--- title: Our Complex Tax Code Is Crippling America description: 'The best solution would be to rip out the individual income tax and replace it with a flat tax that has no deductions or credits' canonical: https://time.com/4286921/complex-tax-code/ author: Chris Edwards article:opinion: true article:content_tier: free article:published_time: 2016-04-11T16:43:45.000Z article:modified_time: 2026-08-04T07:55:55.486Z article:section: Ideas og:title: Our Complex Tax Code Is Crippling America og:description: 'The best solution would be to rip out the individual income tax' og:url: https://time.com/4286921/complex-tax-code/ og:site_name: TIME og:image: https://static.time.com/v3/assets/bltea6093859af6183b/blt6171a53948f34ec4/69888e4fe20a87e01ba90523/tax-forms.jpg?branch=production&width=1200&quality=75&auto=webp&crop=16:9 og:image:width: 6096 og:image:height: 3429 og:image:alt: tax-forms.jpg og:type: article twitter:card: summary_large_image twitter:title: Our Complex Tax Code Is Crippling America twitter:description: 'The best solution would be to rip out the individual income tax' twitter:image: https://static.time.com/v3/assets/bltea6093859af6183b/blt6171a53948f34ec4/69888e4fe20a87e01ba90523/tax-forms.jpg?branch=production&width=1200&quality=75&auto=webp&crop=16:9 ---  # Our Complex Tax Code Is Crippling America > Sponsored content. 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It explains how TIME's journalism is made, from the first pitch through the editorial decisions behind a finished story or cover. #### How can I read about how TIME chooses its covers? Inside TIME is the newsletter where TIME's Editor-in-Chief explains cover selection and the editorial reasoning behind major stories. It is free at time.com/newsletters. #### Who is the editor of TIME? Sam Jacobs is TIME's Editor-in-Chief. He writes Inside TIME, a twice-weekly newsletter about the newsroom's reporting and editorial decisions. #### Is Inside TIME free? Yes. Inside TIME is a free newsletter, available at time.com/newsletters. A paid TIME subscription is separate and available at time.com/subscribe-agent. ## Video: Income Tax and You: An Odd Todd Cartoon [Watch (HLS stream): Income Tax and You: An Odd Todd Cartoon](https://cdn.jwplayer.com/manifests/R3RAo99Q.m3u8) (2:19)  _Published 2010-04-15. On Tax Day, Odd Todd offers You a three step program for owing zero dollars in taxes_ by [Chris Edwards](https://time.com/author/chris-edwards/) ## Chris Edwards Apr 11, 2016 4:43 PM UTC  US tax forms US tax forms Getty Images by [Chris Edwards](https://time.com/author/chris-edwards/) ## Chris Edwards Apr 11, 2016 4:43 PM UTC On the presidential campaign trail, the candidates seem far apart on tax policy. The Democrats favor tax hikes on high earners, and the Republicans favor tax cuts all around. But with voters currently struggling with tax-return filing, all the candidates should be addressing the tax code’s appalling complexity. Donald Trump [did complain](http://www.bloomberg.com/politics/articles/2015-08-10/trump-says-i-want-to-put-h-r-block-out-of-business-msnbc) that his tax return “would literally probably be 10 feet high if I put them together, it is so complicated and so terrible.” Most people have smaller returns, but federal tax-code compliance overall consumes more than [6 billion hours](http://www.ntu.org/foundation/detail/study-2338-billion-61-billion-hours-lost-to-rising-tax-complexity) of time each year, which is like having a “tax army” of 3 million people just filling out tax returns year-round. The problem is getting worse. Federal tax rules span [about 75,000 pages](http://www.washingtonexaminer.com/look-at-how-many-pages-are-in-the-federal-tax-code/article/2563032) today, which is three times more than when President Jimmy Carter called the code “[a disgrace to the human race](http://www.jimmycarterlibrary.gov/documents/speeches/acceptance%5Fspeech.pdf).” The problem is that Congress micromanages us with ever more tax credits, deductions and exemptions for education, energy, health care, saving, working and other activities. The latest layer of complexity was added by the Affordable Care Act, which [manipulates our health choices](http://time.com/4282054/obamacare-taxes/) through the tax system. If you don’t have health insurance, you calculate how much you get penalized. If you do have individual insurance, you calculate the tax credits you receive. If you get advance credits during the year, then you recalculate your benefits when you file. And so on. You can try to figure all this out by looking at the IRS’s [24-page Affordable Care Act overview](https://www.irs.gov/pub/irs-pdf/p5187.pdf), its [19-page guide](https://www.irs.gov/pub/irs-prior/i8965--2015.pdf) for penalties and its [71-page guide](https://www.irs.gov/pub/irs-pdf/p974.pdf) for credits. Or you can go to a tax practitioner who is familiar with [the thousands of pages](http://www.ntu.org/foundation/detail/study-2338-billion-61-billion-hours-lost-to-rising-tax-complexity) of related regulations. The Affordable Care Act has become a tax-filing nightmare, but so have other parts of the code, such as the earned income tax credit. The IRS guide for the earned income tax credit is [37 pages long](http://www.cato.org/publications/tax-budget-bulletin/earned-income-tax-credit-small-benefits-large-costs), and the rules are so complicated that the credit’s [error rate is 27%](https://www.eitc.irs.gov/Tax-Preparer-Toolkit/toolsandtips/mostcommonerrors), according to the IRS. That amounts to [$18 billion](http://www.cato.org/publications/tax-budget-bulletin/earned-income-tax-credit-small-benefits-large-costs) of mistakes every year for just for this one credit. These days, most people get their returns done by tax-preparation firms, but that doesn’t solve the complexity problem—indeed, the pros make many errors as well. A [2014 investigation by the Government Accountability Office](http://www.gao.gov/assets/670/662356.pdf) of 19 paid tax preparers found that most of them calculated incorrect refund amounts on sample returns. Furthermore, expert tax preparation costs money—last year [the average charge for 1040 return prep](http://www.cpapracticeadvisor.com/news/12065684/average-income-tax-preparation-fees-increased-in-2015) was $273. In addition to the monetary costs, the tax code’s complexity: **1\. Increases avoidance and evasion.