While tax reform and, more particularly, tax simplification are popular topics for articles, cocktail party discussions and campaign speeches, the obvious obstacle to fulfillment is rarely discussed ("Advocates stir tax reform pot," Accounting Today, Sept. 6-19, 2004, p. 1).

If the political purpose of taxes is to produce revenues for government operations, then simplification is easily accomplished. Just divide the necessary revenue by the selected tax base and, presto, you have a flat tax rate.

However, the purpose of taxes today, as practiced by the federal government, is to produce social change. If we want to discourage a certain behavior, find a way to increase its cost, à la gasoline and tobacco taxes. If we want to encourage a certain behavior, subsidize it through tax deductions and credits, à la low-income housing and investment in equipment. Even the current national election rhetoric is loaded with proposed credits to encourage extended employee health benefits and to return outsourced jobs to the United States.

So we adopt a "simple" flat tax.

The first difficulty is defining the "income before deductions" to be used as a base. Is a long-haul trucker allowed to deduct the expense of his truck? Is the traveling salesman allowed to deduct the expense of his car? Is the employee who is required to make deliveries allowed to deduct the expenses of his car?

Then, in the next session of Congress, if the farmer is in economic trouble, we give him a special three-year flat tax rate that is less than the standard rate. Since it is important to encourage computer plants in impoverished areas, we will develop "computer building economic development and pure fairness zones" that will be tax-free as long as 26.235 percent of the content is made in the United States or by 63 of our trading partners.

As long as the same politicians who give lip service to tax reform are also the same politicians who use the Christmas tree known as the Internal Revenue Code to win elections and reward supporters and friends, there will never be true tax reform and there never can be a simple tax system.

Gerald N. McPherson, CPA

McPherson, Breyfogle,

Daveline & Goodrich PC

Pueblo, Colo.

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