Is Tax Reform Possible?
Written by Thomas M. Geier, CPA, CFP®, PFS
Millions of US taxpayers are currently in the throes of “tax season”. They are collecting the necessary receipts along with various tax forms with strange sounding numbers and letters, such as W-2, 1099, K-1, and completing the process of submitting their final tax return, the 1040. Most people know that April 15 is normally the tax filing deadline and are either anxiously awaiting a refund or are still dreading writing a check for the tax due.
When asked, it would be very difficult, if not impossible, to find anyone that is not annoyed or distressed by the tax filing process. Although many forms have become simplified and tax preparation software has become prevalent, the worry persists as to whether a return is properly prepared. Tax laws and regulations change constantly and can be very difficult to understand. As you can see from the table below published by the IRS, the majority of taxpayers spend about 16 hours total time on average in order to file their Form 1040.
Americans also wonder just how fair the current system is. Congress writes tax laws to pay for the services that the government provides. Of course, there are vast differences of opinion as to what should be provided and to whom. Many tax laws were written to help with certain specific aims in mind, such as allowing a deduction for charitable contributions and home mortgage interest expense. Many taxpayers are both emotionally and financially tied to their deductions. In addition, over the years, the complex code has caused a dichotomy in who actually pays taxes. You can see from the chart below, 86% of all income taxes for 2013 were paid by the top 25% of all taxpayers. The issues of fairness, and who should pay what, are highly charged.
So if we all agree that the current tax system is costly, onerous, and stressful, can anything be done to change things? Is tax reform possible? Well, many members of Congress believe so. On the Senate side, the Finance Committee recently announced “a bipartisan effort to begin soliciting ideas from interested members of the public and stakeholders on how best to overhaul the nation’s broken tax code to make it simpler, fairer, and more efficient.” You can read more about it from the U.S. Senate Committee on Finance.
On the House of Representative side, the Ways and Means committee also has expressed that “we all can agree that America’s tax code is broken. That is why Congress’s two tax-writing committees have been working to make the tax code fairer for families and spark a more prosperous economy.”
Their web site, https://taxreform.gov/ , asks for specific input from all taxpayers to help in the huge task of tax reform. Already, 50 hearings have been held to discuss the impact on various taxpayer groups and to determine the consequences, both intended and unintended, of any new laws.
Take some time to give your input on the taxreform.gov website. If enough people give good, solid suggestions for reform, maybe some progress can be made. Uncle Sam needs your help!
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© Geier Asset Management, Inc. March 2015. Thomas M. Geier is a Vice President of Geier Asset Management, Inc., a Registered Investment Advisor. The above blog reflects the opinions of Mr. Geier and not necessarily the firm. Any advice given is general in nature and investors must consider their own individual circumstances. Past performance is no indicator of future performance. The firm makes no warranties or representations of any kind relating to the accuracy or timeliness of the information provided.