Tax Simplification and Over-Simplification


Americans have no patience for complexities.  Americans hate taxes, not so much because they think they’re paying too much (though they do–and they aren’t, compared to citizens of industrialized nations), but because they hate the 1040 long form and the Schedule C and the other auxiliary forms, and were even sufficiently unhappy with the 1040 X (short form) to force IRS to come out with the postcard-sized 1040 EZ.


Lately, several of the people I correspond with on various computer bulletin boards have been asking things like “Why should we have to file returns at all? Why don’t they just take out the withholding all year, calculated so that everybody comes out exactly even?”  In point of fact, that is the whole idea behind the withholding system–to make everything come out exactly even.  The need for filing a return–and its accompanying complexities–arise out of two different problems.  One, which has always been us, is that we have decided we want to make certain kinds of expenses deductible, either for the sake of fairness (like medical expenses or casualty losses) or to encourage certain kinds of behavior we have decided are desirable (like buying homes, contributing to charity, and saving for retirement.)  Since not everybody has these expenses or engages in these activities, or spends equal amounts on doing so, people have to file returns to claim those deductions.  It’s easy to simplify the system, if we tax all income, including medical expenses, casualty losses, home mortgage  interest, etc., at the same rate.  But the average taxpayer might lose money in the process, at least in a bad year.


And the other side of the problem is that an increasing number of taxpayers are getting some or all of their income, not from a single employer who regularly withholds taxes and sends them on to Uncle, but from a multitude of private clients, as independent contractors or consultants.  That trend is likely to get a lot worse before it gets any better. It may never get better, if corporate employers have their way.  In another ten years, we may all be independent contractors. Trying to require every one of the contractor’s private clients–anyone who pays the kid next door to mow the lawn or babysit, anybody who gets his house painted or his car repaired–to deduct taxes and do the paperwork necessary to send them to Uncle on the contractor’s behalf–would merely shift the complexity from the employee to the employer, while turning virtually everybody into an employer.


If the complexophobes have their way, presumably the next federal income tax return form (the 1040 BS, for “Bumper Sticker”, which is what it will be printed on) will be entirely blank. The IRS will fill it in with the figures they consider appropriate. Letting the guy with the biggest gun have things his way is the simplest system there is, but rarely is that simplicity enough to compensate us for what he will then be free to take away.


Bureaucratic complexity, in short, is almost always the result of two opposing forces–the demand of some powerful entity for money or power over the individual, and the individual’s wish to have that power exerted fairly and/or at minimal cost to the individual.  The complexities of the tax code mostly have to do with reasons we think people should not have to pay taxes on income earned or expended in certain ways–charitable contributions, for instance, or child care.  A simple tax code would just take 20% (or whatever) of everything, including the change in the beggar’s cup. We have decided, as a society, that fairness is more important than simplicity.  Now, for some reason, we have lost sight of the reason why.  Let’s just let the guy with the biggest gun take what he wants, so long as we don’t have to do any simple arithmetic.


But, says the local chapter of the Timothy McVeigh Fan Club, who says the government has to be the guy with the biggest gun?  Who says government should get a gun–or our taxes–at all?  They don’t have to, of course.  But if we get rid of them, there are plenty of other people, with far bigger guns than we have, anyway, out there, equally eager to take our money and a lot less interested than the government in providing any kind of goods or services in return.  And they’ll be the first to say, as thugs have said for thousands of years, “Don’t make things complicated. Just give me everything I want.” No deductions, no exemptions.  Just 100% taxation.


(Remember the old story about the man who threw his buddy into the lake, after a disagreement over the rules of poker?  The buddy came up, gasping for air, and his pal hit him on the head with a board.   The buddy sank, came up, got hit again, sank, and so on for about five or six go-arounds before he finally drowned.  His pal told the police later “He shore was a fool to keep coming up.”)


(Remember the sexist dictionary that defines the difference between seduction and rape as depending on how much effort the woman is willing to expend to postpone the inevitable?)


Everybody’s proposing alternatives to the income tax.  Dick Armey is proposing a flat tax, by which he means a simple flat percentage of income, applied to all income from all taxpayers, with no deductions.  Bill Archer (R. Tx) is talking about eliminating income taxes altogether and catching us at the other end, with a consumption tax. 


Americans hate all taxes.  After all, the only reason we are the U.S. of A. is that we rebelled against taxation without representation.  We have since discovered we don’t much like taxation with representation either.  According to the Lutheran Brotherhood Insurance Company’s recent study, Americans actually hate sales and real estate taxes even more than federal income taxes–but we’re not too fond of any of them.


Rep. Archer’s consumption tax is a fancy name for a sales tax. (The taxes in honor of which the American Revolution was fought were consumption taxes and what we now call user fees.) It is also, by the way, the main revenue-raising method used by the government of the USSR–remember them?  The very model of a successful economy every American would love to imitate?


Personally, I think all those guys are barking up the wrong tree.  The simplest, fairest kind of tax we could possibly have isn’t a flat percentage tax–after all, most Americans these days can’t do percentages any more. It’s a flat amount tax.  The first $6,000 (or whatever) of every American’s gross income from any source. No deductions, no percentages.  Most of us still know how to subtract.  The same six grand from the ex-steelworker on the corner selling papers, and from his billionaire ex-boss in the suburbs.  What could be fairer?


Oh, yeah.  You want to know what happens to people who don’t make six grand a year, or make just barely that much.  And what about children who aren’t old enough to make any money?  Don’t bother me with that stuff.  Those are complexities.  Ignore them and they’ll go away–that’s the spirit that made this country great. 


Or let’s try another simple solution.  The Gingrichites seem to be taking the position that the way to end poverty is to end all government programs that make poverty endurable.  Why not take this position one step further, and pass a law that, after a stated date, anybody with an income too low to pay the flat amount tax will be taken out and shot?  Now we’ve not only simplified the tax system, we’ve turned it into a screening system to get rid of the deadwood.  That should be a great incentive to get poor people on their feet. Oh, yeah. What about amputees and other people who don’t have any feet?  Are you suggesting some sort of complex exemptions for people with disabilities?    You mean they have to fill out a form that says “I have [1, 2, 0] feet.”?  Yeccccch. No way.



Red Emma

One Response to “Tax Simplification and Over-Simplification”

  1. Charles Fetters Says:

    It’s time for the FAIRTAX. We have to save America

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