Flat Taxes Are Almost As Taxing
Matt Yglesias makes a great point about flat taxes: they have at best a negligible effect on the complexity of filing taxes. The real complexity comes from the calculation of deductions, credits, etc. With a flat tax you don't have to calculate your taxes in each bracket, but that's the only reason it would be easier to file them. The computation necessary for a progressive tax system per se is laughably easy.
posted by James | 12:31 PM
2 Comments:
That's true, but they diminish the importance of income-tax planning because you can't change your tax bracket by trickery. I don't know anything about the economics of tax planning, but I wouldn't be surprised if a lot of (socially useless) effort was expended on this problem.
I don't quite understand this point. It's true that with higher marginal tax rates, there's more incentive to reduce (apparent) taxable income. That's a game you can play with flat taxes or progressive taxes, though, so I guess your point is that people play the game harder when they face higher marginal tax rates? Of course, with a progressive tax system lots of people have lower marginal tax rates, so they would engage in less of this wasteful activity. Overall I don't know which way this cuts, and I doubt it cuts very far.
Post a Comment
<< Home