The Take Bakery: Simplifying the income tax code

A plan to do the impossible

Our income tax code is notoriously byzantine. And complaining about filing taxes is as American as apple pie and getting trounced in the (men’s) World Cup.

For good reason! The average taxpayer spends 13 hours and $250 preparing tax returns. Many comparable countries in the OECD have no return systems or tax return processes that require a lot less effort from the tax payer.

There are better options. The IRS has implemented a free tax filing tool in some states that will soon be rolled out to the rest of the country. And reforms aimed to simplify the filing process, like sending out pre-populated tax forms, have circulated around think tanks for years. But those still don’t address the infuriating complexity that is embedded in our tax filing system.

Now, simplifying the tax code is as politically contentious as it is boring. But there are a courageous few who have dared to imagine a better, a simpler world.

Today, the hero of our story is a tax economist.

In honor of tax day, I want to focus on his plan to essentially undo a century of tax code and making filing taxes a breeze. Politically impossible? Probably. But fiscally tenable? Very much so.

Simplifying the income tax code

The U.S. tax code is complex for largely well-intentioned reasons. Policies like the earned income tax credit (EITC) and child tax credit (CTC) transfer tens of billions in wealth to low-income Americans each year. And the different income brackets try to ensure that wealthier Americans pay a fair share.

So here’s the question: How can we simplify our tax code, while maintaining its progressive structure and ensuring that it continues to distribute benefits that help alleviate poverty?

If radical tax simplification were the Beatles, Brookings economist William G. Gale would be both John Lennon and Paul McCartney. And, of course, I’d be the fan passing out in the front row of the concert.