'This is no way to run a tax system,' exclaims national taxpayer advocate

The National Taxpayer Advocate's annual report to Congress says problems with tax code complexity are undermining Americans trust in the tax system.
by Don Mecoy Published: January 16, 2013
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I recently read this year's report to Congress by the National Taxpayer Advocate, the independent, government-paid watchdog for us average taxpayers. I can only hope members of Congress also read it.

The National Taxpayer Advocate, Nina Olson, offers numerous examples of how our tax system is failing — and how that could lead to a devastating loss of trust.

“This is no way to run a tax system,” Olson wrote.

For example, the Internal Revenue Service last month gambled that Congress would patch the Alternative Minimum Tax and programmed its computers based on that “risk-based” assumption. Had Congress failed to act on the Alternative Minimum Tax, the start of the filing season would have been delayed until at least late March, the report said.

“That would have brought about the most chaotic filing season in memory,” Olson wrote.

Olson's biggest complaint — again — was the bewildering complexity of our tax code, which leaves ordinary taxpayers perplexed about how their taxes are computed or even what their tax rate is.

At the same time, sophisticated taxpayers game the system to avoid taxation, the report said. The nearly 4 million-word tax code is changed, on average, once a day, the report said.

Meanwhile, the IRS estimates it is failing to collect about $400 billion a year that is owed, the report said.

So, it's not surprising that only 16 percent of business people surveyed last year by the Taxpayer Advocate's office believe the nation's tax system is fair; just 12 percent think taxpayers pay their fair share.

Such a lack of trust in the system we use to fund our government was “profoundly disturbing,” Olson wrote.

As she has for more than a decade, Olson called for repeal of the Alternative Minimum Tax, created years ago to ensure that wealthy people paid at least some tax. The AMT, repeatedly patched and altered by policymakers, has boosted the taxes of many middle-class and upper middle-class taxpayers, while most wealthy taxpayers avoid it, and thousands of millionaires pay no taxes whatsoever, the report said.


by Don Mecoy
Business Editor
Business Editor Don Mecoy has covered business news for more than a decade after earlier working on The Oklahoman's city, state and metro news desks, including a stint as city editor. He has won state and regional journalism awards for business,...
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To read the National Taxpayer Advocate's report to Congress, go to taxpayeradvocate.irs.gov.

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