Internal Revenue Service itself doesn't understand the tax code we are asked to follow.

Unfortunately for taxpayers, and even for overburdened IRS employees, the tax code continues to grow and become more byzantine every year. The number of words comprising the tax code grew from 235,000 words back in 1964 to almost 800,000 words in 1994. That is an increase of over 300 percent. This complexity has led to a veritable cottage industry of high-priced lobbyists. In fact, it is interesting to see the parallel between the increase in lobbyists. In 1964, there were between 10,000 and 20,000; now, there are almost 70,000 lobbyists in Washington.

Even the Taxpayer Relief Act of 1997, which I supported because of the sizable substantive real tax cuts that it provided to middle-income families, continues the trend towards tax code complexity. This act added several new forms and resulted in more than 830 tax code changes, although it provided the first tax cut in 16 years. It is no coincidence that when the Taxpayer Relief Act was signed into law last year, H&R Block, the national tax preparation service, saw its stock jump 20 percent. Since then, it has increased 50 percent, to a great extent because of what we did here in Congress in the passage of a bill that further complicated an already overcomplicated tax code.

Worse yet, the marginal tax rate for typical families with a child in college varies widely under the current tax code. As it was pointed out by two economists for the American Enterprise Institute, for typical families with incomes between $10,000 and $120,000, the marginal tax rates bear a strong resemblance to the New York City skyline.

Taxpayers making between $11,000 and $30,000 should not pay higher marginal tax rates than those earning between $30,000 and $40,000. Likewise, taxpayers making between $80,000 and $100,000 should not pay higher marginal tax rates than those earning above $120,000. Yet, while we in Washington debate the merits of all the various tax proposals with all their various advocates and all their pros and cons, the New York City skyline tax continues unfettered.

It is not enough for us to continue to tinker with this tax code. It is not enough for us to merely pass IRS reform legislation, though I support that and I will support further legislation to protect the rights of American taxpayers. We must be much more fundamental in our approach to comprehensive tax reform, and it begins with establishing a sunset date, a date the American people can understand with certainty and realize that the unfairness and undue complexity and byzantine nature of the current tax code will be eliminated once and for all.

In short, the Tax Code Termination Act places federal taxes on the same footing as federal spending. It will allow us to clean the slate, and on that clean slate, Congress will be able to write a smaller, simpler, fairer tax code for the American people. In the end, the tax code will be taken to the cleaners and the taxpayers will get to keep their shirts.

Senator Hutchinson (R-AR) took office in January 1997 and serves on the Labor and Human Relations, Environment and Public Works, and Veterans' Affairs committees.