Those April Blues
Americans are natural procrastinators when it comes to unpleasant tasks, so it should be no surprise that surveys show half of all tax filers wait until this last week before the April 16 deadline to do their taxes. No wonder: This year there are a record 66,000 pages of mostly incomprehensible tax laws to comply with, and for those with really complicated returns, 526 separate forms that may need to be filled out.
In 2005 an astonishing six out of every 10 taxpayers needed the help of a trained professional to complete their returns. Tax preparation is now one of America's fastest growth industries. A Cato Institute study finds that 1.2 million workers are employed as tax accountants, lawyers, and H&R Block employees. Even so, to make sense of their taxes American workers and businesses devote 6.4 billion hours a year, about 45 hours per return. There are now 16 separate tax breaks for college education and several dozen for energy conservation, including write-offs for such things as purchasing electricity-saving refrigerators. About two-thirds of Americans say they can't figure out basic IRS regulations or the tax laws on the sale of a home.
Yet Congress says that it has passed 22 laws to "simplify the tax code" over the past 40 years.
The income tax has not always been such a burden or labyrinth. When the 16th Amendment was under debate nearly a century ago, the proponents -- including Republican presidents Theodore Roosevelt and William H. Taft -- assured Americans that the tax on income would be small and nonintrusive. The amendment was ratified in 1913. Rep. Cordell Hull, who drafted the first income tax, promised that it would apply only to "the Carnegies, the Vanderbilts, the Morgans and the Rockefellers with their aggregated billions of hoarded wealth."
In the beginning the return was indeed simple, resembling the postcard flat tax that Steve Forbes and Dick Armey have advocated in recent years. The original 1040 form in 1914 was so compact, the New York Times printed it on the front page. There were a grand total of four instruction forms. Now there are 4,000.
Tax rates were modest too, ranging from 1% to 7%, with most income under the equivalent of a half-million dollars today exempt. The opponents of the income tax urged that, at least, there should be a provision to the 16th amendment capping the tax rate at no more than 10%. Advocates claimed this was unnecessary because the tax rate would never exceed 10%. By 1918, when the government wanted money to fight World War I, the rate was 70%.
Nevertheless, in its early days the income tax really was only the "rich man's burden": 0.5% of Americans, or about 360,000 people, had to fill out a tax form. Today, 135 million Americans, or nearly every worker, must do so. The same bait-and-switch tactic suckered the country into swallowing the alternative minimum tax in 1969. Originally the AMT was passed to force 155 wealthy individuals who had escaped the income tax to pay their "fair share." This year six million filers are subject to the AMT. If Congress does not intervene, next year it will be 26 million.
In 1914 the total income-tax collections were $10 billion (in today's dollars). Now the income tax gathers in roughly $1 trillion, and gathering that stash requires a massive collection machine. The original IRS enforcement office had 4,000 employees. Now the IRS has 100,000 tax agents, more employees than the Environmental Protection Agency, the Occupational Safety and Health Administration and the Food and Drug Administration combined. Yet Congressional Democrats want to hire thousands more tax agents to audit more Americans and close the $300 billion "tax gap." Before hiring more tax snoops, we might want to heed the warning of historian Charles Adams, who notes in his book "For Good and Evil: The Impact of Taxes on the Course of Civilization": "From the earliest records of civilization, tax laws have taken away liberty more often than foreign invaders."
The complexity of the tax code, the cost it imposes on the economy simply to comply with it, and the civilian army of agents needed to enforce it continues to grow like cancer cells attacking the healthy ones. At the same time, common sense reforms like the flat tax or the national sales tax remain politically stalled -- perhaps because there are so many vested interests in keeping it complicated. Even conservative Republican presidential candidate Mitt Romney of Massachusetts recently came out against a flat tax arguing that it might be unfair. To whom? Tax accountants and lawyers? Meanwhile, just last week the Czech Republic announced plans to become the next former communist nation of Eastern Europe to adopt a flat tax. Everywhere this idea is catching hold, except in Washington.
Looking back 93 years, there's a case to be made that the 16th amendment was an even greater failure than that other Progressive era experiment, prohibition. We should have listened to the advice rendered by the New York Times, which while editorializing against the income tax in 1909 warned: "When men get in the habit of helping themselves to the property of others, they cannot be easily cured of it."
Mr. Moore is senior economics writer for the The Wall Street Journal's editorial page.
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