Every year when I fill out my taxes, I am amazed at how screwed up our taxation system is. If you are an average wage earner, perhaps with a mortgage, then you end up with a really simple procedure for filing your taxes. If you have a business (sole proprietorship, partnership, etc) or if you have investment income, then taxes turn into a byzantine mystery as you struggle to figure out what is actually counted as income. My tax software, broker, and employer are of little help in this process – they tend to report things in language that is subtly different from what the IRS specifies things in. This is probably caused by various attempts to simplify things by using simpler language, but the end result is that things end up being obfuscated.
It’s not clear what all this mess and smell is supposed to accomplish other than to be a full employment act for tax professionals, accountants, and IRS employees. Whenever I hear calls for a “flat tax” I am baffled by why people think this will improve the situation, because it simply replaces one piecewise linear function with a second piecewise linear function. The problem is in figuring out what counts as income, and it seems like it should be a lot simpler than this.