Industry News - Regulatory Updates
May 7, 2012
Lawmakers may not be able to address tax code complications
Despite debate and continuous concern, the U.S. tax code is unlikely to be refined into a more streamlined, comprehensible form.
Many lawmakers support a simplified tax code in principle, recognizing that it may have benefits such as decreasing the compliance burden of individuals and businesses, allowing the IRS to spend less on regulation and making it harder for people to avoid paying what they owe, Investopedia notes. They may hope for higher revenues with a simpler tax code, but the federal government is in the habit of using tax policy as a tool.
In many cases, that tool is used to support activities that lawmakers and most Americans favor, such as education. Current tax law recognizes more than 20 distinct varieties of higher education savings accounts, each with their own eligibility requirements and tax advantages, all of which make the tax code more complex. Legislators are unlikely to eliminate these options, and many of the most complicated and largest tax breaks are politically difficult to eliminate even if they were convinced it were appropriate to do so.
The result of the current situation, according to Investopedia, is that the complexity grows as lawmakers pass or extend tax breaks, while those provisions reduce government revenue. To change the situation, what will be needed is not just a new policy but for lawmakers to adopt a different perspective on that policy. In the meantime, Americans may find themselves in need of accounting tips to stay current with tax law.