On June 9, 2011, Egerton mused that:
The goal that Congress ought to have is to put as many of us out of business as possible. Now I say that with full confidence that it's not going to happen," said Charles H. Egerton. Although Congress may stop short of completely restructuring the code, he said, "we'll have to reinvent ourselves. That's a price we need to be willing to pay."Egerton's comments in an obscure industry publication for tax nerds won't receive much attention. That's a shame. I believe that Egerton is onto something. As he says, our "[Income Tax Code] is just an inscrutable mess. It is complex. It is largely inadministrable." And he's not even considering state tax rules and regulations!
Take a few moments to consider the bigger picture. In America, our quality of life is driven by our political freedom and economic prosperity. Our economic prosperity is driven by the creativity and innovation of our entrepreneurs, technologists and business leaders over the past two centuries. Sure, we had a good "business climate" to promote economic growth (stable rule of law, property rights, market-based capitalism, etc.). But within that temperate climate, Americans have built a remarkable economic engine. We have been really good at developing, financing, producing and marketing goods and services into domestic and international markets. Or more simply: making and selling things.
Where do tax professionals fit into that picture? What value do tax professionals add to the "commercial matrix" of development, finance, production and marketing? The answer may bruise the egos of practitioners and academics from both sides of the political spectrum. The answer is: absolutely none. With respect for your virtues, brothers and sisters, we are simply leeching off a "complex, inscrutable and inadministrable" regulatory regime.
So we have developed an army of tax professionals -- intelligent, earnest, focused men and women -- who contribute virtually nothing to the long-run evolution of the "real economy." As a nation, we allocate nearly half a trillion dollars to tax planning and tax compliance each year -- half a trillion dollars that could be used in more productive activities. Sure, some of us will argue that 'tax professionals help clients comply with the tax rules as they are, and that keeps more cash in the private economy where it will be invested more efficiently than cash in the government coffers.' However, that argument rings hollow. We aren't making things better by leeching off the commercial matrix. We shouldn't (and we don't) need an army of tax professionals to tend to the clients. We need a better, simpler tax regime. And we need more intelligent, earnest, focused men and women involved in the "real economy."
I believe that the tax community should take Egerton's challenge to heart, and begin working on serious proposals to "downsize" our ranks by drastically simplifying the U.S. tax regime. Many tax professionals will resist the challenge, because they earn a comfortable living. And let's face it: displacement from a specialty niche in tax would be socially jarring and economically painful for many. But no pain, no gain. We are currently part of the problem. One of our cultural legacies is our ability to troubleshoot problems. Perhaps the U.S. tax community can rise to the challenge.