For several years now I've been wondering about a couple of things. One would be to come up with a simple taxation formula for individual income. (1) No deductions. (2) Peg the tax rate to a formula, something like tax = 1% per $10,000 of income. (These specific numbers would not work very well.) This would be simple, absolutely predictable, and would set a maximum income at whatever the culture decided was right. An…
Why not just transfer all wealth and private property to the Treasury today? I only need 1 bullet point for that.
While Intuit and their friends do lobby, the US tax code was fiendishly complex long before Intuit was even a thing. "The income tax has made more liars out of the American people than golf has. Even when you make a tax form out on the level, you don't know when it's through, if you are a crook or a martyr." -- Will Rogers Will Rogers died in 1935.
But the majority of Americans have only w2 income and no deductions
If you're an American and have 0 deductions you're seriously incompetent as an adult. The standard deduction is available to almost all taxpayers and requires no evidence, documentation, or proof of any kind:
I read theory a lot and I can see it as an argument that the filing process for Americans with reasonably simple situations are painful and difficult (ie that there’s no government website[1] to file for free, or that the IRS can’t fill in details for you). But I would think tax companies are not hugely important in the grand scheme of things and that the actual reason that tax is so complicated is more broad, eg: -…
Taxation in the US in general does not become more complex as you move to smaller governments. For example, my local appraisal district just sends me a notice (which I am free to dispute if I wish) for my property tax each year. If they don't manage to send it, I don't owe anything.
I guess it depends a lot on where you are. My real estate tax bill has separate rates and line items for town, school district, county, and state. Some places have separate assessments on each district within a municipality. Some cities have their own sales and/or income tax. And then there can be local use fees, vehicle registration, and all sorts of other state/local taxes.
Taxation in the US in general does not become more complex as you move to smaller governments. For example, my local appraisal district just sends me a notice (which I am free to dispute if I wish) for my property tax each year. If they don't manage to send it, I don't owe anything.
I guess it depends a lot on where you are. My real estate tax bill has separate rates and line items for town, school district, county, and state. Some places have separate assessments on each district within a municipality. Some cities have their own sales and/or income tax. And then there can be local use fees, vehicle registration, and all sorts of other state/local taxes.
Yes, I have all that. My point is, if the appraisal district can't explain it to me & back up their math I don't have to pay it.
Contrast that with the bizarre game the IRS plays where your are basically expected to somehow prove you have paid your lot. Despite the IRS damn well having all the information about what you owe anyways.
For several years now I've been wondering about a couple of things. One would be to come up with a simple taxation formula for individual income. (1) No deductions. (2) Peg the tax rate to a formula, something like tax = 1% per $10,000 of income. (These specific numbers would not work very well.) This would be simple, absolutely predictable, and would set a maximum income at whatever the culture decided was right. An…
People would just find ways of giving the money to their children, e.g. cash, or setting up a company and employing them at ridiculous salaries. When you have money there are always ways around things. It's an arms race and unfortunately they rich are winning it.
About the budgets. Certainly the cost of this kind of systems scales sub-linearly with population size?
Not sure there are massive economies of scale in tax collection (and probably some diseconomies of scale too from scaling up from the Faroe Islands to a region/nation too big for a single official to know every accountant personally!). Auditing and providing specific advice on compliance is pretty hands on stuff, and as the population size grows, so does the size, variety and geographical dispersal of the entities be…
Software systems generally benefit from economies of scale. So do financial institutions. Their tax system is simple enough to be automated to a larger extent than the IRS.
Not sure why this would be controversial at all. You're basically arguing that the more complex system of the IRS is 10x more efficient (population/budget) at 1000x the scale, but that the efficiency is unrelated to economies of scale. It just makes no sense to me. Would the costs go down if the Faroe islands adopted the American tax system?
I don’t think bigger always needs to be more complex. For simplicity sake, a 10% tax on income would scale infinitely, no matter how big an economy grows (I’m not arguing in favor of this tax). But the point of the article, in my opinion, is that US has a large problem, costing tax payers an estimated 40 billion in labor figuring out their taxes, where other countries have almost automated the entire process. I think…
Maybe the US could stop taxing labor and investment and simply tax consumption (sales tax). That would simplify everything.
This is simpler but tends to favor the wealthy because such taxes do not impose the same burden proportionately. Moreover the poor rarely invest--I think 401k uptake is only 50% in the US?--and would in present circumstances be challenged to do so. Maybe incentives would change for them under a new system. Another difficulty is that investment income grows over time and governments stand to lose a great deal if they don't tax it.
Not sure there are massive economies of scale in tax collection (and probably some diseconomies of scale too from scaling up from the Faroe Islands to a region/nation too big for a single official to know every accountant personally!). Auditing and providing specific advice on compliance is pretty hands on stuff, and as the population size grows, so does the size, variety and geographical dispersal of the entities be…
Software systems generally benefit from economies of scale. So do financial institutions. Their tax system is simple enough to be automated to a larger extent than the IRS. Not sure why this would be controversial at all. You're basically arguing that the more complex system of the IRS is 10x more efficient (population/budget) at 1000x the scale, but that the efficiency is unrelated to economies of scale. It just mak…
I'm not actually arguing the IRS is 10x more efficient at all (the Faroes' costs are in krone), I'm arguing that its per head spend isn't that much larger considering it handles a lot more complexity and it's seldom regarded as an efficient organization. It's also fairly uncontroversial that labour intensive stuff like auditing businesses and running helpdesks doesn't benefit from particularly significant economies of scale (you spread some software maintenance costs but as you necessarily massively scale up your workforce you acquire inefficiencies from diffusion of knowledge and accountability across a larger, more unwieldy organization and increased management overhead).