Tax Day Thoughts

As best I can tell, the current tax code is designed to turn us all into crooks. It’s impossible to figure out and hence impossible to comply with.

I think about half of the tax code deals with defining taxable income. The other half deals with taxes levied thereon. That’s the half we could simplify.

If we go to a consumption tax, I suspect that we’ll have just as many problems defining consumption as we now have defining taxable income. Then you’ll have the interest groups trying to modify or exempt consumption that benefits them.

I see it as just trading one set of problems for another.

Is the tax code so complex? The vast majority of people take the standard deduction. If you are a prole, living in an apartment, with income that consists of wages only, your return is about as straight forward as can be. A Steve Forbes flat tax does nothing for you.

Chris Edwards is right, too. The complex thing about the tax code is often that cosmic question, "what is income". Our tax code is complex because income is taxed differently depending on the source. Again, Steve Forbes isn't going to fix that, so the flat tax is not necessarily going to make things simpler.

I'm not big on consumption taxes either. They can be evaded more easily that an income tax can, especially if the rate is set as high as it will need to be to fund the Feds at their current rate of spending.

Also, I think that state governments should be funded through sales taxes. Local government has property taxes, and the Feds have the income tax. That way there is less overlap, and no one tax gets too onerous.

There's a very simple answer to the problem of defining income. Tax gross, not net. The tax percentage would be, of course, much smaller.

In fact, the State of Washington, which has a constitutional prohibition against a state income tax, does just this with it's "Business and Occupation Tax". There are fifteen different classifications of businesses, with most paying less than half of one percent of sales. The dead-weight loss in minimal in this scheme.

This could easily be adapted to personal tax returns (with a "standard deduction" to exempt the truly poor).