Tuesday, February 25, 2014

It's Not the Brackets, It's the Breaks

First, what Atrios said:
Getting rid of tax brackets does not make the system "dramatically simpler."
Taxes are actually pretty simple for lots of people: anyone who files the 1040 EZ or just takes the standard deduction, and don't have dependents or mortgage or other deductions and credits to put in there.  Even for people with common deductions, tax filing isn't all that complex.

The main reason that taxes get complex is that we spend hours trying not to pay them, and politicians have put in hundreds of breaks that are available to different people and businesses in different cases.  Anyone who wants to simplify the tax code actually has a pretty simple job: eliminate all deductions and credits.  You would probably want to adjust rates (and brackets) along with that, but that's really it.  You made $85k?  go to table, pull up your tax number, that's what you owe.

Right now someone who makes $85k likely pays taxes as though they made $70k, and may get credit for non-tax activity toward that.  That's why taxes are complex.  Between tables and computers, no one actually calculates their taxes.  The calculations are all done on deductions and credits.  We could have 100 brackets, or even a continuum and it would not make anything more complex.

No comments: