How Would You Change the Tax Code? Taxes Are Too Complicated!

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The tax code is complicated. It’s begging for an overhaul, and I would love to know how you would change the tax code. My preference would be to simplify, simplify, simplify. But that is easier said than done when there are so many competing interests with deep pockets. Why is the US Tax Code So…

The tax code is complicated. It’s begging for an overhaul, and I would love to know how you would change the tax code. My preference would be to simplify, simplify, simplify. But that is easier said than done when there are so many competing interests with deep pockets.

Why is the US Tax Code So Complicated?

The current tax system is a progressive tax system that increases as your income increases. This article about Marginal Tax Rates and Federal Income Tax Brackets explains this in more detail.

Basically, your tax rate increases as your income increases. However, only the amount of income you earn within each tax bracket is taxed at that rate, not the entire amount (as is commonly assumed).

Let’s look at the current Federal Tax Brackets to see this in action.

2021 Marginal
Tax Rate
Single Individuals
Taxable Income Above
Married Filing Jointly or
Qualified Widow(er)
Taxable Income Above
Head of Household
Taxable Income Above
Married Filing
Separately
10%$0$0$0$0
12%$9,950$19,900$14,200$9,950
22%$40,525$81,050$54,200$40,525
24%$88,375$172,750$86,350$86,375
32%$164,925$329,850$164,900$164,925
35%$209,425$418,850$209,400$209,425
37%$523,600$628,301$523,600$314,150

Your taxes are blended at each of these rates, so you will need to do a little math to understand your Effective Tax Rate, or the amount of taxes you pay overall.

Of course, the marginal tax brackets don’t take into account tax credits or deductions, which lower your effective tax rate.

The Impact of Tax Credits and Tax Deductions

Tax credits and deductions can dramatically change the amount of taxes you pay. In some cases, you can end up paying no federal income tax at all (more on this in a moment).

Tax Credits vs. Tax Deductions: According to the IRS, “Tax credits provide a dollar-for-dollar reduction of your income tax liability. This means that a $1,000 tax credit saves you $1,000 in taxes. On the other hand, tax deductions lower your taxable income and they are equal to the percentage of your marginal tax bracket. (source)”

Both credits and deductions reduce the amount of taxes you pay.

  • Tax Credit – Common tax credits include the Earned Income Tax Credit, Child and Dependent Care Credit, Adoption Credit, Lifetime Learning Credit, certain home improvement tax credits, and more.
  • Tax Deduction – Common itemized tax deductions include deducting the amount paid for state and local taxes, charitable gifts, the home office deductionmortgage interest deductions, medical and dental expenses, and more.

You can also save money on your taxes now by contributing to your retirement accounts, such as 401k contributions, or contributing to a Roth or Traditional IRA or another retirement plan.

Tips to reduce your taxes: Almost anyone can take actions to reduce their taxes, including harvesting losses by selling some mutual funds at a loss, increasing retirement fund contributions, increasing charitable contributions, and a few other things.

Half of US Households Pay No Federal Income Taxes

OK, almost half. The number is actually estimated at 47% (according to the Tax Policy Center), but that is close enough in my book.

How can taxpayers avoid owing federal income tax? The main ways are having a low enough income to be exempt from federal income taxes, or qualifying for enough tax credits, deductions, and exemptions.

Not only do some people not pay federal income taxes, but due to the number of credits and exemptions, some people actually receive a tax rebate from the government.

40% of People Profit from Federal Taxes

As if not paying federal income tax weren’t enough, many people actually make a profit from filing their taxes each year.

“The bottom 40 percent, on average, make a profit from the federal income tax, meaning they get more money in tax credits than they would otherwise owe in taxes. For those people, the government sends them a payment. – Yahoo News.

Take this example (same source):

The (recent tax code) changes made it relatively easy for families of four making $50,000 to eliminate their income tax liability.

Here’s how they did it, according to Deloitte Tax:

The family was entitled to a standard deduction of $11,400 and four personal exemptions of $3,650 apiece, leaving a taxable income of $24,000. The federal income tax on $24,000 is $2,769.

With two children younger than 17, the family qualified for two $1,000 child tax credits. Its Making Work Pay credit was $800 because the parents were married filing jointly.

The $2,800 in credits exceeds the $2,769 in taxes, so the family makes a $31 profit from the federal income tax. That ought to take the sting out of April 15.

Must be nice to get paid. 🙂

Taxes Are a Year-Round Task for Small Business Owners!

taxesI am a small business owner, which adds another layer of complexity to my situation. Gone are the days I can fire up a copy of TurboTax or H&R Block Online and finish my taxes in an hour.

It’s not unusual for me to receive income from over 50 different sources. Expenses are another story entirely! I use a company called Gusto to run my payroll. I pay estimated taxes and self-employment taxes on my business income. These help me avoid being subjected to underpayment penalties.

Once upon a time, it was easy to track everything manually, but I now use QuickBooks Online to manage my business income and expenses. And I hired an accountant as well. The combination of these two makes taxes much easier than before. But it still requires work throughout the year to maintain.

Related: Here is a full rundown of how we manage our business finances for those who are interested in a behind the scenes look.

Taxes Are Too Complicated!

I don’t hate paying taxes. I realize that society would be very different without public money. So I am all about paying my fair share of taxes.

But I hate the act of filling out the tax forms, looking for deductions, learning the new tax rules, sifting through data, visiting the IRS webpage, and trying to determine which write-offs and deductions are allowed or not, etc. (thank goodness for tax software like TurboTax or H&R Block!). While I honestly don’t mind paying my share of taxes, I also don’t want to pay more than I legally have to. So I double check and triple check everything to see if there is anything I missed.

Different Tax Systems & Alternatives to the US Tax Code

Each country has its unique spin on taxes. Some are very complicated, like ours. And other tax systems are very basic. Many have a combination of income tax and a national sales tax or Value Added Tax (VAT) System, in which taxes are incrementally added throughout the sales and supply chain and passed on to the consumers. In effect, this becomes a consumption tax, and is intended to pass on more taxes to those who spend more. There are pros and cons to these systems.

Different Types of Tax Systems:

  • Consumption Tax
  • Fair Tax / Flat Tax
  • Progressive, or Marginal Tax System
  • Sales Tax
  • Value Added Tax (VAT)

What Are Your Thoughts on Doing Taxes?

I’ll share my thoughts on the tax system: I Hate Doing Taxes. I don’t mind paying taxes because I know they are necessary for society.

