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The United States has a complicated tax code because it attempts to make things more "fair" for some people. Some of these are things people like, such as deduc

by foota 10y ago

The United States has a complicated tax code because it attempts to make things more "fair" for some people. Some of these are things people like, such as deductions for people with children, paying mortage, etc. Some are more dubious.

amenghra 10y ago
Every country has a somewhat complex and unique tax code. Filing taxes is however much simple in some other countries compared to usa.
euyyn 10y ago
> The United States has a complicated tax code because it attempts to make things more "fair" for some people. As opposed to the other countries with automated taxes, that don't attempt it?
- rtpg 10y ago
  One difficulty is that it's easier to pass a tax break through a budget process than to pass an equivalent "handout" through a separate one. For example, in France if you have more than 3(?) kids, you get 70% off all train rides. That required this whole process to get set up (I imagine it was more through regulation than law but you at least need the budget to the SNCF). The easiest way to get an equivalent thing through the US legal bureaucracy would be to do: "If you send us receipts of your train tickets and have over 3 kids, we'll deduct them from your taxes at 70%". It "pays for itself" in the sense that the government doesn't have to give money to Amtrack, just give back money that was just given to it by the taxpayer. It doesn't require intergovernmental coordination, just the IRS. It can be passed through the huge budget process. Much easier than many other regulatory schemes.
- ptaipale 10y ago
  Well, yes. For instance, Finland, where I live, has a very much simplified income tax collection procedure. Deductions for people with children have been eliminated. Deductions for mortgages are being eliminated. All this in the name of simplicity and, yes, fairness. After all, if you can afford a mortgage, you are clearly well-off, so you should be taxed more. (And there is a good point: Mortgage deductions distort the housing market. But rent subsidies distort it even more.)
  - euyyn 10y ago
    > All this in the name of simplicity and, yes, fairness. I think you agree with me.
Twirrim 10y ago
The UK has a similarly simple tax system as New Zealand. Taxes are taken out of pay every month, and that's it. Every individual gets assigned a tax code, and that tax code defines how much is taken from your pay. That tax code takes in to account how many kids you have etc. etc. The UK tends to approach tax deductions in a different way, preferring to subsidise stuff up front instead, so you never have to remember to file or figure out what your deductions are. You never paid out the money in the first place.
- irrational 10y ago
  Do you get any kind of deduction for giving to non-profits/charities? I give about 12-15% of my gross income to non-profits/charities every year and get a generous tax deduction for doing so. The other thing that tends to be complicated with my taxes is selling stocks. How does the UK handle things like that?
  - arcticbull 10y ago
    Stocks shouldn't be complicated; you've got a cost basis, a date of acquisition, a date of disposition and a final sale price. Withhold based on the deltas and you're all set right?
    - irrational 10y ago
      ESPP are complicated for me because my company withholds the taxes already, but that isn't reflected in the form I get from the stock company so I have to spend significant time every year refiguring out how to adjust and report everything while cursing myself for not taking notes the previous year.
  - Symbiote 10y ago
    The "deduction" from donating to charity is paid to the charity, it is the amount of basic tax paid. It's called "Gift Aid". There is no personal benefit. https://en.wikipedia.org/wiki/Gift_Aid https://en.wikipedia.org/wiki/Gift_Aid
  - 10y ago
Broken_Hippo 10y ago
This, in general, shouldn't affect most folks' ability to have a simple tax filing system. Your bank already has records of things like mortgages which they [can] report to the IRS. You can figure out two-earner tax rates with a program or chart. People already report their children in the W2's. The IRS already has the information on file and I imagine they use it to filter out folks that might need audited. Even with tax credits, a complicated tax system, and all that, there isn't a reason why this can't just be done upfront instead of after the fact - at least for most folks.
umanwizard 10y ago
Why is it fair to give a deduction for mortgage? Buying a home instead of renting is just choosing to invest in real estate instead of anything else you might invest in. Why artificially subsidize one extremely illiquid and volatile type of investment?
- foota 10y ago
  One could argue that by subsidizing home ownership you redistribute profit from people that rent out housing to those that would have been renting that housing.
  - umanwizard 10y ago
    Yes, and by the same logic, subsidizing buying Apple shares redistributes profit from people that make iPhones to people that buy them. Why don't we do that instead?
    - foota 10y ago
      That's isn't actually what subsidizing apple shares would do? But the answer, is that people who buy and rent out property are generally better off than those renting, so redistributing income between them decreases income inequality.
  - millstone 10y ago
    Mortgage interest is also deductible for rentiers. If owner-occupied mortgages were not deductible, it would be redistributing income from those who live in the properties they own, to those who own property and live elsewhere.
- kunaalarya 10y ago
  because you want to incentivize homebuying. Homebuying isn't just an investment. When your mortgage is paid off, it also means your cost of living when you can no longer work is much lower. It also means that you're less likely to be homeless or rely heavily on social services when you can no longer work. Homebuying also spurs a MASSIVE industry of homebuilding, and home furnishing, upgrading, etc.
usrusr 10y ago
I doubt that it is the only reason, but I can tell you that it is the dominant force also outside the United States. I could not think of a better example for "perfection is the enemy of good" than tax systems. Just throw it all out and call it good enough. If you really need deductions for expenses, found a business. For persons, expenses are indistinguishable from consumption.
mariojv 10y ago
One thing that makes it even more complex is state deductions. For example, in Massachusetts you can deduct rent payments to your landlord from your taxable income.

