The IRS Insanity Continues

The Tax Cuts and Jobs Act added section 199A to the tax code. This is the 20% deduction for small business owners. I’ve said repeatedly that the Jobs Act is a tax cut, but it’s not tax simplification. There’s no better proof of this than the regulations the IRS recently released covering section 199A. Keep in mind that the law itself is 12 pages long. I thought that was bad enough. But the regulations are 165 pages long. The preamble to the regulations (the Treasury’s overview) is 50 pages long. And that’s not even the worst of it. The Treasury estimates that businesses will spend 25 million hours per year complying with section 199A. That’s more than one-third the time it took GM to manufacture all the vehicles it sold in the U.S. in 2017. Worse still, the Treasury estimates that the average cost of compliance will be $46/hour. At that, businesses will spend $1,150,000,000 complying with this single code section. What would we rather have businesses do: build quality products, or comply with a morass of federal tax regulations? Isn’t it time for real tax simplification? We need to abolish the current tax code in its entirety.