The tax return season is upon us. Soon, eighty million Americans will hire some of the one million tax preparers at a cost of $370 billion to wade through the 73,954 pages of tax code, more than 500 IRS tax forms, supplements, and guides to make sure we do it right. The IRS checks our tax returns at a cost of $12 billion dollars. The United States has the most complex tax code in the World. Great Britain, in existence for over 1000 years, has a tax code of 400 pages and France has 500 pages.
Why do US corporations use off shore accounts for the 50% of revenues ($4 trillion) earned oversees? The tax rates in other countries are simple and usually lower, estimated to be 12% rather than 30%. Those funds could come back to be taxed at a fair rate and invested in the company, creating new jobs and products, if only for a simple, equal, and fair tax code. The code discriminates between home owners and renters. High earners can move income to next year and beyond, but the low earners, apartment dwellers, cannot.
Saving for education and retirement require hundreds of special savings rules. We have 401(k)’s, deductable IRA’s, non-deductable IRA’s (Roths), educational IRA’s (529’s), annuities, Seps (simplified employment pensions), and others. The IRS guide for IRA’s is 105 pages.
The code drives political donations and favors the very wealthy. While the TV cameras are rolling, our representatives in Washington rail against the unfair and unequal tax code, but do nothing, so their contributors and special interests may benefit. Two thirds of Americans do not itemize, but choose the standard deduction. By not itemizing, they miss out on the myriad of special tax deductions. We should all pay our taxes, yet some do not. The difference between tax avoidance and tax evasion is ten years.
The tax code is too cumbersome, too large, too expensive, unfair and unequal. We should replace it with a simple code, with the principals of fairness and equality before the law, rather than the whims of lobbyists and lawmakers.
Published every Wednesday at least.
