The tax code used to be shorter, but that doesn’t mean it was ever simple. American taxpayers “have been complaining about complicated forms, instructions, and everything else for more than 100 years,” writes Joseph J. Thorndike on the Tax Analysts blog.
Even before Congress passed the income tax in 1913, critics were complaining about the complexity of the proposed legislation. The Wall Street Journal joined the fray, asking “Do you understand the income tax bill?” while warning about “the infinite confusion it will cause.” A few years later, The New York Times wondered “Why can't we have a simpler method?"
But there’s always been a reason for that complexity. Thorndike quotes Cordell Hull – who helped pass the Revenue Act of 1913 as a representative in Congress and who later served as secretary of state, winning the Nobel Peace Prize for his efforts to establish the United Nations – on why the tax system must necessarily be complex: "It should be remembered that an income tax is in its character a complex and intricate matter, because it deals with business which grows more and more complex."
In other words, as businesses become more complicated – just think about howa global oil company is, or a car manufacturer or hedge fund – the tax code becomes more complicated just to keep up.
At the same time, according to Thorndike, there’s another basic cause pushing the tax system into greater layers of complexity: the interest in fairness. Once a government starts taxing, it can’t avoid questions about justice and equality. How much should the wealthy pay? What about corporations? Workers? Much of the complexity of the system is dedicated to answering (and sometimes avoiding) those thorny issues.
Tax reform might make things better, but there’s no reason to think the complexity of the system will be eliminated. As Thorndike writes, “Unfortunately, it’s never been simple – not in the last year, the last decade, or even the last century. And it’s probably going to stay that way.”