Tax breaks make reform difficult

Associated Press

WASHINGTON

Nine in 10 Americans will find the maze of credits, deductions and exemptions on their tax forms so confusing and difficult that they’ll hire someone or turn to special computer software to fill out their returns. Even the commissioner of the Internal Revenue Service says he pays someone to do his taxes.

President Barack Obama and key lawmakers from both political parties say it’s time for a serious national discussion about making the tax code simpler and fairer. It’s going to be a long talk, one that could last years. Why? Because every deduction, exemption and credit, every layer of complexity, is important to somebody, in some cases millions of somebodies.

“That’s what the tax code is now — it’s a whole set of winners and losers,” said Howard Gleckman, a fellow at the Urban Institute and editor of TaxVox, a blog on tax issues. “If you reform it, you’re going to create new winners and new losers, and the losers always scream much louder than the winners cheer.”

There is a lot of political support on Capitol Hill for simplifying the tax code. But in the new era of divided government, it is unclear whether Obama has the ability, or the political will, to steer such a massive piece of legislation through a Republican-controlled House and a deeply divided Senate.

“We’re examining whether we can find the political support for a comprehensive tax reform,” Treasury Secretary Timothy Geithner said at a recent economic forum.

The Senate Finance Committee started having hearings on tax reform last year, and chairman Max Baucus, D-Mont., plans more this year. The House Ways and Means Committee had its first hearing on the issue Thursday.

“I am under no illusion that the task before us will be easy,” said Rep. Dave Camp, R-Mich., chairman of Ways and Means. “To really reform the tax code in a way that lowers the tax rate, broadens the base and promotes the competitiveness of American companies, we will need to make some tough choices.”

Congress isn’t used to making tough choices when it comes to taxes, said Eugene Steuerle, a former Treasury official who worked on the last tax-reform package that passed Congress, in 1986. For much of the past decade, lawmakers have simply borrowed to pay for spending projects and tax cuts.

“Most of the members of Congress have never engaged in legislation that identified the losers — who’s going to pay for government, who’s going to pay to get the budget in order,” Steuerle said. “They’re not used to that type of legislation.”