• Welcome to the new Internet Infidels Discussion Board, formerly Talk Freethought.

Reducing the Number of Tax Brackets Doesn't Really 'Simplify' the Tax Code

Alcoholic Actuary

Veteran Member
Joined
Dec 21, 2005
Messages
1,022
Location
SoCal
Basic Beliefs
Atheist
Excellent article on NPR:

lots-of-candidates-want-to-simplify-the-tax-code-heres-what-they-get-wrong

article said:
"The real complication in the system is in the tax base, not in the rate structure. Figuring out how you calculate capital gains or figuring out whether you're eligible for the EITC [Earned Income Tax Credit for lower-income Americans], given the child rules — once you've got that, then you just plug in the rates."

and

article said:
"The number of brackets has an almost imperceptible effect on the complexity of tax law as it is lived by the individual taxpayer," Kleinbard said. "Taxpayers are not, left to their own devices, engaged in high-level mathematics."

There is multiplication involved so there is plenty of fodder for the math-haters. Of course the real motive for such a maneuver is obvious:

article said:
"The call for fewer tax brackets in every case has as its real motive lowering the tax burden on the highest-income Americans, not making life simpler for the middle class," Kleinbard argued. Consider Bush's tax proposal as an example. While it limits deductions, it also would overwhelmingly benefit the highest earners (and grow the national debt — unless there is unprecedented growth in the economy)."

(link to an analysis of Bush's proposed tax plan)

The article concludes with some very profound points:

  1. There is no 'correct' number of tax brackets.
  2. The US tax system is almost perfectly optimal.
  3. The tax code is complicated but for some very necessary reasons.
  4. The vast majority of US taxpayers will never need to delve into the details of the tax code anyway.

Can we seriously stop whining about our tax code being too complicated? 4th grade children are laughing at us.

aa
 
I still say the rich and the wealthy need a split or two in the brackets. I find the idea of a person making $50 million being in the same top bracket as a person making $400k a bit silly.
 
Second this. Talking about reducing the tax brackets as "simplifying" is simply about trying to get a flat tax. The real issue is what is income and what are deductions.

Really want to simplify matters for the average Joe? Have the IRS do a tentative return for everyone say March 1. When you get the return you can simply sign and return (what most lower income people will do), you can modify some values, sign a different line and return--the IRS then recalculates your return based on the modified values and sends you a check/bill, or you can keep whatever you want and attach it to your own return.

The tentative return includes all the data the IRS can be sure is yours and figures on other matters that you will have behaved like you did last year. (Thus if you took the full IRA deduction last year they figure you'll do the same this year.)

The full data is available electronically also--the mailing includes a URL (everyone gets their own in a very sparse address space--this is actually pretty secure despite having no login requirement) and the decryption key for the data. You can enter that into your tax program and work from there.

The rich are basically unaffected. The average Joe finds matters much easier. The tax preparation industry screams bloody murder as they are decimated.


The second thing to do is take that revenue neutrality law (I forget it's name) out and shoot it. The need to make most bills revenue neutral causes a gazillion stupid little ways of increasing tax revenue, never mind the fairness or complexity involved. After you've thrown it's body out on the dung heap go through the tax code and take out all the crap the politicians put in to satisfy it. The new law should state that only revenue bills can collect money.
 
I guess I'll third this. :) I say something similar whenever I get students asking me about the flat tax proposals that have been floating around for years now--the complex part of figuring taxes isn't in the rate structure, it's in determining your taxable income.

One reform that I've seen suggested a couple of times that might make a difference for a lot of taxpayers, in terms of simplifying the process, would be to increase the standard deduction. If you increase the standard deduction, fewer taxpayers have an incentive to try to itemize deductions, which of course is the big complicating factor for many of them.
 
Of course the real motive for such a maneuver is obvious:
True -- just as the real motive for having a lot of tax brackets in the first place is equally obvious. And Catholic Emancipation was sold to the British public as being in the interests of Protestants, but the real motive for it was obvious. Do you feel that obvious self-interest is evidence against the rightness of a policy?

The article concludes with some very profound points:

1. There is no 'correct' number of tax brackets.
Well, since the intent is evidently for the income-to-tax function to be a curve, and tax brackets are attempts at piecewise-linear approximation to the target curve, the correct solution would appear to be to simply use non-linear functions in the tax formulas.

2. The US tax system is almost perfectly optimal.
:picardfacepalm:

3. The tax code is complicated but for some very necessary reasons.
Necessary for whom?

4. The vast majority of US taxpayers will never need to delve into the details of the tax code anyway.

Can we seriously stop whining about our tax code being too complicated?
Was that you volunteering to do my taxes for me?

