Biggest Problem with Federal Income Taxes

According to the National Taxpayer Advocate’s Annual Report released on January 9, 2013, the number one problem with taxes is complexity. The report recommended that the current Tax Code be scrapped and replaced with one that uses zero-based budgeting. This is a principle that eliminates all tax benefits and restores them only if their public benefit outweighs their complexity. The report also recommends that the IRS provide taxpayers with “taxpayer receipts” to show how their tax payments are being spent.

Another problem identified by the report is general mistrust of tax laws. According to a survey conducted by the Taxpayer Advocate Service, there is an underlying belief that the tax laws are designed to benefit large corporations and wealthy individuals with tax breaks that cannot be used by small businesses and average taxpayers. Only 15% of those surveyed thought the current tax rules were fair. Again, the negative perception about tax laws could be changed with a complete overhaul of the Tax Code.

Some members of Congress have expressed willingness to undertake tax reform. Let’s see what actually happens!