Are other countries' tax codes as complex as the US?

[riverwed070707]

Finishing up my 2019 taxes got me thinking how absolutely absurd our tax system is. I know the people who get the biggest tax breaks would never allow it through but has it ever been considered to do away with brackets and deductions and other variables and just make an across the board reasonable tax rate for everyone? Say everyone making over $20k pays in a flat 5%. Minimum $1,000 tax bill. $100k=$5,000. Those making $1M pay in $50k. Those making $1B pay $50M. Seems reasonable to me. Would provide relief to the low and middle class and it seems it would quickly generate far more than our current tax system.

Yay for owing 31% more in federal taxes over last year despite income remaining relatively the same.

[disneysteve]

has it ever been considered to do away with brackets and deductions and other variables and just make an across the board reasonable tax rate for everyone?

Various politicians have been proposing a flat tax for decades. I seem to recall 17% being the figure that got the most play. Do a search for "flat tax" and I'm sure you can read all about it.

[bjl584]

That's a good question, and I have no idea what the answer is.

But, I have a hard time believing that anyone else's tax code could be WORSE than ours is.

[disneysteve]

https://www.crfb.org/blogs/senator-r...lat-tax-plan-0

Here's just one article about the flat tax plan Senator Rand Paul proposed when he was running for President in 2015. His plan was for a 14.5% tax.

[riverwed070707]

https://www.crfb.org/blogs/senator-r...lat-tax-plan-0

Here's just one article about the flat tax plan Senator Rand Paul proposed when he was running for President in 2015. His plan was for a 14.5% tax.

Interesting. That doesn't benefit me. My effective tax rate is about 14%. 11% if going off of gross. But I also don't believe people making $50k are paying 15%, nor that people making $550k are paying 40% as the chart illustrates so maybe I'm confused about how this would work. Seems to me like it would need to be lower to benefit anyone. Would also be tricky to go from making $49k and paying 0 federal tax to making $50k and paying $7,200. That's a big hit at that pay level.

[riverwed070707]

Interesting. That doesn't benefit me.

I retract my former statement. It would benefit me if I didn't have to pay $600 to file my 79 page tax return or spend 30 hours preparing my documents.

[disneysteve]

I retract my former statement. It would benefit me if I didn't have to pay $600 to file my 79 page tax return or spend 30 hours preparing my documents.

Obviously, part of the appeal is that filing taxes would take 60 seconds and could be done on a postcard. No saving dozens or hundreds of documents all year. No file drawers stuffed with paperwork from years past. Just fill in how much you earned and multiply it by the tax rate to determine how much you owe.

[riverwed070707]

Obviously, part of the appeal is that filing taxes would take 60 seconds and could be done on a postcard. No saving dozens or hundreds of documents all year. No file drawers stuffed with paperwork from years past. Just fill in how much you earned and multiply it by the tax rate to determine how much you owe.

Also the predictability of it and being able to budget. Every year I think I've nailed my withholdings to ensure I don't have to pay or owe. Last two years I paid an underpayment penalty for state despite claiming 0, and fell short on federal $2800 this year. Would be so great to calculate what you owe and either have it auto withheld from paycheck or be able to throw it in a savings account and be done.

[disneysteve]

Would be so great to calculate what you owe and either have it auto withheld from paycheck or be able to throw it in a savings account and be done.

For regular W-2 sort of income, it would be simple. Tax rate is 15%? They withhold 15% each paycheck. Then you'd have to do it on your own for other income, self-employment, investments, etc. Actually, even investments could be done automatically. Earn a $100 dividend? Company pays you $85 and withholds $15 for taxes.

[bjl584]

Obviously, part of the appeal is that filing taxes would take 60 seconds and could be done on a postcard. No saving dozens or hundreds of documents all year. No file drawers stuffed with paperwork from years past. Just fill in how much you earned and multiply it by the tax rate to determine how much you owe.

There are probably a few lobbyists who would fight that idea tooth and nail.
An entire industry or tax professionals and CPA's is alive and well because the average person can't figure this stuff out on their own.

[disneysteve]

There are probably a few lobbyists who would fight that idea tooth and nail.
An entire industry or tax professionals and CPA's is alive and well because the average person can't figure this stuff out on their own.

Of course. It's always about the money.

[Petunia 100]

I don't think we will ever be rid of deductions and credits. You can't influence people to behave a certain way without them.

[disneysteve]

I don't think we will ever be rid of deductions and credits. You can't influence people to behave a certain way without them.

Has anyone seen any data on how the increased standard deduction has impacted charitable giving, if at all? One concern was that if people couldn't deduct donations, they wouldn't be as generous. I know that we haven't changed our donation patterns at all even though the donations are no longer deductible. In fact, I love the fact that I no longer need to keep track of everything.

[kork13]

Realistically, if we could simply eliminate all of the credits, deductions, whatever else, our tiered system would work pretty well. First $X of income is not taxed, next $Y taxed at 10%, next $Z taxed at 20%... Simple, across the board, no exceptions.

The other option that many countries use would be a VAT/consumption/sales tax structure that eliminates income taxes, and taxes are assessed at each step in the process of production/distribution/sale/service. Simple for everyday you & me, potentially more of a pain for businesses.

[disneysteve]

Realistically, if we could simply eliminate all of the credits, deductions, whatever else, our tiered system would work pretty well. First $X of income is not taxed, next $Y taxed at 10%, next $Z taxed at 20%... Simple, across the board, no exceptions.

That would be more fair, also, because a true flat tax would be regressive in nature. Even if you exempt the first $X of income, it's still regressive.