It's tax-filing season. W-2 forms, 1099 forms, and other indecipherable pieces of paper are piling up on desks around the country.

It seems to me that no one really likes the current tax system, and it's not because they don't believe in paying taxes. Taxpayers are mad as they struggle to figure out their deductions, credits, exclusions, and exemptions. Economists despair at the waste from the billions of hours and billions of dollars spent on administrative and compliance costs. Policymakers don't even try to defend a tax code that has ballooned from some 26,000 pages in 1984 to nearly 46,000 pages in 2001.

Now, largely overshadowed by the prospect of war with Iraq, the shuttle tragedy, and the ballooning federal budget deficit, President Bush is working to overhaul the tax system. The Administration wants to abolish the estate tax permanently. It proposes ending the double taxation of dividends. It has put forward the idea of junking IRAs, 401(k)s, 403(b)s, and the like and substituting three savings plans-two for individuals and one employer-sponsored account. These new plans would shelter from taxes far greater investment sums than current law allows. Taken altogether, the Administration is embracing a major shift in tax policy away from taxing capital.

On the merits, a number of the Administration's ideas are good or at least intriguing. The Administration is also right to focus on changes that would boost long-term economic growth rather playing around with short-term stimulus gimmicks.

That said, the overall plan for reform is flawed. For one thing, a piecemeal approach toward a more consumption-based tax system will only increase the complexity and cost of filing taxes. The green eyeshade brigade will find even more loopholes for well-heeled clients to exploit. Government tax policy will still distort rational economic behavior through social engineering and breaks for special interests. The tax system will become more inequitable and less progressive.

The U.S. tax code is a mess. Why don't the White House and Congress take a simpler approach toward reform? Lower everyone's taxes as much as possible by eliminating most deductions, credits, and shelters. Treat investment income like all other income. Let individuals and families rather than the government decide whether their money is for short-term spending or long-term savings.

I have no idea if the economy would grow faster with simplification. I believe it would, but I don't really know. What is certain is that such a system would be simpler, fairer, and far easier to understand.

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