Kansas Governor Kathleen Sebelius, now nominated to be Secretary of Health and Human Services, released a statement yesterday, which reads in part:
“As a result of these amendments to our 2005, 2006 and 2007 returns, we paid a total of $7,040 in additional tax and $878 in interest.”
A few thoughts, resisting the obvious cheap shots:
1. The federal tax code is way too complex. Politicians simply can’t resist using tax law for social engineering and to reward and punish. Simplification is essential.
2. I think the governor gave in too easily. But that’s understandable in today’s political climate where tax problems have derailed other nominations and careers. For example, she couldn’t locate the acknowledgement letter for some charitable donations she made. So she eliminated these deductions. Me, I would have asked the charity to reissue the letter. But, there’s probably a rule against that.
3. Hiring a CPA as Sebelius did to review three years of tax returns is probably expensive. That’s on top of what they may have spent to have the returns prepared in the first place.
4. The cost of complying with the federal tax system is huge. In 2005, the Tax Foundation estimated that individuals, businesses, and nonprofits spent $265.1 billion complying with the tax code. That cost represented 22% of the amount of tax collected.
5. In Kansas for 2005, compliance costs for the state income tax were estimated at 27.1% of the tax collected. That’s $877 per person. Compared to other states, Kansas ranks about in the middle on these measures.
6. The cost of complying with the federal tax code is highly regressive. Those earning less than $20,000 spent nearly 6% of their income on compliance. Those earning $200,000 and over — that’s the Sebelius family neighborhood — spent about 0.5%.