Tax reform - an exercise in complexity.

• Author: Schnepper, Jeff A.

Given the opportunity to drive a stake through the heart of the deficit, Congress and the President chose instead to throw a party, On Aug. 5, 1997, Pres. Clinton signed into law a tax package with $94,000,000,000 in tax cuts. The first Federal tax reduction in 16 years, this bundle of goodies provides relief to the middle class and the rich, celebrates the value of the family, and encourages both children and their going to college.

The act marks the 31st out of the last 34 years in which there have been tax law changes. It proves the adage that the only difference between death and taxes is that death doesn't become more complicated every time Congress meets. In 1986, Americans were presented with what Congress called "tax simplification." Rates were to be flattened and reduced and computations simplified; it turned out that they weren't. Congress has spent the last decade reversing that process.

House Majority Leader Richard K. Armey (R.-Tex.) and Bill Archer (R.-Tex.), chairman of the House Ways and Means Committee, joined in the following 1997 critique of the Federal tax code: "Our tax system is complicated and unfair, and it must be eliminated." So, they poisoned the roots with more complexity.

The new law makes more then 800 changes to the massive Internal Revenue Code. Some become effective immediately; nearly 70 won't take effect until January, 1998; and a few others won't kick in until after 1998. There are changes that are phased in through 2007. Capital gains are now taxed at rates of eight, 10, 18, 20, 25, 28, or as much as 39.6%, depending on what year you are in, what you are selling, and how long you held the property. There used to be one simple IRA. Now there is the regular IRA, the Roth IRA-plus, and the education IRA. Each is taxed differently and each has different income limitations to qualify.

Talk about social engineering. The government's message to the American people is that Big Brother knows best. Do what he wants you to do, how he wants you to do it, and when he wants you to do it, and we will give you a tax break. The new law will benefit members of Generation X, but only if they have the discipline to make annual IRA deposits. Have kids, go to college, and invest--but only long term--and we will reward you. Kids, college, and long-term investing are not bad. I personally am very much in favor of all three. However, the Federal income tax code should not be the vehicle to encourage them.

Cutting taxes for...