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TOM MORGAN'S MONEY TALK
Here is an additional reason for making tax reporting simpler. Lots of people want to see Congress simplify our tax reporting. For a good reason, an obvious reason: To make our lives a bit easier. That is, to put an end to our tradition of spending many hours preparing tax returns. It is an obvious reason because most of us have to spend those hours. Or we have to hire someone to spend them. We know that companies must spend thousands or millions to prepare their tax returns. It is a good reason because the hours of preparation costs billions of dollars. They cause us, cause business, to spend massive amounts of money. For an activity that does not produce more goods for the economy or improve the human condition or solve any problems. It is money poorly spent. Here is another reason why Congress would enrich the country by simplifying tax reporting. This reason is more subtle. Tax simplification would change our behavior in ways that would change our economy. We behave in ways to avoid penalties and enjoy rewards. And so many of us buy houses and take on debts in order to latch onto interest deductions. Often our accountants encourage us to do this. They love it when we can report lots of deductions, and mortgage interest is one fat deduction. Bottom line is that a lot of Americans would not take on this debt if the tax code was simpler. That is, if we had flat tax rates and few or no deductions. A flat tax rate would encourage us to do what is natural. Taking on debt in order to have deductions is unnatural behavior. Here is another example. Companies earn profits and have to pay taxes on them. They pay some of them to shareholders, as dividends. The shareholders then have to pay taxes on them again. This is unjust - the double taxation of profits. The unjust tax code causes unnatural behavior by companies. Companies often cut back their dividends because of this double taxation. They end up blowing this money, money they should have paid to shareholders. This unnatural behavior affects hundreds of billions of dollars. Another example is the selling of shares. Lots of people don't sell them when they should. The natural thing to do would be to sell their shares, because they have better uses for the money. But they don't sell them because they need to avoid paying capital gains taxes. This unnatural behavior, by millions of investors, keeps immense amounts of capital from flowing smoothly within the economy to places where it is needed. Instead, it remains locked up where it does not belong. Because people regard the tax as unfair. The guy who just left the IRS Commisioner's job tells us our tax system is too complex. He made his living from the complexities. Yet he warns us the complexities do us harm. We spend far too much of our time and money in our attempts to avoid paying taxes. Spent in more natural pursuits, it would benefit our economy in countless ways. >From Tom...as in Morgan.
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