My biggest complaint with the tax system isn’t having to pay, rather it is the complexity of the tax system and having to go through the filing process. There are thousands of laws, rules, loopholes, exceptions, and other rules that clutter the books and over-complicate what could be a relatively straight forward process. It is because of this complexity (and my small business situation) that I hired an accountant to do my taxes.

How Would You Change the Tax Code?

I think the tax code can be over-complicated and tricky. But changing the complexity of the tax system is not a job I am capable of doing, and eliminating the loopholes and the vast number of rules would probably put hundreds of thousands of people out of work.

photo credit: woodsy.



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About Ryan Guina

Ryan Guina is the founder and editor of Cash Money Life. He is a writer, small business owner, and entrepreneur. He served over 6 years on active duty in the USAF and is a current member of the IL Air National Guard.

Ryan started Cash Money Life in 2007 after separating from active duty military service and has been writing about financial, small business, and military benefits topics since then. He also writes about military money topics and military and veterans benefits at The Military Wallet.

Ryan uses Personal Capital to track and manage his finances. Personal Capital is a free software program that allows him to track his net worth, balance his investment portfolio, track his income and expenses, and much more. You can open a free account here.

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  1. Leah S says

    I’ve always admired the Fair Tax idea. While I realize that would cut out hundreds of thousands of accountant-related jobs, I think it would go a far way into setting up for a more frugal USA. I think people would be more inclined to try building, growing and bartering for their goods. Who WANTS to pay 23% tax on an item? Even though it’s close to the same number people get taken out of their paychecks and state/county tax rate; a clean cut number like that could have people pausing to purchasing a big ticket item. They’d be more on the lookout for used or a good sale.

    Between higher awareness and a willingness to find a different solution to a needed item, I think USA could become more frugal with a 23% Fair Tax code implemented. Less dependency on the government is a good thing. 🙂

  2. PT Money says

    I would do away with the idea that the progressive tax rate structure is just. In my opinion it’s taxation without representation. And I’ve always thought that, not just since I’ve been making the large bills. 😉

  3. Pinyo says

    I don’t know if this fits under tax code or not, but I would go through the tax code with the intent to simplify it as much as possible. I think some tax codes probably cost the government more money to manage than the tax revenue they make.

  4. Ashley says

    While I agree with the Fair Tax, even more than that, no matter what structure we go with, I’d do away with automatic withholdings and everyone would have to write a check for their taxes.

    OR – (because I recognize that may not be realistic because too many people are irresponsible to save properly), maybe I would like to be it set up like an HSA account. You do have automatic withholdings, but they go into an account that you can only touch to pay taxes. You receive your bill and have to write your check off of that Tax Savings Account.

    Although something like 40% don’t pay taxes and I’d like to see that remedied, I think it would really get people to become more invested in our tax codes if they had to physically write a check.

  5. Kristy @ Master Your Card says

    Make it fair and simple.

    By fair I mean that no single person or business should be getting a special tax break. Set the standards required to raise revenue, but once it’s set, don’t make all these exceptions. Someone in the 15% tax bracket should pay just as much as everyone else in that same bracket. Likewise, a big corporation with $3 billion in assets shouldn’t be getting special breaks that someone else in the same category isn’t getting.

    By simple I mean get rid of the all the legal jargon that makes no sense to the layman and require special classes in order to file your own taxes every year – and that’s just for the 1040 EZ. Anything above a 1040 and you start getting into college level courses. As an example, “Deduct 10% of these expenses only if they exceed 2% of the total adjusted gross income as reported on line 33a.” Huh?

    I’d also eliminate the estate tax on land as an inheritance. By that point it’s taxed three times – when it’s purchased, annually based on value, and then finally when it’s passed on. That’s excessive. This would only apply to the land, though. In terms of monetary inheritance, that’s like a capital gain and in the interest of keeping it fair, I think if investors have to pay capital gains taxes, then those inheriting money should pay as well.

  6. Jarhead says

    Throw out the 1000s of pages of tax code and make it only a couple of lines. All individuals will pay X% of their income is line 1. Line two is exactly the same but it is for businesses not individuals.

    No deductions for kids, mortgage, etc. You get paid and X% is automatically withheld (just like today).

    This will do two things first everyone pays their fair share. Also the government gets to save millions if not billions of dollars by getting rid of the IRS (99% anyways).

    Don’t consider me for the prize as I already have done my taxes so it won’t be of any use to me.

  7. John Hunter says

    Conceptually I think two things are needed. First think of the economic impact of taxes and second make them as simple as possible. So simplifying the tax code is good. Taxing spending is better than taxing income. Taxing kids that get millions from their parents or grandparents is about the best tax in existence. Taxing minimum wages workers to pay social security to millionaires is about the worst tax in existence. For the last 7 years we have been adding to the tax burden of our children and grandchildren as the rate of somewhere near $400 billion a year.

    Put all of that together and we need to most of all stop raising taxes on future generations to pay for todays living beyond our means. Raise a simple tax on consumption (it would be nice if we could reduce the income tax but we have to repay some of the debt those before us accumulated before doing so in my opinion). And raise the inheritance tax (which already only effected those getting millions before we decided to eliminate that tax and raise tax on future generations instead).

    Now we probably cannot start the consumption tax while in the grips of the economic problems created by those living beyond their means the last few decades. But as soon as the economy is stabilized that is what I would do. What will happen instead is we will chose politicians that tax our children and grandchildren so we can not have to pay for what we consume.

  8. Kim says

    Simple. Flat tax based on income only. Those making under the poverty level would pay no tax. Our current tax code has been hijacked to modify our behavior by tax incentives and penalties. Let’s eliminate that!

  9. [email protected] says

    I think the fairtax.org idea is a good one-taxing spending, not income, with rebates to those with very low incomes. How you would make that transition, though, does not seen so clear cut to me, but the current tax code is way too complicated-and not really fair either, and needs to be simplified.

  10. David Aase says

    I agree that a flat based tax on income would be idealistic, however it seems like too many people might abuse a system like that. It could be possible to take unemployment benefits and forgo paying taxes? That doesn’t seem right.

    Our current tax code is on the right path, however their seem to be too many steps involved. Once everyone has access to a computer and the internet, make e-filing mandatory with no fees. That’s how I would change the current tax code.

  11. Ryan says

    David: I agree that mandatory e-filing would make it easier on the government and reduce errors, but it may be awhile before everyone has regular access to a computer.

    People are required to pay federal taxes on unemployment benefits… almost seems unfair, doesn’t it?

