Pass-Thru Income Deduction

I don't want a flat tax (as in "all income taxed at 15%," let's say) because a flat tax has an unfair impact on people at lower income levels. But, otherwise, I agree with your entire post. Here's my ideal law, with the caveat that I have zero legal training beyond six seasons of Law and Order and four seasons of Suits:

(1) The following marginal rates are established:

(Emphasis here: these numbers are made up for demonstration purposes only.)

- $0 through $13,000: 0%

- $13,001 through $25,000: 5%

- $25,001 through $46,000: 8%

- and so on

(2) All money earned, by whatever means and from whatever source, by a person or legal entity resident in the United States shall be subject to the tax specified above.

(3) The Internal Revenue Service shall, no later than the 15th of April of each calendar year (or the next day following the business day after the 15th of April if the 15th of April falls on a Saturday, Sunday, or federal holiday), prepare and mail to each holder of an EIN, each person for whom any tax or income declaration form (such as W2, 1098, 1099, and similar) has been submitted to the IRS, a statement of what the IRS believes the taxpayer owes or is due as a refund.

(4) If the IRS has notified the taxpayer that the IRS believes the taxpayer is due a refund, the taxpayer may notify the IRS of a financial account located inside the United States into which such refund shall be deposited or may request a paper check for such refund or, under such rules as the Secretary shall provide, make a request for United States Savings Bonds. Any request must be made within five years of the date the taxpayer knew or reasonably should have known that the refund was due, otherwise the refund is the property of the Treasury absent a showing of exigence.

(5) If the IRS has notified the taxpayer that the IRS believes the taxpayer owes additional taxes, the taxpayer shall make payment to the IRS no later than the 15th of July following receipt of said notice (or the next day following the business day after the 15th of July if the 15th of July falls on a Saturday, Sunday, or federal holiday) by providing the IRS with debit instructions for a financial account located inside the United States or via a paper check or other form of transfer of dollars.

(6) In the case that the taxpayer disagrees with a notice provided by the IRS under paragraphs 5 or 6, the taxpayer shall, no later than the 15th of July following receipt of said notice (or the next day following the business day after the 15th of July if the 15th of July falls on a Saturday, Sunday, or federal holiday), file the tax forms designated by the IRS under such rules as the Secretary shall provide, to indicate what the taxpayer believes is the proper tax due or refund owed. If the taxpayer still owes additional tax, the tax payment shall be due at the time of filing. The IRS shall have 120 days to respond, otherwise the taxpayer's submission is deemed valid and binding upon the IRS.

(7) There is no paragraph seven.

Generally these changes have some sort of champion requesting them and don't just arise from the ether. I'm not sure we can explain it all away as Congress not realizing that their decisions will advantage large business interests at the expense of smaller ones, particularly when the beneficiaries are also sponsors.

I don't think that makes a whole lot of sense. Do people actually do that?

That's what was so nice about a pass-through entity: It was both politically and revenue neutral. All of the profits flowed through to the taxpayer and the politics and revenue occurred there. Terms like "fairness" had no relevance to them.

It could not have been simpler and it was completely outside the sphere of the political discussion on taxes.

But now, by answering a question that nobody asked, the new tax code politicizes the passthrough entity and, in my opinion, will eventually lead to its discontinuance - or at the very least, layers of complication added every time we revisit this topic.

I benefit maximally from this change to passthrough entities but it is a benefit I never asked for and that will hurt me (and all of us) in the long term.