Tax code burdens small business?
Witnesses tell tax panel that government makes matters worse by constantly
changing tax rules.
March 8, 2005: 11:10 AM EST

WASHINGTON (Reuters) - Complicated tax rules burden and distract small
businesses, but the government makes matters worse by constantly changing or
updating them, experts on Tuesday told a panel seeking to simplify the tax code.

"Small businesses and self-employed taxpayers, in particular, are burdened by
the complexity of our tax code and bear a substantial proportion of the $125
billion in compliance costs," former Florida Republican Sen. Connie Mack said
in a statement prepared for delivery at a meeting of the panel in Tampa,
Florida.

The administration made Mack's statement and other testimony available in
Washington. Mack co-chairs the panel.

President Bush formed the group to propose ways to simplify the federal tax
system and make it more conducive to economic growth. The panel has until July
31 to produce recommendations.

The tax code has grown convoluted as the government tries to encourage
certain behavior -- such as research and development -- and as taxpayers seek to
minimize payment, tax lawyer Jack Levin of the firm Kirkland & Ellis said.

"Recurring pattern: government adopts tax incentive, then taxpayers squeeze
conduct into favored category to use or abuse incentive. Then government adopts
increasingly complex and lengthy rules to define favored category with more
precision," Levin said in his presentation.

Todd Fleming, the chief executive of a 52-employee electronic security
company, Infrasafe, Inc., said the tax system drains resources from his business,
but also benefits it with favorable tax provisions.

Fleming urged elimination of the alternative minimum tax, a tax-law provision
that ensures that individuals and companies pay income taxes, no matter how
many deductions or credits they claim. But it is increasingly hitting
middle-class families and today is being paid by about 3 million taxpayers.

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