    To everyone: Great comments! Good luck to everyone who entered!

  12. Julieanne says

    I’d institute a flat tax on everyone’s income, and call that good enough. We’re all tired of jumping through tons of hoops just to get our taxes paid…or to get out of paying our taxes!

  13. Night Runner says

    Like some of other posters before me, I would do away with the progressive method of taxation. It doesn’t seem to encourage people to earn more money – or at least to disclose their earnings to the IRS. Then again, I’m definitely biased on this issue, since I expect to go up a few several tax brackets in the not-so-distant future. 😉

    • Ryan says

      I think you hit on it when you said: “disclose earnings.” There are a lot of people who deal in cash and won’t report anything to the IRS if possible.

      And nothing wrong with moving up a tax bracket or two – it just means you are earning more money! 🙂

  14. Robert says

    I’d like to see a simplification of the progressive system we have that would start at one percent once you earn above a trailing retrospective 3 year average poverty line rounded up to the next $1000 and indexed by the regional consumer market basket indexes. Incrementing the tax one percent for every $5000 up to ten times the established regional poverty line base and level above that ceiling. The states would tax goods and services to fill the funding gaps as they do now but with federal caps on taxing “essentials” i.e. food, etc. They would be free to tax the crap out of things the states deemed luxury goods and service … afterall, we are the USA. There tax policy dreamed up in ten minutes or less … I’m sure there are many better ideas than the current system.

  15. Mrs. Micah says

    I hear ya on doing taxes. Midway through the year I put together a big total income spreadsheet which helped a LOT during tax time. I only update it about once a month, but it makes a difference.

    Still found myself digging up things like hosting invoices and the like.

    • Ryan says

      Mrs. Micah: I keep up with my income spreadsheet as I receive income, which makes it easier on me. I update the spreadsheet, then file the e-mail or invoice/receipt.

      The thing that has been taking so long for me is the payments I received from PayPal that weren’t reported to the IRS (basically income not reported via 1099), and finding all the receipts from my expenses… Ughhh.

  16. Kristen says

    The only reason that I don’t hate tax time is because I’m very lucky to have an uncle who is a CPA. He does all of our taxes and even addresses the envelopes for us. It’s a good thing we have professional help though. My husband has a lot of deductions for his job. We had the dubious honor of being tied for the most complicated tax return my uncle had to do this year!

    • Ryan says

      Kristen: It’s always nice to have someone in the family that can help out! I may just hand over my taxes to an accountant next year – I think it will be worth the cost!

  17. MoneyNing says

    I was just telling my wife how I spent one full day on organizing my tax records and I pay an accountant to file my taxes.

    Filing taxes suck 🙂 At least I’m done now (hopefully).

    • Ryan says

      MoneyNing: I’m thinking about hiring an accountant next year, but even if I do, I’m sure there will still be work on my end. My plan is to keep better records this time around, which will hopefully make things much easier next year!

  18. Miranda says

    Paying estimated taxes really helped me this year. It was a great thing to keep me from getting overwhelmed. And since my taxes got more complicated last year, I started using an accountant. Totally worth the money.

    I print out a statement from PayPal every month and file it away as supporting documentation. It makes things a little easier in terms of documenting that mode of income.

    Sorry things are such a bummer for you this go 🙁 Next year, they should be a little easier, now that you understand how successful you are!

    • Ryan says

      Miranda: Great idea regarding printing out a PayPal statement each month. I think I will go back and do that for last year (reconciling my PayPal income is the last remaining item on my to do list before filing). I exported everything into an Excel spreadsheet, but I think a paper copy will work better for me.

      Paying estimated taxes is definitely my plan going forward. It will make everything easier for me. An accountant is something I am seriously considering – I have no problem paying someone who will be more efficient and more accurate than me. I’ll gladly write a check to remove this bit of stress from my life!

  19. Benjamin says

    Congratulations on the success of your business! That is an excellent “problem” to have indeed.

    My wife and I welcomed our second child in Sept so that accounted for us receiving a bit more back than I had originally thought! I always try to keep my refunds to a minimum each year, but I was certainly pleased to learn that I had miscalculated!

    • Ryan says

      Benjamin: Yeah, it’s not a bad problem, it just makes taxes a little more complicated. I don’t mind owing more money because a) that means I earned more money, and b) I saved everything I earned in a savings account and haven’t spent any of it. So I will simply withdraw it and send it in.

      Our first child is on the way, which should help out a little bit next tax season! Congrats on your second! 🙂

  20. Andy says

    I hear you. I actually formed my S-corp recently after meeting with my accountant (for my personal taxes). She said if you make more than $2000 a year, forming an S-corp is a no brainer. No more self-employment taxes and the IRS is less likely to audit you as oppposed to deductions claimed in a 1040 C. Also, I just pay her $50 a month to tax care of all my taxes and transactions! Simpler.

  21. Martin says

    I am a tax accountant and I am enjoying these posts immensely.
    My two cents:

    If you have a business, buy quickbooks software (money well spent). Its cheap and when you reconcile your accounts you won’t forget or double account any income or expenses.

    FYI- the IRS has announced that they will be using paypal records to make sure that 1099s are being issued and reported.

    • Ryan says

      Martin: Thanks for the tips. I’ve looked at QuickBooks and have considered it. I keep my Excel spreadsheet available on multiple computers, but I think QuickBooks has an online version.

      As for PayPal, I plan on going through line by line to ensure I catch everything. The last thing I want to do is miss a large portion of income and get hit with penalties or fines. I receive a lot of payments via PayPal from internet companies located in the UK, and I don’t think they are required to give 1099’s, so I won’t have paperwork on this – they will need to be reported as 1099-MISC. I report everything though – like I mentioned, I don’t want to cheat.

  22. Bob Meighan says

    I’m glad to hear you use TurboTax to ensure you don’t pay a penny more than necessary and get every deduction/credit that you deserve. While we can’t help much in the way of organizing your information (other than recommending Quicken or QuickBooks), we certainly can help save you time and frustration.

    By the way, you mentioned that you need to file an LLC. Depending on the nature of your LLC, you may need TurboTax for Business instead of Home & Business. Regardless, I would not suggest you upgrade at this point unless you find a need. Many customers think they need to upgrade to H&B simply because they have a home-based business. If Premier is working for you now, then stick with it.

    I better get on to doing my return soon (or my extension)!

