"Beware the Ides of March," Julius Caesar was reportedly warned. In modern-day America, it's the Ides of April (i.e. mid-April) that worry us. Some thirty million tax returns are mailed in on the last day for filing, including some (like mine) that call for a refund. That's because of the struggle required to fill out Form 1040 and its myriad attachments. Completing the form itself is not as bad as the search for records, receipts, and prior-year forms which supply the information. But there is always the agony of indecision: is this deduction allowed? Have I done the math properly? Did I include all the W-2s and other attachments?
In an attempt to bring some relief from this trauma, some people (including last year's Presidential candidate Steve Forbes) have proposed scrapping the current system in favor of a flat tax. Everyone would be taxed at the same rate, with no deductions, credits, or loopholes. Tax collection under this plan is greatly simplified; in fact, for most people, no form would be necessary -- their payroll deductions would suffice. The idea has popular support, because it would be worth paying more tax (well, a little more) to avoid all those forms.
Unfortunately, the flat tax has no chance of being adopted. To understand why, we must first recognize the transformation of government from its original purpose, doing what individuals could not do for themselves (e.g. national defense), to its current role as molder and shaper of Americans' behavior. Anything Congress cannot affect directly by passing laws, it can (and often does) influence indirectly by financial incentives. But grants given to individuals or groups show up in the budget and can be criticized by government watchdogs. Tax deductions and credits, on the other hand, are far less visible. Moreover, they are administered by the recipients themselves via tax forms, rather than through the usual bureaucratic structure.
For an example of this principle in action, consider government support of the arts. Grants to individual artists are often ridiculed because of the artists' subject matter, which some people find offensive or tasteless. But many more artists are supported through private gifts to non-profit foundations -- gifts which result in tax breaks to the donors. And there is seldom any complaint about the rules used to establish non-profit status and thus eligibility for tax-assisted giving. With this powerful tool in hand, politicians can reward all kinds of activities they deem useful to society. They will not willingly give it up (especially since the flat tax concept didn't get Forbes elected).
Given the government's track record on implementing reforms, I suppose it's just as well they're not likely to try reforming the 1040. Some years ago I saw a fanciful prediction of what the simplified form might look like, containing only two lines:
| 1. How much money did you make last year? | |
| 2. Send it in. |