The US tax code is too complicated. This is known.
In the race for president, like all races for president in recent memory, candidates promise a simpler tax code. Close this loophole, eliminate that credit, CUT EVERY RATE IN SIGHT.
It's all just theater, albeit, incredibly boring theater. Taxes are boring and complicated and they keep many, many of you gainfully employed! But many people worry, if a massive simplification of the code were to occur, what that would mean for your job security.
The answer: probably nothing. In fact, it might even secure it even further.
This morning I linked to this TaxVox piece by Howard Gleckman that explains why Carly Fiorina's 3-page tax code idea, based on this draft from Bob Hall and Alvin Rabushka of the Hoover Institution, is complete and utter nonsense. In fact, the three-page tax code's silliness is what's actually simple. Here's Gleckman:
Their tax is certainly simple. But it is simple because it has no individual and few business deductions. Would voters be willing to swap their deductions for mortgage interest, charitable giving, state and local taxes, etc for three-page tax code they'd never read? I’m not so sure.
Okay, so politically, it's not simpler. It's practically infeasible! But what about the content of the draft? Back to Gleckman:
The Hall-Rabushka code says this:
Sec. 105. Business taxable income defined
Business taxable income is business receipts less the cost of business inputs, less compensation paid to employees, and less the cost of capital equipment, structures, and land.
Sec. 103. Cost of business inputs defined
(a) In general. The cost of business inputs is the actual cost of purchases of goods, services, and materials required for business purposes.
Seems straight-forward enough. But here’s a question that might be familiar to Mrs. Fiorina from her CEO days: What does “actual” cost mean? Is it market price? Or some artificially high price paid to a related party in order to maximize the deduction?
In practice it wouldn't simpler, either! Josh Barro at the New York Times also points out that Hall-Rabushka draft would only replace Subtitle A:
That would still leave Subtitles B through K, a further 1,445 pages describing taxes other than the income tax, and setting out important administrative matters like what happens if you don’t pay your taxes. Those pages would need to be retained or replaced with new law, unless Mrs. Fiorina wants the Internal Revenue Service to make up its own rules.
If all this simplicity were come to pass, there would still have to be men and women going over interpretations, rules, court cases, etc. etc. etc. Not any different than today.
The legislation could even have a cool name like the Full CPA Employment Act or something. Who knew this could work out so well for you?