    Bob Meighan
    VP, TurboTax

    • Ryan says

      Bob: Thank you for contacting me. I finished gathering my paperwork this evening, and I plan on running through TurboTax Premier from the beginning sometime this week. I will have a better idea of my needs after I do that. I am still using TurboTax Premier, and haven’t yet determined if it is necessary to upgrade to TurboTax Home & Business.

      I am the sole member of my LLC and there shouldn’t be anything complicated with my business structure, so I don’t think my tax situation will require TurboTax for Business. But I will look into it. After my experience this year I plan on investigating QuickBooks and/or hiring and accountant. I don’t want a repeat of this year!

      Thanks for the tips!

  23. Kristy @ Master Your Card says

    Yup, I’m with you on doing taxes. It’s not the act of actually paying my share of taxes, but the whole process of filing that I can’t stand. Matter of fact, here we are coming up on April 1, and I have yet to file mine. I’ve done well just to keep everything in one place, but I’ll probably wait until the last possible minute to do them. I hope not, but that’s just me. It’s funny too, because Jonathan wanted me to write a post about taxes and I had a good laugh over that. As financially savvy as I am, taxes are not my forte!

    • Ryan says

      Kristy:Taxes are not my forte either. I finally got all my supporting paperwork together last night. It took several hours on top of the 4 hours I’ve already put in. All told, it will take me entirely too long to do my taxes this year. Ugh.

      I have made improvements to my record keeping system, but I may hire out next year. It will save me time and frustration, and it’s a qualified business expense, which is an added bonus!

  24. DDFD at DivorcedDadFrugalDad says

    Solid advice on a necessary evil . . . just be sure to get every penny back that you are legally entitled to.

    I always start next year’s tax folders, just as I wrap up this year’s folders– it is so hard to stay organized that I try to work at it at every turn.

  25. Randy Hughes-King says

    I know I’m way late, anyhow:

    A. Tax Code
    1. Code
    a.The only alterable section of this code is “c” subsection of sections “2” and “3”. The alteration is only allowed by citizen referendum.
    b. These taxes are to take effect at the time of currency exchange.
    1. Sales Tax
    a. Sales is defined as an exchange of currency for anything other than labor.
    b. Labor is defined as the efforts of a person.
    c. Sales Tax: 5%
    2. Income Tax
    a. Income is defined as the exchange of currency for labor.
    b. Labor is defined as the efforts of a person.
    c. Income Tax: 5%
    B. Tax Code Exemption
    1. Government
    a. Any exchange of currency with the government as a party or observer will not be taxed.

  26. Charles says

    Agree with Pinyo, some codes are income negative for IRS, for third parties and bothersome for the filer. Change made in 1986 requires filers claim every penny of interest earned on bank checking and savings accounts. Banks must provide customers and IRS with 1099-INT forms regardless of amount interest earned. Loss in manpower, equipment use, time, postage, etc, for banks and IRS cost taxpayers in long run with smaller interest returns, added filing complications and delays.
    Nobody invests in bank checking and savings interest to get rich; it’s a place to put paychecks, rebates, tax returns, etc. for day to day transactions.
    State and local codes are just as vulnerable to negative income requirements.

  27. Justin Builes says

    This is a regulation that is hitting near and dear to my heart. It is one I am actually considering to make the effort to fight and change.

    Qualified Student Loan Interest Deduction:
    Under the current system, the deduction of student loan interest is limited to $2500 per year and is prorated through a system that reduces this deduction once your AGI reaches $55,000 and is fully eliminated if your AGI reaches $70,000.

    Neither if these income amounts is a significant salary amount, especially if you have any substantial amount of debt. Add to that student loan repayments and, trust me, you do not have any excess income. In times where you want people to have income to spend, what better way than to put it back into the demographic of people aged 24-40, this age group contains the most disposable income and the tendency to spend such income.

    The real issue here, is that if the student loan was a mortgage on a house, all interest would be deductible under the current tax system. Not to mention, the taxpayer would be the owner of a house and the tax shelters, and equity that goes along with it. This means, by spending $150k on a college education, I am being penalized compared to if I had studied a trade and purchased a house.

    My proposed change to the tax code would be to remove the cap on deductible student loan interest. We chose to go to college to better ourselves and create the next generation of business men, accountants, and lawyers… in doing so we are being punished by not becoming plumbers and construction workers. Put more money back into the pocket of the 24-40 demographic of working professionals and watch a change in the economy.

  28. Hank says

    Your last paragraph summed it up perfectly. It is not the problem of having to actually pay taxes….it is the complexity of them. Have you ever read Neal Boortz book about the Fair Tax? It is a very interesting idea on how to change the system to a consumption tax sort of like a VAT that most of Europe has.

    • Ryan says

      I haven’t read his book, but I lived in the UK for a couple years, so I’m familiar with the VAT system. It is easier to understand and ensures the tax liability is spread among everyone – individuals and corporations alike.

      But I don’t think we will see it anytime in the US. It would put hundreds of thousands of people out of work and actually force a people and companies to pay more taxes than they currently pay. I can’t imagine it being a popular option for those in Congress looking for reelection.

    • fredct says

      Hank, I haven’t read the book in question, so forgive me if it’s not true of that book… but my pet peeve on that issue is that many people confuse a ‘flat tax’ with a simple tax. A flat tax – with one tax bracket (which is what ‘fair tax’ usually means) – can be just as confusing and complicated and a bracket-system… because the complication comes into play with what counts as income and what’s eligible for a deduction or a credit.

      You can keep a multi-bracket system and still make it much more simple by simplifying all the other junk. Most editorials or writings I’ve read on the matter try to conflate the two.

      Of course, there are other things you have to be concerned about… if you really wre to eliminate all deductions, then without the mortgage deductions, the value of housing would nice a nose dive, since buyers couldn’t rely on any tax breaks to offset the mortgage costs. And it’d probably be completely politically impossible to eliminate mortgage deductions, among others.

      So I agree with the general goal, but I think it’s usually presented dishonestly, and it’s much more complicated than over laid out.

      • Ryan says

        Are you familiar with the Value Added Tax (VAT)? It is common in Europe and is added to goods and services at each step of the manufacturing process. Companies can then claim credits if the item is used to produce something else. (Example, a car manufacturer pays VAT on carpeting, then claims a credit because it is used in the manufacture of the car). The consumer and businesses end up paying the total tax bill. It causes the cost of goods to increase, but not prohibitively. However, the argument against it is that it is disproportionate to lower income families because they typically spend a higher amount of their income than those with higher income levels. Overall, it is a much more transparent system than what we currently have.

