The Decline (and Fall?) of the Income Tax.

First, a confession. I wasn't quite sure whether to read Professor Michael Graetz's The Decline (and Fall?) of the Income Tax. Michael is a dear friend and colleague. By my lights, he is one of the funniest and most astute tax professionals on the scene today. I just wasn't quite sure what he'd be like in writing.

No surprise, he's as wonderful in print as he is in person. The Decline (and Fall?) is a funny, easy read... but beware the sharp edges. It takes the reader on a magical mystery tour of our income tax system. Along the way, we learn how and why things went so wrong. By the end of the trip, we learn what can and should be done to save the tax system from itself.

It's a Funny, Easy Read

Professor Graetz's book is a serious history of our tax system. But it's funny. And I mean really funny -- laugh-out-loud funny. The chapter headings are a dead giveaway. What is there to say about chapters with headings like: It's a Sin to Get a Mexican Divorce; Chasing Chinchilla Coats; Dad Is Not at the Dining Room Table Any More; The Madness of Two Georges; Read My Hips. It turns out that the exact text follows these leads. My personal favorites include a hilarious discussion of the marriage penalty, which concludes, as follows:

The IRS apparently regards

long-term living together as

better public policy than

divorces followed by

remarriage.

What's Gone Wrong

Professor Graetz shines a bright light on the question of what has gone so wrong with our tax system, and why. He rounds up all of the guilty as charged. While different readers will undoubtedly pick (identify with?) different villains, I think Professor Graetz makes a compelling case that there are two primary culprits. First, the tax law has strayed too far from fundamental "American" values. Whether it's the marriage penalty, or just plain penalties, there are too many instances where the tax law defies common sense. Second, the tax law has become far to complex for too many taxpayers.

What Is to be Done?

Professor Graetz does something quite remarkable in his portrayal of the problems. He doesn't blame anybody. He doesn't finger bad or incompetent actors. To the contrary, he makes clear that our current system is the by-product of a process where capable and well-meaning participants are "doing what comes naturally." This ability to distinguish between the dancers and the dance lets Professor Graetz reach his compelling suggestions for fundamental reform. I don't agree with all the particulars, and don't want to spoil his punch lines. But suffice it to say that his proposals put the tax system back where it belongs -- a far simpler system that doesn't stray too far from common sense, and takes us where we need to go in light of the demographic and fiscal policy challenges that lie ahead.

FRED T. GOLDBERG, JR., is a partner at Skadden, Arps, Slate, Meagher, & Flom in Washington, D.C. He has previously served as Chief Counsel and Commissioner of Internal Revenue and as Assistant Secretary of the Treasury for Tax Policy. In 1993, he received Tax Executives Institute's Distinguished Service Award.