I finished my federal and state tax returns this past week and got them mailed – always a huge relief. I do my family’s taxes myself; I figure anyone with a law degree should be able to handle this task of citizenship.
But every year it gets harder. The Internal Revenue Code is now 3.8 million words. The instruction book for Form 1040 alone is 189 pages.
This year my federal and state returns, with all of their supporting worksheets, created a 297 page PDF file. This level of complexity is preposterous.
What bothers me the most is that year in and year out my household pays approximately 20% of our adjusted gross income in federal taxes. Some years it’s 19%, some years it’s as high as 22%. But it’s always in that range, no matter how variable our income or deductions.
Why can’t I pay a flat tax rate of 20% or thereabouts? I’d give up some of my deductions to reduce the complexity of our tax returns.
We need tax reform desperately in the United States. Here are a few of the reasons:
- Only 53% of Americans pay any federal income tax. Yes, I know there are payroll taxes, but more Americans should share in the burden of paying income tax. Maybe then they would care more about who represents them in Congress.
- The Alternative Minimum Tax hits more and more middle-class Americans every year, despite annual “fixes.” (The AMT was the Warren Buffett tax of 1969.)
- Our current tax code skews the economy. For example, the mortgage deduction pushes people into home ownership and contributed to the 2008 recession. The differing taxation levels on bond interest, stock dividends and capital gains incentivizes behavior based on factors other than the value of the investment.
- Neither the current Obama nor Republican tax reform proposals address the ballooning deficit in a serious and detailed way. We are not adequately funding our growing entitlement morass.
I believe in a progressive federal income tax system. But I don’t believe it needs to be this complex. No one – not even Mitt Romney nor Warren Buffett, and I am certainly not in their league – should have to fill out 297 pages of worksheets and forms to file a tax return.
Are you chafing about filing your tax returns?
Here are two posts I recommend – one from Smart Money on “10 Things I Hate About Tax Day,” and the other a calmer, more philosophical approach at Janet Sunderland’s blog, Spiritual Crossroads, entitled “Taxing the Brain.”