        That said, I don’t see anyone wanting to vote for that when 40% of Americans get paid come tax time and 47% don’t owe federal taxes. Why would they want to start paying federal taxes on what they buy when they don’t pay federal income taxes now?

        • fredct says

          Yeah, I am familiar with VAT, at least to the extent you described it… I’ve never lived in Europe to be intimately familiar with it.

          Yes, VAT has it’s good and bad points – in order to prevent shifting the tax burden drastically, it would have to come with an annual credit for each person (like the standard deduction & exemptions now). But what percentage of people that would leave paying no taxes or getting much back, I don’t know and is probably highly dependent on the proposal, if indeed a proposal even gets that specific.

          I agree with you though that it’d be hard to overhall a system unless large percentage of people see a distinct advantage from it, and that’s a hard case to make in the current environment.

        • Ryan says

          Oh, I’m not intimately familiar with it – I just paid more at the stores. The wikipedia page is about the extent of my knowledge. 😉

          I’ve heard talk of proposing a VAT with credits based on income, but that means people will pay more in advance, then receive a check after the fact. Or another way would be people receiving a check at the beginning of the year based on the previous year’s income.

          Either way, I can’t see half of the people in the US deciding to give up the current situation (not paying federal income tax) and exchanging it for what amounts to a consumption tax.

  29. Joseph | kickdebtoff says

    I think tax systems are complicated all over! whatever the system you look at has it’s up and downside. Do you think though that if the tax system and process was made simple people would gladly pay taxes?

    • Ryan says

      Would a less complicated system make people glad to pay taxes? No, I don’t think so. Because it would probably remove a lot of the tax breaks and exemptions they currently receive. I don’t think any tax system that makes people pay more taxes would make them happy.

    • Money Reasons says

      I think a flat tax would make it very simple to file your federal income tax return.

      I also think a flat tax would have a negative impact in the accounting profession, at least to some extent.

  30. [email protected] says

    I don’t know the answer, but the tax system needs an overhaul. The US can’t keep on spending the way it does when such a large percentage of the country doesn’t pay up.

    However, the example of the family of 4 making 50,000 a year has me puzzled. Isn’t 50,000 a bit on the low side for 2 adults and 2 children? Or am I completely off base?

    • fredct says

      Didn’t read my post, huh MR? 🙂 Thanks for illustrating my point though… which is that people constantly conflate the idea of a flat tax and tax simplicity, when in fact they are not the same thing at all. You can have a very complicated flat tax, or a very simple bracketed tax.

  31. Becky says

    I work for an accountant doing taxes during the season and it’s quite interesting seeing the varying situations coming through our office.

    I read this article (similar to your post) on YAHOO yesterday and it reminded me of my BIL’s question a few weeks ago. He has 5 children and he couldn’t wrap his head around the fact that he was getting more money back than “he paid in” (withheld). I told him, yeah it’s great now, but you know someday we’re all going to have to pay that back! I can see deductions/exemptions/credits taking your tax due down to zero, but that should be it!

    • Money Reasons says

      I disagree, but I see where you are thinking.

      You’re stating that the simplest of concepts can be made complicated.

      Still the reduction/elimination of tax variables would dictate that the tax code would be considerable simplified. Without the elements of tax credits, deductions, and exemptions and so forth… it will be simpler.

      So what you are proposing is that it might start out that way, but would evolve into the complicated muck that it currently is today. And if you don’t believe it’s muck, try calculating kiddy taxes manually with capital gains of $3,000… what a joke!

  32. Money Reasons says

    I was aware that almost half of the people in the U.S. doesn’t pay taxes (and that doesn’t bother too much). BUT, I didn’t realize that a lot of them got money back! How can you call it a tax when it really redistributes income? Amazing and very sad.

    Does this mean that even if I have no (or very very small) earned income for the year, and if I file, I get those tax credits back as cash?

  33. sunk says

    family of four making 50k over the table may need all the funds to support the family.

    we are a republic, redistribution is part of the equation

  34. fredct says

    @ Money Reasons,
    “You’re stating that the simplest of concepts can be made complicated.
    Still the reduction/elimination of tax variables would dictate that the tax code would be considerable simplified.”

    Kind’ve, but not quite. A flat tax simply says that all income is taxed at the same rate.

    You can still have an complicated system to determine what counts as “income”. You can still have mortgage and child care deductions, and medical cost exclusions, and credits for energy saving home improvements, and 2% AGI exclusions for miscellaneous deductions and all the rest of it.

    Of the 76 lines on the 1040, there is exactly *one* where the tax brackets come into play.

    I suppose a flat tax would inherently eliminate a handful of lines where income is taxed at different rates. But there’s no reason you need a flat tax to do that.

    What I believe you *mean* to say, is that we should have a tax with no deductions or credits and all the crazy rules surrounding them – or at least a lot less of them. And we shouldn’t have different tax rates for different kinds of income. And I agree. That’s tax simplification.

    But you could still have ‘progressive tax brackets’ and it would be just as simple.

  35. K.C. says

    The tax code is used to influence behavior as well as to collect revenue for the government and re-distribute income. Behavior that Congress wanst to encourage gets deductions, exemptions, and credits. Behavior that Congress wants to discourage gets none of the preceding and may have a surcharge levied against it.

  36. Jarhead says

    I am one of those 40 percent that had no tax liability and got a good sized return. Not only did I get the above mentioned credits (two children under 17 and the making work pay credit) I also got the Earned Income Credit as well as the First Time Buyers Credit. In all my total refund was about 45% of what my taxable income that was reported on my W-2 this year.

    Is it fair probably not. I feel that the government should get rid of all refundable credits and limit refunds to what was paid in. Am I complaining that I got a large refund not at all as it allowed me to pay off 98% of my credit card debt take a vacation before I deploy as well as get some home improvements done that I have been wanting to do.

    In all I think the entire US tax Code is completely screwed up and needs to be revamped to help close all the llopholes and hopefully close up the deficit that Mr Obama(and the rest of Washington) is inflating at an exponential rate.

    • Tyler WebCPA says

      You’re totally right to take advantage of every thing Washington legally gives out, even if you feel that they shouldn’t be doing so. The government has a long history of using tax legislation to support certain special interest groups, pet projects, and as a means of influencing certain behaviors. Unfortunately their meddling has unintended and perhaps unforeseen side effects, like discouraging savings and productivity.

      Even though I’m an accountant and I make money because it is difficult or impossible for many people to prepare their own tax returns because of the complexity of the tax code, I would strongly support a simplification of the tax code because I feel it would make this country stronger and her citizens better off. Although I have to say I’m not at all worried about having to change my profession anytime soon.

