Once upon a time, I actually liked filing for income taxes. I was in high school up north (Canada) and mailing the yearly package meant without much income meant getting a nice check. That seemed like yesterday.
Nowadays, I scramble to get my taxes done every year – gathering all my receipts, 1099s, gains/loss reports, etc etc. I pay an tax accountant to file my taxes because I don’t want to miss any tax deductions and also in case I ever get audited. I find it money well spent, but I was surprised at the effort that I still have to put into this whole process even though I’m already paying someone else to do it.
Mr. America, could we simply the tax code?
If you just adjust the tax rates so you are revenue neutral, can you not burden all of us with the complicated (and for most of the population, impossible to figure out) tax system?
Misusing the Tax Deductions
Many of us won’t understand the tax code enough to benefit from it anyway, and here’s an example of what I mean.
The housing industry is great at selling home ownership. In fact, they keep telling people that you should buy the biggest house possible to save money on taxes. Actually, I take that back. It’s not just the housing industry. My tax accountant told me I needed to buy a house to cut down on the taxes that I pay a few months ago too. “Ahh no, it’s an extra expense.” was my response. Yet, many people would trust that advice and end up buying a home thinking that they are actually saving money in some way. If you don’t know by now, listen carefully.
You are not saving money through tax deductions by getting a bigger house. You are only paying less because of it. The bigger the house, the more money you spent, period.
I wish no one would spin the truth just for more sales, but who am I kidding, it’s not going to stop. Therefore, the only way to stop the misunderstanding is to not have the deductions in the first place.
Sure, it sounds like we have to pay more taxes but without deductions, the tax rate can be lower.
Simplified Taxes Means Convenience
The direct benefit for simplifying the tax code is of course the efficiency of this whole tax filing process. Can you imagine spending less than 5 minutes to file? Wouldn’t you be able to love the government just a little bit more? Just enter your income and you know exactly how much you need to pay. How great is that?
What About Corporate Taxes
The tax deductions model isn’t all bad though. For corporations, it might make sense because they actually have the resources to hire people to make informed decisions. When the government wants to attract companies to invest in our country for example, the corporations can weigh the pros and cons because they have people to understand exactly what the consequences are. Can you say that for individuals?
Operation: Tax System Kill
Some may completely understand the tax code and act accordingly but most don’t. Right now, it’s filled with opportunities for people to mislead us so why not get rid of the mambo jumbo? My accountant friends will kill me so I won’t be celebrating with you but for the rest of us, it will be so much better.
This is part of the Government Improvement Series, where we discuss on ways that the government can help the U.S. become a better nation every Friday. If you like this article, you may be interested in finding others at the link above.
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{ 10 comments… read them below or add one }
Like you, I continue to pay my tax man (of 30 years) to do my taxes. There’s just too much to miss or mess up – especially those foreign tax credits that carry forward and such. And the rules change every year! I consider it money well spent – and if you’ve ever gone thru an audit (I have 3 times) it’s soooo much better to have the tax man work with the IRS and you just have to send the backup paperwork to the tax man and NOT deal with the IRS directly. And, by the way, I won all three audits – well don’t know if ‘won’ is the correct word, but when you get additional money back from the IRS I think you win
Good for you. It’s nice to hear that when they audit you thinking that you OWE money, you actually GET some back!
You might be surprised how many tax accountants are strongly in favor of drastic tax code simplification. (Example: me!)
Could you elaborate on why accountants would want to simplifying the tax code since their job is dependent on it? For example, if we can all do it ourselves, doesn’t it eliminate the personal tax preparation industry all together?
If it was simplified to the point that everybody prepared everything themselves, then we’d get to focus exclusively on the fun part–tax planning/advising.
Also, there would be numerous degrees of simplification that could occur before we’d reach a point anywhere near that at which everybody would want to be doing their own returns.
Also, any tax accountant who has even the slightest interest in what’s good for the country realizes that the complexity results in waste.
All that money that gets spent on tax compliance is pure waste. It’s money that, essentially, taxpayers are spending on taxation, and yet it never shows up in the government’s pocket to be able to fund worthwhile services.
Tax planning and advising? What is that about since I don’t think anyone has ever given me advice that lasts more than the next estimated payment date.
I would imagine that the simpler the tax code gets, the smaller the client pool and the better prices we will get
I look forward to that day!
On another note, waste with something related to government? What’s that?
It never ceases to amaze me that people
a) Hate paying more taxes. To me the more I pay, it means the more I’ve earned
b) Think that a larger real estate tax deduction is a good thing. As you say, the larger the deduction the higher your taxes. That means more cash out of pocket.
Why don’t people get this?
Government should take a lesson from the frugal– cutting spending is easier than raising revenues . . .
However, politics is an upside down world where it is easier to raise taxes, than to cut entitlement and pork programs . . .
This article misses the point. Tax breaks aren’t about helping citizens save on their tax bill. It’s about the government exerting its wishes on the market by affecting prices. thanks for article.