4th grade children are laughing at us.

aa
Show me a 4th grader who can do my taxes and I'll show you a future Fields Medalist.

There is no profundity in the article. There is just the equivalent of a person who doesn't live under one of the FAA's new "NextGen" aviation freeways, posting ad hominems that add insult to the injury that has been done to the people who do.
 
I still say the rich and the wealthy need a split or two in the brackets. I find the idea of a person making $50 million being in the same top bracket as a person making $400k a bit silly.
Why? What possible justification is there for making one man work ten days a month on the king's corvee when another man only has to work five days, unless you're mercifully giving a break to the five-day man because he's so poor that taking away the time he has left to support himself and his family is a hardship to him? The idea that a person making $400k can't afford to do his whole part in keeping society going is a bit silly. So unless your reason for having the tax law discriminate against the rich is hatred for the rich rather than mercy for the poor, what's a split in the upper income tax brackets for?
 
This is the perspective of a person who is figuring out their tax during tax season after the year has ended. It completely ignore the perspective of 2+ million business owners who must plan for and make quartery payments and/or may want to know what kind of tax savings is involved with something like buying new equipment _before_ the purchase is made.
 
First off, no one person is worth $500M/yr so most of that should be redistributed, since they stole/scammed/exploited their way to it.
I don't care if you cure cancer, run 100M in 8.9 seconds and make semen taste like chocolate, you ain't worth no fucking $500M/yr.

$400K is the upper limit to what could be justified as one person's productivity, above that is just exaggerated self worth and thievery.

...and most 4th graders can operate an iPad, so I'd bet they could run TurboTax.
 
I still say the rich and the wealthy need a split or two in the brackets. I find the idea of a person making $50 million being in the same top bracket as a person making $400k a bit silly.
Why? What possible justification is there for making one man work ten days a month on the king's corvee when another man only has to work five days, unless you're mercifully giving a break to the five-day man because he's so poor that taking away the time he has left to support himself and his family is a hardship to him? The idea that a person making $400k can't afford to do his whole part in keeping society going is a bit silly. So unless your reason for having the tax law discriminate against the rich is hatred for the rich rather than mercy for the poor, what's a split in the upper income tax brackets for?
Huh? Is it impossible for some people to keep statements within the context they were previously presented?
 
I swear, trying to have a discussion with some people is like trying to deal with a hagfish.

[youtube]https://www.youtube.com/watch?v=pmaal7Hf0WA[/youtube]
 
First off, no one person is worth $500M/yr so most of that should be redistributed, since they stole/scammed/exploited their way to it.
I don't care if you cure cancer, run 100M in 8.9 seconds and make semen taste like chocolate, you ain't worth no fucking $500M/yr.

$400K is the upper limit to what could be justified as one person's productivity, above that is just exaggerated self worth and thievery.

...and most 4th graders can operate an iPad, so I'd bet they could run TurboTax.

By how are you defiining productivity? Let's compare you with Tom Brady throwing a football. Are 80,000 or so people going to pay $100 a ticket to see you throw a football?
 
But to answer the OP, it's not the tax brackets that are tough, its the 300 or so questions TurboTax asks and how to figure those out
 
First off, no one person is worth $500M/yr so most of that should be redistributed, since they stole/scammed/exploited their way to it.
I don't care if you cure cancer, run 100M in 8.9 seconds and make semen taste like chocolate, you ain't worth no fucking $500M/yr.

$400K is the upper limit to what could be justified as one person's productivity, above that is just exaggerated self worth and thievery.

...and most 4th graders can operate an iPad, so I'd bet they could run TurboTax.
By how are you defiining productivity? Let's compare you with Tom Brady throwing a football. Are 80,000 or so people going to pay $100 a ticket to see you throw a football?
Can we talk about the Cleveland Browns? Where underperforming players have sell outs despite their performance? Much like people like Carly Fiorina who were paid quite well, but didn't do a good job?
 
True -- just as the real motive for having a lot of tax brackets in the first place is equally obvious. And Catholic Emancipation was sold to the British public as being in the interests of Protestants, but the real motive for it was obvious. Do you feel that obvious self-interest is evidence against the rightness of a policy?

Nope. However, there is plenty of other evidence against providing tax relief for the wealthiest USians - outside of obvious self interest. The very fact that one would disguise this self-interest as "tax code simplification" (when it really isn't) is dishonest and deserves to be pointed out.

