The last major tax-code changes were in 1986. Close to 20 years later, the system, riddled with a new generation of tax favors, was addressed by President George W. Bush, who put together a tax advisory panel. Its recommendations in 2005 were promptly ignored.
Last year, the co-chairs of President Obama's National Commission on Fiscal Responsibility and Reform suggested a slew of tax-law changes to help trim the nation's deficit over 10 years. It failed to gain enough panel support to force Congress to look at the proposals.
Tax-reform efforts always smash into a basic reality: Just about everybody gets a tax break, but it is always the tax break for the "other guy" that needs to be eliminated to make the tax system fair and equitable.
Many of the biggest tax breaks go to individuals for items such as interest paid on mortgages for owner-occupied houses, some kinds of life insurance, and state and local taxes.
Any change "is going to have a cost somewhere else in our society," said Gary Wilcox, a Washington lawyer who heads the tax practice at Morgan, Lewis & Bockius L.L.P. and who is a former deputy chief counsel for the Internal Revenue Service.
Wilcox said the tax system had already been cleared of many of the worst abuses. Individual tax shelters were eviscerated by the 1986 changes. Since then, the IRS has gone after corporate tax shelters. It is still fighting the use of offshore bank accounts to escape taxes, Wilcox said.
The complexity that remains is intentional, he said. "It's just enormously complicated to accommodate different ways of doing business," Wilcox said, referring to a long list of types of corporations and partnerships.
