The Role of Administrative Factors in Tax Reform: Simplicity, Compliance and Administration

Janet Holtzblatt and
headshot of Janet Holtzblatt
Janet Holtzblatt Senior Fellow - Urban-Brookings Tax Policy Center
William G. Gale
William G. Gale The Arjay and Frances Fearing Miller Chair in Federal Economic Policy, Senior Fellow - Economic Studies, Co-Director - Urban-Brookings Tax Policy Center

December 1, 2000


This paper examines the role of complexity, evasion, and administration in tax reform. We describe the features of tax systems that generate complexity and evasion and explore why, even though almost everyone agrees that taxes should be simple and perfectly enforced, no tax system appears to meet those standards. We describe structural and administrative changes that could significantly simplify the existing system. We show that a national retail sales tax would prove difficult, if not impossible, to administer because of high rates, tax evasion, and political pressure to exempt certain goods. The flat tax would be administrable, but would likely become
significantly more complex than proposed due to political pressure to restore popular tax subsidies and reduce tax avoidance. Although it commands widespread support and is
technically feasible, substantial tax simplification will prove difficult to achieve in the existing system or a new one.