"A lot of our astute moves have been basically keeping up with tax laws, where to go, where not to put it. Whether to sit on it or not. We left England because we'd be paying 98 cents on the dollar. We left and they lost out." -- Keith Richards - Rolling Stones
Most of us need help in filing our taxes each year. Even with very simple returns, most people want someone knowledgeable to file it for us. That is why H & R Block is doing so well. The U.S. Tax code is currently 16,845 pages long. But Congress is always fiddling with it, and that number will continually grow. Parts of it are so complicated that even the experts sometime scratch their heads. In the mid-90's, Money Magazine produced a tax return for a fictitious couple who had a mortgage, with the husband working full time, and the wife running a part-time business from the home. On a scale of complexity, this would fall somewhere in the middle. They then gave the task of preparing the tax return to 40 different tax preparers, ranging from H & R Block types to individual CPAs. The results were 40 different taxes owed in a range of 1000's of dollars.
What have we done? Why have we created this monstrosity? In spite of the size of the tax code, and an aggressive enforcer (The IRS), there is still a huge leak in the system. The underground economy which deals in cash, never pays a dime in taxes. And it never will since there is no paper trail. Then there are the tax loopholes. For example, did you know there is a special provision for favorable treatment of racehorses? And not just any racehorse....just two year olds and younger. Section 68(e)(3)(i)(I) creates a special depreciation schedule for these fine creatures.....talk about a loophole for the rich.
The answer to all this silliness is a simple flat tax which doesn't allow special interest loopholes. Twenty-four nations have adopted the flat tax. Russia gets more revenue with its 13% flat tax than it did under the old system when tax rates were over 50%. And to address the underground economy and to broaden the tax base, implement a modest value added tax (VAT), which basically is a sales tax on consumption. Thus everyone pays something, not just those who have a paper trail.
Taxes are the price we pay for civilization. But there certainly must be a more civilized way to collect them.
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Postscript -- IRS Mission Statement
"Provide America's Taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all."
-- Publication 1, Catalog Number 64731W
