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Senate Finance Committee releases draft of tax simplification options.

On March 21, the Senate Finance Committee released a document titled “Simplifying the Tax System for Families and Businesses.” It is the first in a series of papers on tax reform options being considered by the Committee, including options suggested by witnesses at the 30 tax reform hearings that have been held, bipartisan commissions, tax policy experts, and members of Congress. The document emphasized that the list was non-exhaustive and that placement on the list doesn't imply endorsement of any particular option by either Committee Chairman Max Baucus (D-MT) or Ranking Member Orrin Hatch (R-UT).

The reform options included the following:

• Reduce tax fraud and taxpayer identity theft by limiting access to personal identifying information, partnering with third parties to share successful practices to combat identity theft and tax fraud, and improving information sharing with federal, state, and local law enforcement.
• Reduce the tax gap by, among other things, restructuring and simplifying the penalty system to improve voluntary compliance and ease administrative burdens, improving and enhancing third-party information reporting, and enhancing privacy protections in IRS whistleblower programs.
• Improve the taxpayer experience in IRS audit and collection procedures.
• Enable IRS to verify information on taxpayer's returns against third-party information as returns are processed.
• Reduce compliance costs by having IRS fill out simple returns for taxpayers (i.e., by pre-filling returns with third-party information and preliminarily calculating tax liability, similar to California's “Ready Return” program).
• Repeal provisions that require taxpayers to calculate their tax liability multiple times (e.g., the alternative minimum tax).
• Simplify and conform definitions in the Code.
• Improve government transparency by providing taxpayers with a receipt for taxes paid, which would show the taxpayer's average tax rate, marginal tax rate, the value of the tax expenditures they claim, and/or an allocation of their tax payments to the major spending categories in the federal budget.