The point you are making on the flip side of the argument is valid too. It is obvious that the purpose for increasing the number of brackets is to reduce the tax burden on the poorest or increase the tax burden on the wealthiest. But I don't see anyone couching that argument as 'increasing the number of tax brackets'. eg. Bernie Sanders has just come out and said that he intends to increase the tax burden on the wealthy.
1. There is no 'correct' number of tax brackets.
Well, since the intent is evidently for the income-to-tax function to be a curve, and tax brackets are attempts at piecewise-linear approximation to the target curve, the correct solution would appear to be to simply use non-linear functions in the tax formulas.
Fine by me. It actually solves several problems...
2. The US tax system is almost perfectly optimal.
:picardfacepalm:
I take it you disagree? The article had links to a separate study that compared the current US system with a flat-tax-plus-transfer option and the Mirrlees system. Neither was much of an improvement.
3. The tax code is complicated but for some very necessary reasons.
Necessary for whom?
Did you even read the article?

article said:
"The tax code is thousands of pages long for a very simple reason: It is a model, in the economic sense, of all of economic activity," he said. "Most Americans don't spend a lot of time worrying about the taxation of cutting timber or of being crew on a tuna boat. But there are rules for that, and you may find the rules irrelevant to you, but the rules are complex for a reason."

The vast majority of the rules and amendments to the code were made to either incentivize a behavior (like having corporations make more eco-friendly decisions) or to avoid taxing income multiple times (like having corporations pay tax on profits and then having investors pay tax on dividend income from the corporation - paid out of profits).
4. The vast majority of US taxpayers will never need to delve into the details of the tax code anyway.

Can we seriously stop whining about our tax code being too complicated?
Was that you volunteering to do my taxes for me?

No, see that's why people believe the tax code is complicated - because they are more concerned with what everyone else is paying in taxes. I know what my income is, what my deductions are, and what my tax rate will be. If I started worrying about everyone else's taxes - I might agree that some simplification is in order. Or I would make it a full time job to know the details.
4th grade children are laughing at us.
Show me a 4th grader who can do my taxes and I'll show you a future Fields Medalist.
All 4th graders can subtract and multiply. Show me how reducing the number of tax brackets will help them do that more easily.
There is no profundity in the article. There is just the equivalent of a person who doesn't live under one of the FAA's new "NextGen" aviation freeways, posting ad hominems that add insult to the injury that has been done to the people who do.
I didn't know this was a thing, but again how does knocking the brackets from 4 down to 3 help with this complexity?

aa
 
First off, no one person is worth $500M/yr so most of that should be redistributed, since they stole/scammed/exploited their way to it.
I don't care if you cure cancer, run 100M in 8.9 seconds and make semen taste like chocolate, you ain't worth no fucking $500M/yr.

$400K is the upper limit to what could be justified as one person's productivity, above that is just exaggerated self worth and thievery.

...and most 4th graders can operate an iPad, so I'd bet they could run TurboTax.

Obviously false. Consider a marketplace where the value is clearly determined: Bands. They make their money by getting fans to buy their works/pay to attend their performances.

There's no way to steal, scam or exploit their way to their income. Thus anything they make is legit.

If they can make a mint in a clearly legitimate fashion it should be obvious that others can make big contributions even though it's harder to measure.

Thinking that there's no way someone can contribute more than $400k/yr of value is simply showing your limitations.

- - - Updated - - -

By how are you defiining productivity? Let's compare you with Tom Brady throwing a football. Are 80,000 or so people going to pay $100 a ticket to see you throw a football?
Can we talk about the Cleveland Browns? Where underperforming players have sell outs despite their performance? Much like people like Carly Fiorina who were paid quite well, but didn't do a good job?

Football teams exist to provide entertainment. The fact the tickets sell means they are providing that entertainment. They did a good job.
 
I think the other thing that stresses people out with doing the taxes is the worry if they do it wrong. So even simple math gets hard when you you have the worry about the government pounding your door down or worried about being thrown in jail.
 
I think the other thing that stresses people out with doing the taxes is the worry if they do it wrong. So even simple math gets hard when you you have the worry about the government pounding your door down or worried about being thrown in jail.

Shit, it must be horrible living in a totalitarian police state.

I submitted an incorrect tax return a couple of years ago, due to a simple arithmetic error that led to my underpaying by about two thousand bucks.

Fortunately, rather than pounding my door down and throwing me in jail, the ATO instead decided to write a politely worded letter, pointing out that the numbers appeared to them to be incorrect, and asking me to either explain their error, or to pay the difference between my figure and theirs. They even said that they would waive any interest charges, as long as the matter was resolved before the close of the new financial year.

I sent them the money. No jail time was served, and no doors were pounded.

Perhaps if you don't want to live in fear of making a simple arithmetic error, you could consider emigration to Australia? We have surfing and kangaroos too :)
 
Back
Top Bottom