Bringing the funny

It's one thing I haven't done yet.

And it's not going to start now.

Despite being 30, my tax situation has largely been simple (actually, that's probably very normal). Last year (2005) things started to get complicated, as Joanne had a stock option that was sold. And this year (2006), more capital gains fun with the Freescale sale, dealing with cost basis, qualified disposition, unqualified dispositions... It makes for a swell weekend.

So I think I speak for everyone when I say the income tax code is suboptimal. Even though it's unlikely to change in any meaningful way, it is fun to dream of changes.

One approach from the political side, is to raise the standard deduction/exemptions by a lot to be basically relieve, say, those making under $25,000 ($50,000 for couples) from even having to file. And the party that got behind this you would think would gain a lot of support from the lower working class without actually giving up a lot of revenue. I don't have the numbers handy, but the bottom half of taxpayers pay a really small percentage of overall taxes paid to the Federal government.

That doesn't really simply the code that much, unless you make that part of a flat tax that is basically "x(y-z)," where "x" is the flat tax rate, "y" is income and "z" is the standard deduction. so that's option B. so then the question is to include unearned income (non-wage income such as dividends, capital gains, etc) or not.

And then there's the "fair tax", ie national sales tax, which has a lot going for it (and it has its own blog).

the main pluses:

• very simple and transparent
• it is progressive because of the rebate check
• sales tax revenues are more stable than income tax revenues
• improves savings habits
• investment is more fluid (could be a minus as well)

but there are negatives

• sales taxes stability is likely in part its small percentage. having a 30% rate will eventually be viewed as an extra cost that will attempt to be avoided (black and gray market)
• the exemption for used items may depress certain sectors/industries (new home construction, transportation, etc), though this could be an example of Schumpeter's Creative Destruction.

there are other pluses/negatives, but it's probably moot. This large of a change to the tax code is too revolutionary to be realistic.

so what to do...

one thing that occurs to me, literally just now, is to make investments a deduction, and then make their sale all regular income. there's probably a number of reasons this is a terrible idea, but i just want to say adjusted cost basis is a pain.