by foota 10y ago

amenghra 10y ago

Every country has a somewhat complex and unique tax code. Filing taxes is however much simple in some other countries compared to usa.

euyyn 10y ago

> The United States has a complicated tax code because it attempts to make things more "fair" for some people. As opposed to the other countries with automated taxes, that don't attempt it?

rtpg 10y ago
One difficulty is that it's easier to pass a tax break through a budget process than to pass an equivalent "handout" through a separate one. For example, in France if you have more than 3(?) kids, you get 70% off all train rides. That required this whole process to get set up (I imagine it was more through regulation than law but you at least need the budget to the SNCF). The easiest way to get an equivalent thing through the US legal bureaucracy would be to do: "If you send us receipts of your train tickets and have over 3 kids, we'll deduct them from your taxes at 70%". It "pays for itself" in the sense that the government doesn't have to give money to Amtrack, just give back money that was just given to it by the taxpayer. It doesn't require intergovernmental coordination, just the IRS. It can be passed through the huge budget process. Much easier than many other regulatory schemes.
ptaipale 10y ago
Well, yes. For instance, Finland, where I live, has a very much simplified income tax collection procedure. Deductions for people with children have been eliminated. Deductions for mortgages are being eliminated. All this in the name of simplicity and, yes, fairness. After all, if you can afford a mortgage, you are clearly well-off, so you should be taxed more. (And there is a good point: Mortgage deductions distort the housing market. But rent subsidies distort it even more.)
- euyyn 10y ago
  > All this in the name of simplicity and, yes, fairness. I think you agree with me.

Twirrim 10y ago

The UK has a similarly simple tax system as New Zealand. Taxes are taken out of pay every month, and that's it. Every individual gets assigned a tax code, and that tax code defines how much is taken from your pay. That tax code takes in to account how many kids you have etc. etc. The UK tends to approach tax deductions in a different way, preferring to subsidise stuff up front instead, so you never have to remember to file or figure out what your deductions are. You never paid out the money in the first place.

irrational 10y ago
Do you get any kind of deduction for giving to non-profits/charities? I give about 12-15% of my gross income to non-profits/charities every year and get a generous tax deduction for doing so. The other thing that tends to be complicated with my taxes is selling stocks. How does the UK handle things like that?
- arcticbull 10y ago
  Stocks shouldn't be complicated; you've got a cost basis, a date of acquisition, a date of disposition and a final sale price. Withhold based on the deltas and you're all set right?
  - irrational 10y ago
    ESPP are complicated for me because my company withholds the taxes already, but that isn't reflected in the form I get from the stock company so I have to spend significant time every year refiguring out how to adjust and report everything while cursing myself for not taking notes the previous year.
- Symbiote 10y ago
  The "deduction" from donating to charity is paid to the charity, it is the amount of basic tax paid. It's called "Gift Aid". There is no personal benefit. https://en.wikipedia.org/wiki/Gift_Aid https://en.wikipedia.org/wiki/Gift_Aid
- 10y ago

Broken_Hippo 10y ago

This, in general, shouldn't affect most folks' ability to have a simple tax filing system. Your bank already has records of things like mortgages which they [can] report to the IRS. You can figure out two-earner tax rates with a program or chart. People already report their children in the W2's. The IRS already has the information on file and I imagine they use it to filter out folks that might need audited. Even with tax credits, a complicated tax system, and all that, there isn't a reason why this can't just be done upfront instead of after the fact - at least for most folks.

umanwizard 10y ago

Why is it fair to give a deduction for mortgage? Buying a home instead of renting is just choosing to invest in real estate instead of anything else you might invest in. Why artificially subsidize one extremely illiquid and volatile type of investment?

foota 10y ago
One could argue that by subsidizing home ownership you redistribute profit from people that rent out housing to those that would have been renting that housing.
- umanwizard 10y ago
  Yes, and by the same logic, subsidizing buying Apple shares redistributes profit from people that make iPhones to people that buy them. Why don't we do that instead?
  - foota 10y ago
    That's isn't actually what subsidizing apple shares would do? But the answer, is that people who buy and rent out property are generally better off than those renting, so redistributing income between them decreases income inequality.
- millstone 10y ago
  Mortgage interest is also deductible for rentiers. If owner-occupied mortgages were not deductible, it would be redistributing income from those who live in the properties they own, to those who own property and live elsewhere.
kunaalarya 10y ago
because you want to incentivize homebuying. Homebuying isn't just an investment. When your mortgage is paid off, it also means your cost of living when you can no longer work is much lower. It also means that you're less likely to be homeless or rely heavily on social services when you can no longer work. Homebuying also spurs a MASSIVE industry of homebuilding, and home furnishing, upgrading, etc.

usrusr 10y ago

I doubt that it is the only reason, but I can tell you that it is the dominant force also outside the United States. I could not think of a better example for "perfection is the enemy of good" than tax systems. Just throw it all out and call it good enough. If you really need deductions for expenses, found a business. For persons, expenses are indistinguishable from consumption.

mariojv 10y ago

One thing that makes it even more complex is state deductions. For example, in Massachusetts you can deduct rent payments to your landlord from your taxable income.