I’m a case study in complex taxes. During 2007, I switched jobs, got income from a half dozen sources, bought one house, sold another, made energy saving upgrades to the home I bought, and had a baby. I didn’t sell any investments outside of tax sheltered accounts but I did have interest and dividend income from a bunch of places. So how difficult were my taxes? Using name brand software provided through a major financial services company, I finished my taxes for $44.00 and two and a half hours of time on a Sunday afternoon. A lot of my information was copied from last years’ return or downloaded directly from people who paid me or were paid by me.
I’m not bragging. Actually, I’m not even that organized. I know that businesses, particularly small ones, do have real problems with tax compliance. But I’ve never thought that complexity provided a compelling reason, or even a decent one, to change America’s tax system. Particularly with computers–which most Americans have in their homes–doing taxes isn’t that hard. It’s the size of the bite that government takes that bothers me, not the difficulty of figuring out its exact size.
I’ve long favored some sort of flat tax because it is fair, pro-investment, and transparent. But not because it will make things simpler. In fact, I think there’s a downside to making taxes much simpler than they are now: a paperless-for-average-people tax system like the one in the UK lets most people go through the entire year without getting a stark reminder of just how much government costs. And, at least for me, that’s worth “wasting” a few hours a year.