  37. Dan says

    “A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world’s greatest civilizations has been 200 years” – author unverified.

    No sign of the above slowing down.

    • fredct says

      I’m very curious on the ‘sample size’ that ‘unverified author’ is using. Isn’t democracy about 200 years old in it’s modern form? And the same size before that can probably be counted on one hand (the roman empire and, um…)?

      P.S. Voting for the candidate who promises tax breaks with no commitment for corresponding spending decreases is simply another version of that same thing.

      • Dan says

        The author traditionally given credit for the quote is Alexander Tytler, Scottish lawyer and writer from the 18th century. However, some historians have suggested it may have been penned by 19th century French political thinker Alexis de Tocqueville. Either way, I take the 200 year figure with a grain of salt.

        What strikes me is the statement regarding citizens voting themselves “largesse from the public treasury”. This has been occurring for quite some in the U.S., most notably since FDR with the advent of Social Security and again under LBJ with the Great Society. Welfare programs create an inter-generational dependent citizenry and doting, yet controlling politicians. You may hear talk about “social justice” and helping a particular group of people, but underneath it’s a system of buying votes.

        Today’s most recent example: the “health” care bill: Promising the world at the expense of private insurance companies and the federal budget. The next example: immigration reform (amnesty). Politicians are silently licking their chops at the thought of millions of new voters from south of the border beholden to them.

        I disagree with your postscript. I pay net taxes, so when I vote for the candidate who is promising me a tax break, I’m simply getting back what was originally mine. The 47% mentioned in the article would vote themselves that which was never theirs.

  38. fredct says

    Well whether its Tytler or Tocqueville, the numeric part of their quote seems to be 200-300 years out of date, and somewhat disproved by this point, no? It’s easy to take the figure with a grain of salt when it’s wrong. How many hundreds of year does it need to be wrong by before being discredited?

    It’s funny that you imply the health care bill was ‘buying votes’, implying some high level of popularity, while the argument against it was always – and continues to be – that it is not popular. That argument is oversold as well – polls that did not use leading wording found it to be pretty much split. But I find it highly amusing that you are using the reverse argument. Talk about between a rock and a hard place… you accuse him of simply doing things to buy votes, while he’s simultaneous he’s being accused of defying the will of the people and pushing through something that’s unpopular. My only response is… huh?

    Your greatest falsehood however, is saying that it’s “at the expense of private insurance and the federal budget”. I’m sure you full well know the CBO says it’s deficit reducing to the tune of over a trillion dollars. And the stock of private health insurers have not tanked, quite the opposite… and in fact the industry groups have generally supported the reform effort and the specific bill because it will create tens millions of new customer that will actually be a benefit to them. It’s not all sunshine for them, there are certain negatives, but it is by no means “at their expense”.

    Next, if you’re such an ideologue that any attempt at reforming the immigration system (in a way that reflects reality) is automatically ‘amnesty’ to you, then you’ve already made up your mind regardless of facts. Sure, health care reform is going to kill grandma, and any kind of immigration reform at all is amnesty… that’s productive dialog.

    Finally, I know it’s easy to rationalize voting yourself a tax break (p.s. I myself pay plenty of net taxes as well), but the facts are still the facts. In a deficit environment, if you vote for a candidate promising you a tax break, with no realistic plan to accordingly reduce spending, then you are voting to increase the deficit. “It was mine originally” may be a feel good rationalization, but it’s irrelevant… you are voting to borrow more now and put the debt on the backs of our children. You are voting for your own pocket, not for the good of the country.

    As long as you think that’s okay, you have no ground to criticize others to do the same thing. The net financial effect is identical.

    • Dan says

      The federal government dishing out benefits resulting in trillions in debt is an excellent example of “loose fiscal policy”. The relevancy of this aspect of the quote stands regardless of the accuracy of the yearly figure that follows.

      I agree, the health care bill is unpopular. Even prior to the bill’s passing, there was already a growing number of disgruntled voters. However, I also see evidence of a yea-I-can-get-free-health-care-now thought process throughout the country. It’s folks of this mentality who are being pandered to. In my opinion, they’re large enough in number to partially offset the opposite voters. (And let’s not forget the union exemption from the Cadillac plan tax.)

      Not sure where your trillion dollar deficit reduction comes from (Tocqueville? 😉 ) – the number is $143 billion according to the CBO’s latest report. But even that number is suspect. The CBO does not consider the adaptive behavior of medical providers and patients in response to the workings of the bill. Also, I see any attempt to project a +trillion dollar budget 10 years into the future as an exercise in futility. Aside from the CBO, I don’t have confidence in the federal gov to efficiently run a program on a scale of such magnitude that affects 1/6 of the economy and creates over 100 new bureaucracies. Especially considering the fed’s stellar fiscal record with S.S., Medicare, Medicaid, etc.

      The hc bill imposes an all pre-conditions accepted mandate, and a medical loss ratio (MLR) increase to 85% (meaning 85% of all premium revenue must be spent on claims as opposed to administrative and corporate costs). Add to that the oversight committees on premium hikes and you have tight federal control over both cost and revenue for insurance companies. I’m not saying let’s forget cancer patients, but financial fallout is inevitable with these regulations.

      I was referring to the current immigration reform bill being considered – the Schumer-Graham bill which includes a “pathway” to citizenship. In other words, anyone in this country who is here illegally can be made legal. This concerns me because I see millions of purchased votes being added to the 47%.

      Reducing taxes does not necessarily reduce government revenue. Lower taxes create an environment conducive to business expansion, investment, job creation, consumerism, and ultimately, more government tax revenue. That’s not just good for my pocket; it’s good for the country. That said, I’m all for reducing spending, too.

      Still, taxes must be paid. The 47% either pay net zero or less than zero taxes. For them to be able to vote themselves this system is dangerous – hence my criticism.

      Oh, I never said anything about killing grandma.

      • Dan says

        Union Cadillac tax exemption – not in the final bill, thank you, but almost. AFL-CIO threatened lower voter support if they didn’t get their exemption in the House bill. There were union provisions in the Senate bill passed in December.

        CBO doesn’t consider adaptive behavior: Increased access means increased demand – couple that with an already diminished supply of medical professionals, and medical costs rise. Will availability/quality decrease? Will PA’s be given more authority to fill the gap? Will there be new subsidies to generate more medical students or attract foreign doctors? The CBO claims its numbers are middle of the road to account for variation, but then follows that statement with “effects of comprehensive reforms are extremely uncertain”. CBO also states that hc bill policies are “difficult to sustain over a long period of time”, and “budgetary impact could be quite different if key provisions are ultimately changed”. Lots of missing factors and unanswered questions.

