March 8, 2013

This time of year, I always recall watching a news show a couple decades ago of Henry Bloch giving testimony before some Congressional panel. Henry and Richard Bloch were the founders of H&R Block, the tax preparation company.  (They spelled the company’s name “Block” to make it easier to say and remember.)

Back then, as now, most people viewed filling out their forms with dread and were happy to pay the Bloch brothers twenty bucks or so to do it for them.  In the Congressional hearing, I remember a congressman telling Henry Bloch that they, Congress, were going to simplify the tax code and, “Our goal is to put you out of business, Mr. Bloch!” Yes, siree, by God, Congress was going to ride to the rescue of the harassed taxpayer!

Stupid me. I believed him.

At the time I worked for an insurance company, and I told my boss that we shouldn’t invest in H&R Block because Congress was coming to its senses and was going to simplify the tax code.

Well, the last I looked the tax code was over 70,000 pages and growing, and the Bloch brothers have made millions.  My company didn’t buy any of their stock and I didn’t either, which is one of the reasons I’m here and not in Hawaii.

It looks like Congress can’t, or won’t, simplify our taxes, and the reason is twofold. One, “taxes” are a very big business. Lots of people work on tax preparation, tax legislation, tax collecting and tax avoidance, both in and out of government. Two, behind every line of our tax code is a special interest and/or somebody’s idea of an important social purpose to be served through the tax code.

In the meantime, it’s gotten much easier to file our taxes thanks to personal computers and tax preparation software.  It takes me no more than a couple hours to load the software, fill in the blanks, print a copy and hit a key to electronically file and pay. Years ago, it took at least a day to make the entries, do the math, make copies, stable and mail, etc. etc. What a pain.

However, while the personal computer has made doing taxes pretty easy these days, it has also mades it easy for the politicians and tax bureaucrats to add complexities and little hidden tax favors and get away with it.  Maybe, without the computer, our Byzantine tax code would have self destructed by now.

Wouldn’t it be nice to have a law requiring every one of our elected Washington, D.C. solons to do their own income tax returns, no computers allowed? I’m betting taxes would get simplified, and damn quick.

Meanwhile, as a nation we will continue to spend billions of dollars on unproductive, wasteful tax activities.  We will continue to have a tax code full of  the “soft” corruption of special tax breaks for special interest groups, and we will continue to make investment and spending decisions influenced by the tax code, not necessarily the best way to invest or spend.