Mr. Obama’s Smoke And Mirrors
President Barack Hussein Obama

Mr. Obama’s Smoke And Mirrors

If access to the Internet is a little slow this weekend, please keep in mind that millions of Americans are doing annual harrying experience called filing their Federal and State taxes.  The IRS expects some 140,000,000 returns to be filed by Tuesday, April 17th.  Many of these returns will be filed electronically.  Most Americans agree that our tax code is too long and too complicated. Americans will spend about 5.4 billion hours this year complying with the tax requirements.   The code itself is some 5,500,000 million words, many inconsistent with each other.  There are 569 different income tax form requirements.   The code itself has grown by 18.9% since 2005 and the directions for a typical 1040 totals 161 pages.  The “EZ” version is 41 pages.  No single person on the face of this earth completely understands the entire tax code – not even the IRS employees.

We know that this being an election year, Congress will accomplish very little.  While most Americans, even CPA’s, agree that we need a simpler and fairer tax code, I expect that we will never see it.  First of all, no one in Congress wants to tackle the simplification of the tax code.  Two, lobbying is the biggest business in Washington.  Many of America’s 15,139 registered lobbyists are working to increase the level of complexity of the tax code by fighting for special loopholes and regulations. Three, even President Obama, while he may suggest a simpler code, is now advocating for what he calls the “Buffet Rule.”  This is a tax on wealthier Americans, and while it does have some merit, just makes the existing tax code that much longer and more complicated.  Many wealthy Americans receive a large percentage of their income in the form of capital gains which are taxed at 15%.  Obama wants the wealthier Americans to pay 30%.  Do we just add 15% to their tax liability?  Accompanying the Buffet Rule is more complicated tax regulations regarding the use of corporate jets.  I don’t completely understand the tax ramifications on the use of fractionally owned corporate jets but I guarantee that the IRS will find a way to add an additional hundred pages to the tax code.

If all this is not complicated enough, we have two existing issues in our current economy.  Tax compliance is a multi-billion dollar industry and 58% of all individuals filing taxes hire someone else to do it totaling 81 million returns.  H & R Block alone employs more than 90,000 tax preparers with an annual income of close to $3.87 billion dollars.  Intuit, the owner of the Turbo Tax software package, is looking at similar revenue for 2012 near $4 billion dollars.

Complicating matter even more, the IRS employs a staff of about 93,000 employees with an operating cost of $11,207,223,000.  The IRS employees range from attorneys, processors, and auditors.  As part of the 2012 budget, President Obama has requested $13.3 billion dollars for the Internal Revenue Service.  Actually, Mr. Obama is calling for a boost in funding for the IRS.  Of the $13.3 billion dollars requested in the President’s budget, roughly $6 billion would go toward enforcement activities, an increase of $463 million over the prior year.  So, again, we have a case of the good President speaking out of both sides of his mouth.  He proposes to add to the complexity of the code through the Buffet Rule, does nothing to clarify the already complex tax code, but allocates additional money for enforcement.  I don’t think the good President wants too many people to know about his tactics especially in an election year.

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Written by
Donald Wittmer