Whats On My Mind?

Another April 15th has arrived!   Accountants everywhere are scrambling to file extensions after consulting with their clients.  The genius of the withholding system is that the majority of Americans do not really experience anything on April 15.  In fact, I would guess the majority do not even recognize how much of their income is reduced by tax burdens.  Withholding laws create that ignorance.  Even those of us fortunate enough to have an income that requires us to file extensions and send in an estimate to complete the projected deficit from our withholdings now have additional options that keep us from feeling the direct pain of the burden.  I write this after hanging up with our accountant who will electronically file an extension and apparently create an authorization to have one of our bank accounts debited for the payment we are estimated to owe.  I did nothing other than have a five minute phone call.

Accountants have wonderfully become the experts you must rely upon to handle preparation of your taxes if you have any complexity in your financial life.  They earn the charges my wife and I will be asked to pay in the next billing.  I have a finance background and degree and the last thing in the world I care to try and figure out anymore is the tax code.

Yet, have you ever considered what a terrible waste of resources this whole tax filing issue really causes?  Over the years, I have become more and more convinced that a simple flat tax on income would provide the fairest and simplest way to fund the government.  A simple one page document where you attach your proof of income, multiply it by a percentage, and send it in.  I would do away with the entire withholding system so Americans had to scramble to pay their taxes…or plan for them.  Feel the pain on Tax Day and consider that pain the next time your favorite politician proposes the government provide some new service.   Eliminate the wasted energy and resources of figuring out the code and getting all of your deductions.  This is one of the reasons I did not support the housing tax credit….it is an artificial force on the market and it just mucks up a bunch of tax returns.

At the end of the day the flat tax does hurt my accountant.  Except I bet they figure out something more productive to do with the gained hours.  The H&R Blocks of the world would likely be put out of business but last I heard they were getting into other services also.  Most importantly, we would all pay the same amount of our income….no matter who we are.  Sure, there would likely need to be a cap on income where the tax stops, but that would be a limit for maximum earners. 

The gains in productivity!  I spent an entire Saturday filling in a tax booklet with some rather obscure data just so our Accountant could complete our taxes.

Yes..I understand that is a pipe dream with the group running the show right now.  I hope it is not a pipe dream for those who wish to enter the game starting this November.  A flat tax with a goal of gaining back all this lost productivity that makes Tax Day such a big deal will get my vote.  Anybody ready to make a proposal?