Thursday, April 15, 2010

Don't Mess With Taxes

Today is Tax Day, a day that Congress has wisely decided to put (calendar-wise) as far away as possible from Election Day. (After all, if we voted right after or right during the time we had to fill out the needlessly complicated forms we might not think so highly of our incumbents). In theory, income taxes make sense--everyone pays a percentage of what they make each year. But then it gets complicated--Congress wants to raise more money than before, so the theory goes that we should get a higher percentage from the higher earners. (Of course, if you're wealthy from making your money on capital gains or inheritance, or have a creative accountant, you won't have to worry about those higher taxes! Congress has you covered). Okay, still simple enough.

But then they decide how about a break for those who have to raise children or other dependents? After all, the childless sad sacks shouldn't have all the fun. And what about deducting payments for home mortgage interest? Screw the renters! People should be encouraged to own their homes, look how good that works out for the economy. So we have deductions for that too.

And if you donated to charity, well, let's add some self-interest to your altruism and give you a tax deduction for that too. Did you have to move for a job, or pay medical expenses? More deductions! And that's just the basic stuff. By the time Congress got done we ended up with a tax code that's over 50,000 pages long.

Don't expect this to ever change. Every few years some "tax reformer" politician comes out and promises tax simplification. They say they'll make a tax return that can be filled out on the size of a postcard (presumably with more privacy than a postcard). No exemptions or deductions or credits. Except maybe for the home mortgage deduction (since it's popular). Or for charitable deductions (since we want to encourage that). Or medical expenses.....and so forth.

You know what's simple? Sales tax. On your receipt you see what you pay, and the merchant is the one responsible for charging it and paying it to the government. Hits everyone evenly so any increase will need to be equally justified to the public at large (rather than just telling the voters that someone else will be paying it).

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