By Barney, Doug; Tschopp, Daniel; Wells, Steve
The CPA Journal , Vol. 82, No. 12
Ever since the tax law was introduced, there has been an outcry for simplification. But how can this be accomplished? The authors suggest writing simpler laws. Standard readability indices can be used to evaluate the tax law and illustrate the writing skills of its authors. The discussion below focuses on samples from the Internal Revenue Code (TRC) as written by Congress, the Treasury Regulations as promulgated by staff, and the IRS's guidance and instructions. Comparing all three sources on a single topic (capital gain) permits an evaluation of the readability of the laws and interpretations written by mese government sources.
"I know that these monsters are the result of fabulous industry and ingenuity, plugging up this hole and casting out that net, against all possible evasion; yet ... one cannot help wondering whether to the reader they have any significance save that the words are strung together with syntactical correctness."
- Judge Learned Hand
(Yale Law Journal, no. 2,
December 1947, pp. 167, 169)
The U.S. income tax law is complex for several reasons. Among mese are the volume of law, the technical aspects of the law, and the complexity of the writing.
The sheer volume of U.S. income tax law undoubtedly adds to its complexity. The National Taxpayer Advocate has identified complexity as the number one concern for U.S. taxpayers. According to the 2010 National Taxpayer Advocate's Report to Congress:
* Tax compliance consumes 6.1 billion hours of taxpayer time annually.
* Tax compliance cost $163 billion in 2008.
* The tax code is 3.8 million words long, or 1 1,045 single-spaced pages.
* A stack of Treasury Regulations stands one foot tall.
* The IRS publishes over 450 forms that are collectively 17,000 pages long (Thomas Davies, Jon Carpenter, and Gene Iverson, 'Tssues in Federal Income Tax Complexity," South Dakota Business Review, vol. 59, no. 3, March 2001, pp. 1, 9).
* The tax code is four times longer than War and Peace, and it is still growing (Doug Shulman, "We Can Tease Out More Certainty and Consistency: Dealing with Complexity, Avoiding Perplexity," delivered to the New York State Bar Association on Jan. 26, 2010).
Although the volume of U.S. income tax law is impressive, the technical aspect of the tax law adds dramatically to its complexity. A 2000 Tax Executive article identified sources of complexity as "Internal Revenue Code provisions which contain either vague or highly technical requirements, often riddled with exceptions, limitations, and other special rules that even the most sophisticated of tax advisers can find difficult, if not impossible, to decipher" ("Tax Simplification Recommendations," Tax Executive, vol. 52, no. 2, March/April 2000, p. 140).
How tax law is written also adds to its complexity. Long, compound sentences make understanding difficult, if not impossible. Use of the passive voice reduces the readability of the text. In some tax law, it almost appears mat obfuscation is the objective.
Tax law complexity is not new; it has been the subject of quotes and jokes by many celebrities, from Will Rogers to Ronald Reagan. According to Scott Moody, tax law complexity has been the subject of complaints since 1914, shortly after adoption of the constitutional amendment allowing the income tax ("The High Cost of Compliance," Human Events, vol. 57, no. 30, Aug. 13, 2001, pp. 1214). Yet, HtUe or nothing has come from the repeated jabs at our income tax laws and calls for simplicity. The cause for complaints has become more dramatic in recent years. Moody cites a Tax Foundation study listing the length of the IRC at 172,000 words in 1955, but 982,000 in 2001. The Treasury Regulations grew even faster, from 572,000 words in 1955 to 5,947,000 words in 2001.
How does the United States compare to other countries regarding tax law complexity? Not as poorly as one might think. According to a study conducted by PricewaterhouseCoopers, World Bank, and International Finance Corporation, the United States ranked 69th (out of 183 countries) in terms of the ease of tax compliance ("Paying Taxes 2012: The Global Picture," http://www. …