        Lack of confidence in massive federal program efficiency: I gave you specific examples: SS, Medicare/caid. Also considering the new bureaucracies, massive size and scope, and trillions in total debt, I find it very convincing to reasonably have little to no confidence that this behemoth can stay out of the red. The onus is on your side of the argument to provide specific examples showing fed efficiency with huge programs.

        Financial fallout with ins. companies: No specifics in mind – I can’t think of any other industry that has had its business model and handling of cash flow dictated to it the same degree that the hc bill does. When you strip away major aspects of the free-market decision-making abilities of a firm, it’s a reasonable position to predict financial difficulty.

        I’m not demanding near perfection for hc reform – just that it doesn’t do more harm than good.

        Amnesty: Thank you for the clarification of the word. Through “substantial steps and costs and effort”, the 47% will rise.

        Lower taxes/higher revenue: There is not a simple rule for this topic. If the rate is too low, it’s obvious that you don’t collect enough revenue. On the other end of the scale, there has to be a point at which a rate increase stagnates the economy and reduces revenue. I’m not advocating a literal application of the Laffer curve, but I would seek an optimal area in the middle. Otherwise, where’s the theoretical basis to not raise rates through the roof?

        As far as “self-interested” voting goes, I would bet that most tax-payers who vote for tax cuts are also strongly in favor of spending cuts and want to see the debt reduced. In fact, most politicians that campaign on tax cuts usually also promise reduced spending (whether or not they make good on the promise).

  39. Tyler says

    Can you clarify the 50% statement? Does this mean that 50% of people filing returns had ZERO net income, meaning they were returned all taxes that had been paid out of their income, or does it mean that 50% of filed returns were given a refund rather than owing money?

    • fredct says

      > (And let’s not forget the union exemption from the Cadillac plan tax.)

      Sorry, but, not true. There is no union exemption from the Cadillac tax. It was discussed, but it was not in the final bill.

      > Not sure where your trillion dollar deficit reduction comes from (Tocqueville? 😉 ) –
      > the number is $143 billion according to the CBO’s latest report.

      In the first 10 years, yes. The $1 trillion number ($1.3 trillion really) is for the first 20 years. I understand and agree with your skepticism on the accuracy of numbers with such a long time frame, but when you can be $1 trillion dollars wrong, and still be deficit-reducing, that’s a pretty good starting point. How much more you can really ask for? When’s the last time the Congress passed a bill that had an initial estimate anywhere near that good?

      >The CBO does not consider the adaptive behavior of medical providers and patients

      and

      > I don’t have confidence in the federal gov to efficiently run a program on a scale of
      > such magnitude

      and

      > I’m not saying let’s forget cancer patients, but financial fallout is inevitable with
      > these regulations.

      I’d really love to hear some specifics. A general sense of foreboding does not make for a particular convincing argument.

      Sure, things can go wrong… be it public or private, when aren’t there adjustments that need to be made later? Having worked in private industry for my entire working career now, and things always need to be fixed, and improved, and learn lessons.

      Saying it needs to be perfect (or nearly so) before anything can be done, is a way to never get anything done. A baseline lack of trust that nothing ever works is another sure way to make sure nothing ever gets done. Sure, SS, Medicare, Medicaid have their problems… but they also have their substantial successes. Would you really rather we had never had them? If so, you’re in the distinct minority.

      > The Schumer-Graham bill which includes a “pathway” to citizenship. In other
      > words, anyone in this country who is here illegally can be made legal.

      I don’t want to get too much into another topic. Especially since I fully admit that I know little about the bills in the works on immigration. I usually don’t find it worthwhile to put so much time into bills that are so preliminary and will probably have significant changes going forward.

      However, a “pathway to citizenship” is not “amnesty”. “Amensty” means “a general pardon for offenses, esp. political offenses, against a government, often granted before any trial or conviction.” If a pathway requires substantial steps and costs and effort, then it is simply not amnesty. I reserve judgment on any particular plan until I hear the details, but to start out misusing a word on day 1 – and a politically and emotionally charged word at that – is not the way to start.

      A pathway is not “amnesty” and every government program isn’t “socialism”. Misusing loaded words is not constructive for a national discussion. Or for an individual one.

      > Reducing taxes does not necessarily reduce government revenue. Lower taxes
      > create an environment conductive to business expansion, investment, job creation,
      > consumerism, and ultimately, more government tax revenue. That’s not just good
      > for my pocket; it’s good for the country. That said, I’m all for reducing spending,
      > too.

      I’m sorry, but you’re engaging in the long-discredited theory of ‘self-financing tax cuts’. The idea that tax cuts are so good for the economy that they actually generate more revenue than they lose. It’s a magical little bit of thinking, often used for rationalization, and it’s just not true. Wouldn’t it be so lovely if it was?

      Yes, tax cuts do cause economic activity (so does spending), but they don’t pay for themselves. A vote for tax cuts without spending cuts, is just as much a self-interested lining of your own pockets as is spending without paying for it.

      Lastly, to get back to the main topic, we both agree that 47% paying no taxes (although the figured it artificially inflated by the recession and the stimulus tax credits) is not a good long term plan. No argument there. It’s your using of the topic to jump off into inaccurate criticisms of the health care bill, as well as a refusal understand that the voting instinct to vote for your own pocketbook is just as strong – and dangerous – on both sides of the political spectrum.

      • fredct says

        Mostly the first one.

        Perhaps it’s me being a bit of a tax geek, but it’s not necessarily ‘zero net income’. You can have a net taxable income > 0 (1040 line 43) for the year, and a net tax for the year also > 0 (1040 line 43). But your various credits add up to more than your net tax, so that you’ve paid nothing today for the year.

        It’s definitely not the refund one.

        • Ryan says

          Tyler, the first one. Almost 50% of people had enough credits and deductions to effectively reduce their federal income tax to nothing, and almost 40% of people actually received more money from the government than they paid in taxes, effectively profiting from the tax breaks, credits, deductions, etc.

  40. fredct says

    Replying to Dan…

    “Lack of confidence in massive federal program efficiency: I gave you specific examples: SS, Medicare/caid… The onus is on your side of the argument to provide specific examples showing fed efficiency with huge programs.”

