Everyone wants a simpler tax code. Obviously there are a few accountants who are pretty happy for the extra work that labyrinthine tax rules create for them, but to hell with those people. Everyone else, especially everyone running for public office, really wants a simpler tax code.
It is just that actually delivering one is such a problem. Every exemption, no matter how insignificant, has a small group that desperately wants it and those people will campaign ruthlessly for its preservation. It is nearly impossible to imagine support from multiple parties for a real improvement in this regard because no matter what the government proposes to do away with they are taking money from some group that is sympathetic. Maybe they are robbing the elderly, or perhaps it is parents, the poor, family farms, small business owners, etc. etc. No opposition party is going to miss the chance to portray the government as a bunch of heartless bastards trying to pry money from those who so desperately need it.
One thing that really worries me about tax reform is that the people who seem inclined to pursue it are so often trying desperately to find a simple system that crushes the poor. I am consistently blown away by what Republican presidential hopefuls put forward as part of their tax simplification schemes, mostly because they so blatantly aim to improve life for the highest paid people. They use words like 'flat tax' and 'fair tax' and 'equal tax' to suggest that somehow their plans are better than the current skewed system, but they usually fail to mention that, to them, fair means that the rich really need more money. Especially the super rich... because they have it pretty hard, as I understand it.
Simple does not have to mean 'screw the poor'.
Canada is less interesting in this regard because there is not so much support for massive tax reform, nor so much of a push for 'fair taxes'. None of the major parties here are seriously pushing to overhaul the tax system as far as I know, as they all seem comfortable suggesting tiny changes here and there without really tackling the complexity issue in any significant way. Parties promise individual changes to appeal to specific demographics but we don't have crazy schemes to debate like the Americans do from their contenders for president.
If people want a simple system, and everyone does (those few jerkface accountants notwithstanding) then it is an easy thing to create one that doesn't transfer money up the social ladder. A $15,000 universal income and a 60% income tax on all earnings of any type gets rid of the need for most personal exemptions and removes the necessity for much of the current social safety net. Meanwhile, it fixes a lot of the cracks in that system that currently are such a problem. You can also get rid of sales tax too, which removes a bunch of overhead from businesses and irritations for customers, but of course you would have to make up the revenue in higher income taxes. There you go politicians - a super simple tax system that doesn't aim to kick the poor when they are down.
Now go implement it.
Harper just did a pretty good job of screwing with taxes with the whole child benefit garbage.
ReplyDeleteWell, Harper loves boutique tax cuts. During the Reform era he advocated a flat tax of the 'screw the poor' type, but when in power he's gone for the constantly-increase-complexity route. Taxes is the only place you can announce a $300 benefit when you really only give people $45 and have there be a good chance they don't notice, so it's a pretty ideal place to garner political support.
DeleteThe accounting associations are actively lobbying for tax simplification. Tax simplification is good for accountants.
ReplyDeletehttp://www.cga-canada.org/en-ca/ResearchAndAdvocacy/AreasofInterest/TaxSimplification/Pages/ca_tax_simplification.aspx
How is a system that means that accountants have far less work for them to do (and are far less necessary) good for them? I mean, I am sure most of them advocate for simplicity because it is obviously better and less wasteful, and I am not at all surprised that their organizations advocate this way... but the conclusion that it is good for *them* in general seems bizarre.
DeleteWe probably mean different things by simpler.
DeleteThe Tax law was simpler 10 years ago and the increased complexity has been a negative for accountants.
Being liable for advice/work based upon an ever increasingly complex Tax law is risky. A simpler law lowers the risk of a career ending lawsuit claiming losses due to professional incompetence.
Increasing complexity will force tax accountants to specialize, which would make it harder for accountants to work in small communities, if they need to turn away people outside their specialty.
I think the 2015 Income Tax Act is about 20% longer and more complex than was the 2005 Income Tax Act. I think it would have been better to achieve lower taxes by adjusting the marginal tax rates (or change the tax brackets) instead of creating a new tax credit for “Children’s Fitness” and then having to explain exactly what types of expenses would or would not qualify. If the text of the Income Tax Act had not been expanded upon, every 6 months for the past 10 years, we would still need accountants. Though they would have spent their professional development time on improving understanding of complicated concepts instead of on learning new concepts.
Ah, that makes sense. I suspect more complexity still means more available work, but there certainly are negative implications too. Good to know.
DeleteSales tax in the US are determined by the States and not by the Federal government. It's the reason some states have no sales tax, some have no income taxes etc. Therefore no president & congress could get rid of sales tax.
ReplyDeleteMost versions of the flat tax have no taxes for the first %. Even Rick Perry's (who i'm not a fan of) has tax exemption for the first 50k. According to Wikipedia the average family income in the US is 51k, so most families in the US will not pay any federal income tax. I'm not super rich by any means, and I just did some quick math, I would pay almost the same amount of federal taxes in rick perry's plan as I do now. This might help the really rich as this does not tax capital gains, but I don't really see how this screws the poor. If you have a family of four and make 50k per year, you don't pay much in federal taxes anyway, so not much will change. Personally I would like to see a consumption based tax (National Sales tax) and do away with any kind of income based tax, with some exemptions based on how much money you make.
This is all moot talk as nothing will change with the tax code no matter who is president, for exactly the reasons you have outlined above.
If a tax plan lowers tax on the rich and lowers overall revenue it will be paid for by slashing expenses. That is going to be a burden that falls on the poor, mostly likely. If Rick Perry's plan included paying for this overall lowering of revenue by cutting military expenses or corporate welfare then it might well not be so bad, but we know that isn't going to be the case.
ReplyDeleteEven then, a plan that means that the super rich basically pay no relevant taxes is a recipe for a permanent upper class and that isn't a good thing for society, much less the American Dream.