What's Happening?
The Internal Revenue Service (IRS) has been under scrutiny for its inefficiencies, which are largely attributed to the complexity of the U.S. tax code. Recent efforts by the Trump administration to improve the IRS include adopting new technology systems
and outsourcing some paper processing tasks. However, these measures are seen as insufficient by some experts who argue that the root of the problem lies in the overly complicated tax code. The IRS is tasked with not only collecting taxes but also administering various tax credits and expenditures, which complicates its operations. The Tax Cuts and Jobs Act, passed during President Trump's first term, simplified the tax process for many Americans by increasing the standard deduction. However, subsequent changes have reintroduced complexities, making it difficult for taxpayers to navigate the system without professional help.
Why It's Important?
The complexity of the tax code has significant implications for both taxpayers and the IRS. A complicated tax system increases the likelihood of errors and non-compliance, which can lead to costly audits and penalties for individuals and businesses. For the IRS, managing a complex tax code requires more resources and personnel, which can strain its budget and lead to inefficiencies. Simplifying the tax code could reduce the administrative burden on the IRS, improve customer service, and make tax compliance easier for taxpayers. This could also enhance public perception of the IRS, which has been negatively impacted by stories of backlogs and poor service.
What's Next?
There is a growing call for Congress to simplify the tax code to alleviate the IRS's operational challenges. This could involve reducing the number of tax credits and deductions and streamlining the tax filing process. If Congress takes action, it could lead to significant changes in how taxes are collected and administered in the U.S. Stakeholders, including policymakers, tax professionals, and taxpayers, will likely engage in discussions about the best ways to achieve a simpler and more efficient tax system.
