On net, however, the new law made taxes much more complex and made tax planning much more difficult.The new tax law provided a few simplifying measures (with respect to the EITC, the repeal of limitations on itemized deductions and personal exemptions, and the reduction in marginal tax rates).As a result, an analysis of the extent to which policy changes can affect tax complexity should incorporate these factors. They will likely remain in force even if the tax system were reformed or replaced. Moreoever, the factors that generate complex tax systems-policy trade-offs, politics, and taxpayers’ desire to reduce their own tax burdens-are not features of particular tax policies per se.
#VEXING NOTION DEFINITION CODE#
Features of the tax code that are designed increase tax equity, police intentional tax evasion, or encourage some particular activity often increase complexity. In particular, they reduce the ability of policy makers to achieve other goals of tax policy. They would likely raise the use of tax subsidies-say, for education-reduce unintentional tax evasion, and increase the likelihood that taxpayers would see the tax system as fair.
They would reduce taxpayers’ costs of complying with the tax system in terms of time, money, and mental anguish.
This suggests that pleas for simplification need to be buttressed by an understanding of the causes of complexity and the likely outcome of simplification efforts. The fundamental paradox of tax simplification is that, although everyone thinks taxes should be simpler, almost every year tax policy becomes more complex.
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