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Tax Day 101: The tax code needs a fix – but exactly how?

Almost everyone agrees that the US tax code needs fixing, but people don't agree on how to do it.

By Staff writer / April 15, 2010

People in line at the post office in Los Angeles. As the April 15 deadline for filing US income tax returns has arrived, most people agree that the US tax code is too complicated, but there's little agreement on how to fix it.

Damian Dovarganes/AP


Did filing taxes tax your patience? You're not alone.

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Americans spend 6.6 billion hours per year filling out tax forms – including 1.6 billion hours on Form 1040 alone, according to Internal Revenue Service estimates cited by the Tax Foundation in Washington.

The word "complexity" doesn't quite do justice to a tax code that grew from 409,000 words in 1955 to more than 2.1 million by 2005, according to a Tax Foundation tally.

It's a dream come true for members of congressional tax-writing committees, who reap lobbyist donations each year as they ponder the latest tweaks.

The government gives with one hand and takes with the other

The result is a Rube Goldberg-style system that rains credits and deductions from one funnel while using other hoses to vacuum up revenue for the government. With the new Schedule M here and the alternative minimum tax there, it's little wonder that people make lots of mistakes.

Nearly half of filers -- 46 or 47 percent by some estimates -- will owe no income tax this year. But most of them are required to fill out the form anyway. Meanwhile, the government is still running in the red, with tax revenues not matching the rise of spending.

So what's the fix?

Most tax policy experts say that at least some consolidation and streamlining is needed. But the prescriptions vary widely. An Obama fiscal commission is pondering some of the options, while others are relying on grass-roots followers to develop traction.

Suggestions for 'fixing the tax code

Here are a few of the big ideas out there:

Flat tax. This would replace the current graduated income tax, which has different rates for different income brackets, with a single rate. The idea is backed by many Republicans, who argue that it will boost the efficiency (growth) of the economy, while still generating enough revenue for the government. Conservatives emphasize the tendency of people -- including the rich -- to avoid taxes as marginal tax rates go up. Liberal critics of a flat tax say the people with higher incomes should pay at higher rates.