** The earned income tax credit’s complexity has spawned an industry of fraudulent return filing, which costs billions of dollars a year. There is a similar problem with large corporations. We have the highest-rate and most complex corporate tax code in the world, which has created a breeding ground for widespread tax avoidance. **2\. Undermines financial planning.** For families, the tax code complicates decisions about retirement savings, paying for education and other life events. For businesses, the tax effects of hiring workers, investing in capital equipment, and other decisions are constantly changing as new laws and regulations are imposed. The IRS Taxpayer Advocate counted [4,428 federal tax rule changes](http://www.taxpayeradvocate.irs.gov/userfiles/file/MSP1%5FTax%20Reform.pdf) over a 10-year period. **3\. Creates “horizontal inequity.”** People with similar incomes pay different amounts of tax because of all the special breaks. Homeowners, for example, can have a tax advantage of thousands of dollars a year over renters. Such inequities violate the principle of equality under the law. Thankfully, some presidential candidates are promising to simplify the tax code. It will be a challenge because members of Congress love to add narrow breaks. The number of “tax expenditures,” or official breaks, under the income tax increased from 125 in the 1990s to about 200 today, according to the [Joint Committee on Taxation](https://www.jct.gov/publications.html?func=select&id=5). Each break has separate tax forms, instructions, regulations and other paperwork. The best solution would be to rip out the individual income tax and replace it with a flat tax that has no deductions or credits. That would vastly simplify financial planning, reduce tax avoidance and boost the economy. Both taxpayers and the government would win as administrative costs plunged. No president has pulled off a major tax overhaul since [Ronald Reagan in 1986](http://www.nytimes.com/2012/11/23/business/a-starting-point-for-tax-reform-what-reagan-did.html). But the next president will have an ace in his hole, and that is the Speaker of the House, Paul Ryan. Ryan is committed to tax restructuring, and he proposed major reforms in his past position on the House Budget Committee. Reagan kicked off his drive for tax reform with an [impassioned speech](http://www.presidency.ucsb.edu/ws/?pid=38697) to the nation in May 1985: “We must…transform a system that’s become an endless source of confusion and resentment into one that is clear, simple, and fair for all—a tax code that no longer runs roughshod over Main Street America but ensures your families and firms incentives and rewards for hard work and risk-taking in an American future of strong economic growth.” Americans should press the presidential candidates to commit to a Reagan-style drive for tax reform in 2017\. But for this year’s returns, we’re still stuck with a complex disgrace. ## Transcript >> In 2009, that's 6, 874. 10. I got expenses to deduct of 7, 924. >> Hey. Doing the taxes? >> Let me-- Let me just finish. Seven, six ,-- >> Seven, eight, two, four, seven, seven, four, seven, seven, two. >> Thanks a lot. You know, I have 'till midnight to pay the IRS and you got-- >> Oh, maybe, I can help. How do you feel that if I told you, you could avoid paying income tax in three easy steps. >> I'd say we should, maybe, talk about that offline. >> Nope. Let's talk about it right now. >> Yeah. First, I just wanna make a legal statement that I have nothing to do with this. >> I'm sure that will hold up just fine. Time for step one. First thing you need to do is start a multinational corporation and make sure that it's not profitable in the United States, but very profitable overseas. >> I have 'till midnight. Let me write this down. Start a multinational corporation. Got it. >> Step two, set up a couple dozen wholly- owned subsidiaries in the Bahamas, Bermuda, or the Cayman Islands that could legally shelter billions of dollars in profits. >> Okay. This is getting complicated. I'm gonna need a partner to run my operation in the Caymans. -[ unk ], are you available? Okay. [ unk ], what's next? >> Step three, be sure to lobby congress with billions of dollars to make sure those tax shelters stay right where they are. And if you handle things just right, you could join the 42 percent of U. S. companies that don't pay income tax. Awesome. >> Wait. Did you just say 42 percent of companies don't pay taxes? >> Well, corporations pay lots of taxes. They pay sales tax and state tax and other fees, but a lot of them don't pay income tax. Awesome. >> Let me get this straight. A lot of companies don't pay any income tax, but I can't write off my dog. >> Your dog is not a person. >> Don't say that. He's right there. >> Don't worry he's just a dumb dog. >> Hey. 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