I've been reading a book called "A Fine Mess" by T.R. Reid, who makes some very compelling cases and scenarios for tax reform. I support many of his ideas for simplification of the tax code, but of course, this puts me in a strange position, as tax simplification would hurt me professionally. As someone in the profession, however, I have certainly been exposed to a great many tax laws that are questionable at best and blatantly unfair at worst. Has anyone else read the book and if so, what are your impressions?
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I haven't read this, but I believe it's doubtful any simplification will take place. It's not politically wise to "take away" any deduction. Messaging wars would ensue.
I do find it comical that when pols talk about simplification, they talk about the number of different rates. Like that's the complicated part. LOL! -
As far as the tax code being fair that will never happen as the definition of fair is subjective. You could put 10 people together and get 10 different answers as to what is "fair".Comment
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I agree that simplification if highly unlikely, as eliminating preference items would be too politically costly. Still, the book does survey tax codes in many countries and some of them have had success unwinding absurdly complex tax systems, replacing them with ones that tax broadly but generally at lower rates. Of course, most of these places have very high VATs, which would probably be political suicide here.Originally posted by kathyc2 View PostComment
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There are states who have vastly simplified income tax structures, so they could take a cue from their playbook. And it could be done in stages. It seems I remember Bush #2 had tax reform acts in nearly every one of his 8 years in office. I swear I thought one year he had four. The only complaint I had was when it was not done until Jan and was retroactive.Comment
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Do you ever look at the IRS tax stats? Effective tax rate (tax/agi) for 2014 tops out at 29.1% for those in the 2M-5M AGI range. Then ETR drops to where ETR for AGI >10M is 25.4%, which is the same rate at those in the 500K-1M AGI range.
Also, a single person w/ 95K W-2 income and taking standard deduction would pay 17.8% ETR. If you add on the 7.65% FICA you get 25.5%.
It depends on how you look at it, but our progressive rates aren't as progressive as what they appear to be on first glance.Comment
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I'll admit that I can be quite a jerk to people with no knowledge of tax going on and on about how we need the fair tax (national sales tax). I start pointing out all the pitfalls and asking them how to deal with them and they are totally dumbfounded.Comment
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