    The onus that you create appears to be a standard that basically no organization, public or private, could ever meet. Social Security, every year until last year’s ‘great recession’, has been cash flow positive… on a net-basis it is still way in the black (that the money was spent elsewhere isn’t in the SS program’s control). It has provided retirement security for millions, greatly reduced instances of poverty and related deaths in elderly populations. Yet you consider it a failure.

    Likewise, the USPS, established in the late 1700s has been very successful for the majority of it’s history. And consider what they offer… if someone told you “I have a service that will come to your home – no matter where you live in the country – hand pick up any note or letter you wish to deliver, and within a week – and often within a day or two – hand deliver it to any other home anywhere in the country… and the price for this is 44 cents” – you’d really consider that a failure? Postal service is the bargain of the century.

    Yes, the world is changing out from under their business model and they are struggling to adapt. And that is a damnation of all public programs? Was the end of the carriage makers a damnation of private industry? Is the collapse and nearly collapse without govn’t intervention of a dozen major banks in the past 2 years not a damnation of private industry? How many private companies have made it since the 1700s and not had any problems or lean periods – the standard you appear to be holding the government to? How many hundreds of thousands if not millions have gone out of business entirely?

    Speaking of efficiency, your decried Medicare and Medicaid operate with ~2% management overhead. Private insurers? Well over 20% management overhead. Yet you claim private industry is always more efficient?

    The fact is, by saying that SS, Medicare, Medicaid, the USPS, etc are failures, you are setting up standards that no private company could ever meet either. You are holding government agencies to a standard of utter perfection in order to pass your ‘threshold’, while doing no much thing in the private marketplace.

    “If the rate is too low, it’s obvious that you don’t collect enough revenue. On the other end of the scale, there has to be a point at which a rate increase stagnates the economy and reduces revenue… I would seek an optimal area in the middle. Otherwise, where’s the theoretical basis to not raise rates through the roof?”

    I completely agree with everything you said here. I just think we disagree on what makes for the ‘optimal area in the middle’. An increase from 35% to 40%, for instance, I think it still well within that optimal area.

    “As far as “self-interested” voting goes, I would bet that most tax-payers who vote for tax cuts are also strongly in favor of spending cuts and want to see the debt reduced. In fact, most politicians that campaign on tax cuts usually also promise reduced spending (whether or not they make good on the promise).”

    So this gets back to our main disagreement…

    I’m sure that most are. And the same goes the other way around. People who vote for new programs also – by in large – strongly support properly funding them. No one really ever votes to raise the deficit.

    I figure your counter point will be that, yes, but they usually want it paid for by others. And that is likely often true… but likewise, people who want spending to be cut, usually want programs cut that help *others*. My argument is simply that there is no particular moral high ground on this argument. One side often wants to pay programs for them by taxing others. The other side often wants to pay for tax cuts for themselves by cutting programs for others.

    Do not pretend that there is a morally superior position here.

    And one key thing to note… I said a *realistic* plan to cut spending. I can’t recall the last time I hear a conservative campaign get more specific than “I’ll cut waste, fraud, and abuse”. That’s not specific, and basically means they have no idea when or where they’ll cut, or if they do, they don’t want to share.

    To get explicit partisan for just one paragraph, the difference between the parties lately has been that for *most* of what they do, the Democrats offset it to remain deficit neutral, the Democrats regularly pass pay-as-you-go rules (while imperfect, are a step in the right direction). The Republicans on the other hand, pass large tax cuts without any offsetting, and also start new entitlement programs (part D), without any offsets. In recent history, at least the Dems have *tried*, which beats not giving a damn when you’re in power (Republicans) any day. Republicans seem to only give a damn about deficits when they’re the minority and sniping on the Democrats.

    • Dan says

      It may not be specifically Social Security’s fault that its funds have been plundered through the decades, but that falls under the banner of federal inefficiency. For Medicare/caid, despite the low overhead of only 2%, they’re still heading for a cliff. These programs may be solvent today, but that won’t last long according to projections.

      Speaking more generally now, the only standard I’m calling for is a black balance sheet. This is impossible to achieve?

      Taken as a whole, I don’t consider the rise and fall of businesses throughout U.S. history as a damnation of private industry. It is through this sometimes painful process that we have almost constant growth of GDP, technology, and standard of living for all. When I see companies go out of business because of poor financials or an obsolete product, that’s the self-cleansing mechanism of the market working properly.

      Similarly, I’m not condemning public programs as a whole. I acknowledge the good they have achieved. However, one of the differences with public vs. private is the corrective process. The only check-balance for government programs is the election booth which is very limited in power to affect budgeting. The branches of government change parties over the years, but we still have massive debt from the same entity that all citizens are forced to fund. In this sense, the federal government is held to a lower standard than private industry: Any private company operating its finances like the fed gov would have to shut its doors, as it can only receive revenue from people by choice (government grants, kick-backs, and bailouts aside).

      That is what takes away my faith that the health care bill will be deficit and cost-reducing, and self-financing.

      I see your point about people wanting cuts in their own taxes and other people’s programs and the reverse. The great ethical imbalance that I see is that regardless of intent or net result, the 47% (there’s that number once again) don’t have skin in the game the same way that the 53% do. They’re not paying into the system.

  41. Scott Greene says

    The current Income Tax system has been falling apart for years.

    Even CPA’s and tax preparers do not understand the Income Tax system, as evidenced by the different answers you get to the same questions about how to report various income transactions.

    Just look at the enormous amount of tax court cases where people pay money to argue with their government over what is deductible, what is not deductible, what can be carried forward, what can be carried back, what are the facts and circumstances surrounding the income and/or deductions, etc. etc.

    If this 75,000 page income tax code was clear and understandable, there would be very little arguments over much of anything!

    So instead of people spending their time making money, they end up spending time and money figuring out how to comply with the government’s bookkeeping requirements, which change every single year!

    The current Income Tax system is a horrid mess and hurts everyone.

    Anything (flat tax, fair tax or 9-9-9) would be light years better than the insanity we have now.

  42. John Crly says

    A FLAT 15% Federal Tax, zero deductions, no double or triple taxation would immediately raise $2.55 Trillion, which would get Congress out of the business of legislating the code to their own ends and gives them a hard budget to work within to ultimately balance the budget. It would initiate the effort to close the current spending gap which is at a record 23%. We The People are currently steering ourselves into the brick wall of insolvency if we don’t act immediately. Oh, and a flat tax would reward stable, single digit returns by pouring them into real capital investments. A win-win for America.

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