Is Complexity Killing the Economy
The United States Tax Code is between 16,845 pages and 76,000 pages. No one, not even the IRS, knows what’s in it.
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The Secretary of the Treasury, Timothy Geithner, cannot do his own taxes—and he’s the cabinet secretary who “owns” the tax code.
Every year, well-meaning IRS employees give taxpayers incorrect advice and instructions because of complexity.
On a personal note, even though I use TurboTax and have a relatively simple tax situation, I have made at least one mistake on four of my last six tax filings.
Is it any wonder that our economy’s fingernails scrape vainly along the smooth surface of the 21st century? Is it any wonder that companies like GE pay no taxes on billions in profits, while families with modest incomes struggle to get by?
Complexity may not be inherently evil, but it can cause inherently evil outcomes. But what could fix it?
How about this: a tax code everyone can understand. A tax code that ensures everyone with reasonable income pays something. And a tax code that doesn’t punish married or single people.
There are several flavors of this flat tax idea, but I like mine best. I got it from Jack Kemp back in the 1980s. Here it is:
Line 1: How much did you make?: ____________
Line 2: Subtract 20,000 from Line 1: ____________
Line 3: Multiply Line 1 by .15: ______________
Line 3 is your tax. Send it in.
There’s only one filing status: person. There’s only one exemption: your first $20k. There’s only one tax rate: 15 percent.
Maybe the rate needs to be 18 or 12—depends on who you ask.
But this simple formula, for people and businesses, would make taxes fairer, more understandable, and simpler. The super rich could not avoid taxes, and a fifth grader could understand them.
Have a better idea?