The Income Tax And How It Grew

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This was the era in which an army of clever attorneys and accountants emerged to circumvent the law through such devices as hobby businesses and the incorporation of yachts and country estates. Their expertise was often gained in the bureau itself, at public expense, as the Joint Committee on Tax Evasion and Avoidance must have reflected in 1937 as it viewed photographs of shacks maintained in the Bahama Islands as the headquarters of fictitious corporations. This decade, too, was high noon for notorious violators of other laws who seemed to be beyond the reach of authority but were successfully brought to book on tax charges. The most spectacular instance of what the Treasury men could do with subpoena, gun, and camera was the termination of the career in crime of “Scarface Al” Capone, the Chicago racketeer who committed murder with impunity but came to grief when he failed to file his Form 1040. The latter omission proved to be fatal, and the sharp dresser who once rode to the theatre in an armored limousine accompanied by eighteen sharpshooters in tuxedos ended up in a federal prison cutting out overalls.

The anguished cry of the taxpayer for an income-tax form that he can understand is as old as the income tax itself. The pea in the shoe was the technical jargon and the complexity of the blanks. As an article in the New York Times recently observed, it was and is a singularly bleak employment for the pencil-biting citizen not only to have to levy against himself but to wrestle with such brainteasers as he confronts in completing Schedule A, transferring his total itemized deductions shown on line 40 over to line 52 on page 2, entering on line 51 the adjusted gross income previously calculated on line 17 on page 1, subtrading line 52, and entering the remainder on line 53. At line 54 he or she subtracts from the figure on line 53 the appropriate number of exemptions ($750 each at the present time), and there it is on line 55—the grand figure of taxable income. Yet it’s really child’s play, the IRS says, to figure the tax. See instructions.

Today one cannot pay a doctor’s bill, receive a bonus, win a prize, buy or sell property, take a customer to see a show, sign an alimony agreement, draw up a lease, establish a trust, mingle business and pleasure in foreign travel, exterminate termites, or die without setting in train certain consequences of professional interest to the IRS accountants and auditors. Why is it, one may ask, that the branch of law which touches human activities at more points than any other is such a rough trip? For one thing, our tax laws resemble an old inner tube that has survived many a blowout and puncture and has become a thing of shreds and patches. For another, the law has to grapple with the accumulated decisions of the courts and the revenue services’s own rulings. For still another, the law must be armed against the machinations, not of the average citizen, but of the cleverest adversary the law schools can produce. It is with justice that the latest taxreform act—that of 1969—has been called, jocularly of course, the Lawyers’ and Accountants’ Relief Bill. For as long as the tax laws are as complicated as they are, and that promises to be forever, the unemployment figure for these professionals will be zero.

Several years ago Senator Arthur V. Watkins came upon a 212-word, brain-boggling sentence in the Internal Revenue Code. He read it several times, but all he got out of it, he explained later, was an aggravated thirst. He tried it out on several senatorial colleagues, no strangers to windy sentences, but they, too, ended up confused and dehydrated. Whereupon Senator Watkins offered a prize to the public at large, consisting of a book on “simplified English” and a copy of the Bible, a literary work with a high reputation for lucid prose. The competition was open to any American who could recast the sentence in clear, understandable words. The contest was administered by a distinguished committee from the School of Commerce of New York University. There were hundreds of entries. But—surprise—the committee rejected them all and in effect awarded the prize to the IRS . “Brevity,” the committee concluded, “is not necessarily a virtue in official documents; precision is.”

To some, probably the majority of, taxpayers, simplicity continues to mean the use of language that the ordinary man can understand. To others it has to do with fairness. They are giving their time as well as money to the government, they argue, so why does the task have to be so difficult? Unfortunately, in tax matters what is simple may not be equitable, and what is equitable may not be simple. Fairness is applauded by all men in theory. But abstract justice becomes hard to discern in the dense thicket of income-tax deductions, exemptions, capital gains and losses, depletion allowances, and other fine, threadlike distinctions that presumably got into the code for the noblest of reasons—to make sure that persons of equal income pay equal taxes.