Tax software saved my butt

This year's tax deadline looms. I was pretty sure I had some money coming to me, so I filed in February, as is my usual custom. I must say however that my taxes this year were more difficult than they've ever been in my lifetime. It's not just that the tax code is getting more complicated; it's also the fact that I have stuff, i.e. the house, other deductions, transactions on capital, and so forth. It used to be that I'd file 1040A and I could pretty much figure it all out on the back of an envelope. Nowdays if I had to depend on paper only, it would literally take me days to read through all the instructions, caveats, worksheets, and so on that say what to do. It's just my dumb luck that personal computers and tax software have happened to keep pace with my personal tax circumstances.

Just take for example the situation with capital gains. I had long term gains and short term losses. Honest to Pete there's a whole blessed two-sided worksheet, not counting instructions, for handling that alone. Of course, how you compute that affects your adjusted gross income figure. The AGI, in turn, affects what percentage of your itemized deductions you can actually take as deductions. It all weaves together, and it's not trivial! Sure, the software cost money, but the hours saved justified the expense five times over.

But just because there's software to help doesn't begin to justify the complexity of the tax code. With or without computers, it's an enormous drain on people's time and effort. There are armies of people whose labours are dominated by preparations and recordkeeping driven by tax compliance. Literally billions of man-hours are being squandered annually. This is work potential that would be released into more productive pursuits by a strict bout of tax simplification. It's almost magically wonderful if you think about how much benefit could be realized with so little cost.

The difficulty of course is political, and the longer the tax code is allowed to grow the harder it is to pull up the weed. Most parts of the tax code, just by costing somebody or benefiting someone else, develop a constituency thereby. There is a constituency for the tuition tax credit. There is a constituency for using work expenses as deductions. There is an enormous constituency for the home mortgage deduction. Each twist and turn of the code breeds its own vocal supporters. On top of that, the code's sheer complexity itself spawns its own breed of constituents. Do you think that H&R Block wants taxes to be simple? Tax attorneys?

That's why true reform is so hard, in this as in other realms. We say we want it but when it gets right down to it, we realize we don't.