On Taxes

I’m going to post about the New York Tech Meetup Later. (they delayed it because it is internet week)

Right now, it’s all on taxes.  There has been enough talk between such a variety of different people (some in the tech world, some not) about taxes.  In the tech world, there seems to be a lot of worry about if certain reformations would be passed that would effectively takes cuts out of VC funds to do funding because of the way income tax is done.

I find it an issue that I only vaguely understand.  It’s not that I don’t understand the ideas of carried interest being treated different for tax purposes than ordinary income.  (I do.)  It’s like most Americans, taxes are really boring.  Not only are they really boring, they are excessively complicated.  They are so complicated that on the Federal level, if you think you may take too many deductions, you must calculate twice (alternative minimum tax rate).

To me, that’s a sign of a system out of control.  When only ~50% of your population pays taxes (federal, I have no idea how state and local taxes work, and this may not include sin taxes or sales taxes which are attached to items at purchase time)

Everyone has to pay taxes:  It should ideally be a small amount.  Why- because everyone should be partipating in things involving this country.  If you want a standing army, you got to pay for it.  If you want a road, you got to pay for it.  And it is not fair to say that just because some people get more use that they should pay for it all (perhaps they should pay more, but all, that’s silly.)  I hope that this country is made up of mostly nice people.

That being said: I think largely we are able to function the way we are is because our tax system is really messed up.  By really messed up I mean the following:

1) we start out with a base rate:

2) you take a ton of deductions

3) you may or may not need to calucate ATM

4) you hope all is well and pay your taxes

Why is there a step 2 and 3?  And what does that tell you about step 1?  Probably that the rates at step 1 are too high for everyone!  Further, it tells you that taxes are extremely complicated to do (another overhead problem).  It makes otherwise good citizens very stressed about taxes- they end up paying other people to help them pay their taxes.

That money, that is going to pay accountants (not that accountants are bad people), could have been spent on other areas of the economy (or altenatively, on a much flatter tax structure)  Instead, we pay legions of people to help us pay/not pay taxes.  And that makes me want to rid myself of a curl or two.  This all could be so much simpler.  We could all get a simple form, add up the value of our income/assets that made income that year, and pay a flat fee based on a very simple income bracket tax system.  No questions, less audits!

If the average person can’t sit down over the course of two nights and do their taxes by themselves: We have a social problem.  If said average person is also not paying taxes: We also have a problem.

And this is already before how complicated it is to pay state and local taxes.  Some of which has similar problems (did you know that the county I am currently living in allows for about 10% of houses to be improperly assessed…)

So think on that for a second:

End deductions.  make way for a flatter tax system for all.  Stop trying to label certain kinds of income for individuals “carried income” and “ordinary income”

At the end of the day- cash is king, and the tax man knows it.  So just pay your taxes in the simplest way possible.

Please!

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