A tax system with progressive rates does not need to be complicated. The complexity comes from insane number of special taxes and exceptions built into the system in an attempt to manipulate people's behavior or as political favors to certain groups.
Example of a progressive, simplified income tax form:
IRS FORM A
Name: ______________________________________________
Social Security Number: ___-__-____ OR
State ID Number: ____________
1. Total individual income from all sources:
Records available to the IRS show your income
to be at least $XXXXXXX. _________________
2. If line 1 is less than $33,000, enter again here.
If line 1 is $33,000 or more, enter $33,000 here:
Records available to the IRS show this amount
to be at least $XXXXXXX. _________________
3. If line 1 is less than $66,000 but $33,000 or more,
subtract $33,000 and enter the difference here.
If line 1 is $66,000 or more, enter $33,000 here:
Records available to the IRS show this amount
to be at least $XXXXXXX. _________________
4. If line 1 is less than $100,000 but $66,000 or more,
subtract $66,000 and enter the difference here.
If line 1 is $100,000 or more, enter $34,000 here:
Records available to the IRS show this amount
to be at least $XXXXXXX. _________________
5. If line 1 is less than $500,000 but $100,000 or more,
subtract $100,000 and enter the difference here.
If line 1 is $500,000 or more, enter $400,000 here:
Records available to the IRS show this amount
to be at least $XXXXXXX. _________________
6. If line 1 is $500,000 or more, subtract $500,000
and enter the difference here:
Records available to the IRS show this amount
to be at least $XXXXXXX. _________________
7. Sum the following: 10% of line 2, 20% of line 3,
25% of line 4, 30% of line 5, and 40% of line 6.
THIS IS YOUR TOTAL INCOME TAX. Enter it here:
Records available to the IRS show this amount
to be at least $XXXXXXX. _________________
8. Calculate 10% of line 1. THIS IS YOUR TOTAL SOCIAL
SECURITY TAX. Enter it here:
Records available to the IRS show this amount
to be at least $XXXXXXX. _________________
9. Add lines 7 and 8 here:
Records available to the IRS show this amount
to be at least $XXXXXXX. __________________
Records available to the IRS show your total tax withholding
to be $XXXXXXX.
If this is greater than or equal to line 9, you may submit this form
for a tax refund.
If this is less than line 9, submit this form along with the attached
payment form below (IRS FORM P).
Submit this form and any necessary payments by April 15. Forms received
after April 15 are ineligible for any tax refund.
If additional payment is due to the IRS but not received by April 15,
penalties will be added to your tax liability, as described on
IRS FORM X. FAILURE TO PAY INCOME TAXES IS A FEDERAL CRIMINAL OFFENSE
PUNISHABLE BY UP TO 5 YEARS IN PRISON.
"Total individual income" includes wages, salaries, tips, revenue from
sale of capital assets, stock dividends, and inheritance of cash assets.
It does not include acquisition of non-cash assets including real or
personal property, securities, or other capital assets. However, any
sale or liquidation of non-cash assets may then become subject to
income tax. In general, one-time transactions of less than $1,000
may be omitted. Detailed rules are available in IRS DOCUMENT I,
available at http://www.irs.gov/documents/i/ or at your local library
or post office.
For any recurring transactions, or one-time transactions of $1,000
or above, IRS Form R or O should have already been submitted to the
IRS. We have enclosed copies of those forms in this mailing. If any
of these forms are in error, file a copy of IRS FORM C to appeal
for a correction.
About one page, and in the best case you just copy down the numbers the IRS already gave you and mail it in after 5 minutes of thought. Note that the exact rate structure is an arbitrary guess on my part, but is even more progressive than the current system.
And don't give you suggested values ahead of time based on the W-2 and 1099 data they already have. Also, I recall having to use the full 1040 when I had 1099 income--the 1040EZ is really just streamlined for people who had a single W-2 all year.
Yes, having 1099 is a big pain. But most people are W-2, so it's not a big deal.
When you take a 1099 job, you include in your rate the extra money that you'll need to do the extra paperwork.
Similarly, I never consider the money that I need to pay for taxes "mine". This is why I am not bitter about taxes. When I ask for salary, I decide how much money I want (or can get), calculate how much of that the government is going to take, and ask for the amount of "real pay" that ends up being the amount of take-home pay I want. That way, income tax is my employer's problem, not mine.
True, but there is a big difference - the 1040EZ is certainly easier to fill out, but the current convoluted tax laws mean that you could be leaving a substantial amount of money with the government unnecessarily. When I was first starting out I used the 1040EZ because I was scared of the complex forms - and later when I started itemizing I realized I had been overcharged easily a $1000 a year in taxes that I didn't need to owe had I simply filed my taxes differently (albeit using rather more complex forms).
It would be a very different story if the form suggested above was _the_ form, with zero loopholes available to people with expensive tax attorneys.
Perhaps that is why I am not so jaded; I still fill out a form that looks much like that when I file. This is because, of course, I don't make much money yet.
Is this a bad thing? Is saying "we'll give you $5000 off your taxes if you buy a hybrid car" worse than saying "we'll throw you in jail unless you buy a hybrid car"? That's the alternative.
(You could argue that we don't need the government because humans are self-organizing and all that, but do we really want to go that far?)
Complicated taxes are a necessary evil. But it would be nice if the government just sent me a bill at the end of the year saying "oh hai, write us a check for $12345" and that was the end of it.
Is this a bad thing? Is saying "we'll give you $5000 off your taxes if you buy a hybrid car" worse than saying "we'll throw you in jail unless you buy a hybrid car"? That's the alternative.
If gas consumption is too high, why not increase the gas tax and let individuals figure out the best way to deal with it? Maybe for some people the best solution is to reduce their commute rather than buy a new car.
Is there any reason the government couldn't just put a direct $5,000 subsidy on hybrid cars? Or, even better, redesign its infrastructure policy to favor energy efficiency? (Considering all the things the federal government does to encourage cheap gasoline, a $5k tax credit for cars that use slightly less gasoline is nothing.)
The alternative is grants paid to hybrid car manufactures or car dealership or car buyer.
The only reason we don't use that far simpler system is government spending that looks like a "tax break" is some sort of fetish among the Republican party.
Edit: Democrats often do the same thing, just not to the same extent.
There are vastly more alternatives than that. I'm really surprised to see this post from you. You could leave income tax alone and just add in a big sales tax on non-hybrid cars, for example.
