Congress Continues To Make the Tax Code Ridiculously Hard To Understand

I shouldn't have to spend so much money on an accountant every year. But I don't really have a choice.

My income tax is due in a few weeks!

I hate it.

I'm pretty good at math, but I no longer prepare my own taxes. The form alone scares me.

I feel I have to hire an accountant, because Congress, endlessly sucking up to various interest groups, keeps adding to a tax code. Now even accountants and tax nerds barely understand it.

I can get a deduction for feeding feral cats but not for having a watchdog.

I can deduct clarinet lessons if I get an orthodontist to say it'll cure my overbite, but not piano lessons if a psychotherapist prescribes them for relaxation.

Exotic dancers can depreciate breast implants.

Even though whaling is mostly banned, owning a whaling boat can get you $10,000 in deductions.

And so on.

Stop! I have a life! I don't want to spend my time learning about such things.

No wonder most Americans pay for some form of assistance. We pay big—about $104 billion a year. We waste 2 billion hours filling out stupid forms.

That may not even be the worst part of the tax code.

We adjust our lives to satisfy the whims of politicians. They manipulate us with tax rules. Million-dollar mortgage deductions invite us to buy bigger homes. Solar tax credits got me to put panels on my roof.

"These incentives are a good thing," say politicians. "Even high taxes alone encourage gifts to charity.

But "Americans don't need to be bribed to give," says Steve Forbes in one of my videos. "In the 1980s, when the top rate got cut from 70 percent down to 28 percent…charitable giving went up. When people have more, they give more."

Right. When government lets us live our own lives, good things happen.

But politicians want more control.

American colonists started a revolution partly over taxes. They raided British ships and dumped their tea into the Boston Harbor to protest a tax of "three pennies per pound." But once those "don't tax me!" colonists became politicians, they, too, raised taxes. First, they taxed things they deemed bad, like snuff and whiskey.

Alexander Hamilton's whiskey tax led to violent protests.

Now Americans meekly (mostly) accept new and much higher taxes.

All of us suffer because politicians have turned income tax into a manipulative maze.

We waste money and time and do things we wouldn't normally do.

Since I criticize government, I assume some IRS agent would like to come after me.

So, cowering in fear, I hire an accountant and tell her, "Megan, don't be aggressive. Just skip any challengeable deduction, even if it means I pay more."

I like having an accountant, but I don't like having to have one. I resent having to pay Megan.

I once calculated what I could buy with the money I pay her. I could get a brand-new motorcycle. I could take a cruise ship to Italy and back every year.

Better still, I could give my money to charity and maybe do some good in the world. For the same amount I spend on Megan, I could pay four kids' tuition at a private school funded by SSPNYC.org.

Or I could invest. I might help grow a company that creates a fun product, cures cancer, or creates wealth in a hundred ways.

But I can't. I need to pay Megan.

What a waste.

COPYRIGHT 2024 BY JFS PRODUCTIONS INC.

Comments

[JeremyR]

I did mine in like 20 minutes with Tax Slayer

If you have to hire an accountant to do your taxes, it's probably because you're rich. Which isn't a bad thing, but obviously you can afford it, just like I can afford the $50 for Tax Slayer

[LittleCupcakes]

Stupid argument. It’s like a cop saying “if you have nothing to hide, then why not let me search your house?”.

It’s the writer’s money, and he can spend it how he likes. That he feels he must spend it to avoid jail is the problem, not whether he can afford it.

If you can afford taxslayer, then you can afford to Venmo me $100 for food . Will you do that?

[defaultdotxbe]

It’s the writer’s money, and he can spend it how he likes.

He can also spend $50 on Tax Slayer (or $30 on TurboTax, like I do) but will probably not get all his deductions and end up paying more in taxes. He can probably even use one of the free services (and likely pay even more in taxes). But as you say, it's his money and if the convenience is worth it he can spend it how he likes.

Point is he's not spending so much to avoid jail, he's spending it so he doesn't have to spend even more, which still sucks, but is much closer to the point of "he can afford it" than jail.

[psmoot]

You're missing the point. It's not that he minds paying an accountant, it's that he's practically required to do so.

Yes, Stossel is rich. He probably earns income in a zillion obscure ways, ways you and I don't. It's not surprising StackOverflow won't have good answers to his tax questions.

That doesn't change that the examples he cites are insane and it's all because we have this fractally-complex definition of income and expenses. The Baptist rationale is we want to make sure we only tax you for actual income and don't tax you for legitimate expenses. The Bootlegger agenda is to use the tax code to subsidize favored interest groups and penalize disfavored ones. And the control freak goal is to use taxes to nudge us in favored directions.

It's nuts. Taxes should be as simple and non-distortive as possible. We shouldn't be nudging people with the tax code, nor should we solve all the worlds problems with it. I personally would be fine with a new Reaganesque radical simplification. Lower rates and get rid of 80% of the special case deductions, especially if they're big ones (e.g. the mortgage interest deduction).

[Mark Twine]

Mr. Stossel fails, or chooses not, to understand a basic politico-economic principle, which is: All the money – all of it - belongs to the government. The tax laws and provisions are there to guide you to knowing how much of their money they’re going to let you keep this year. He should consider his accountant’s cost as (1) an investment, which has a ROI by his accountants knowledge of deductions Uncle Sugar will allow or tolerate, or (2) a form of Danegeld, the payment of which is preferable to having a crew of armed vikings breaking into his house, confiscating his bank account, and/or taking him jail (do not ignore that he is also avoiding the risk of being killed by these armed vikings if he makes a furtive move in their presence and they feel “threatened” whilst they are educating him about what being a serf means).

[Rossami]

What is your definition of "rich"?

More to the point, how old are you? If you can do your taxes in 20 min (regardless of what tax software you use), that tells me your life is so simple that you don't have the background to understand Stossel's article.

[KHFleischer]

We wouldn't need tax accountants for Federal tax returns, and the Federal tax wouldn't be so Byzantine if we enacted the Fair Tax (HR 25), which would replace income, capital-gains, self-employment, and payroll taxes with a retail sales tax on new (not used) merchandise. And it would exempt from that tax, by means of a "prebate," each month, of the amount of Fair Tax paid by a poverty-line family of similar size for necessities. No reporting of income and its source, no annual tax returns, and no IRS. Even career criminals would have no choice but to pay it! But illegal aliens would not get the Prebate. See fairtax.org.

[Spiritus Mundi]

The current tax code is a federal jobs program.

[Miss Ann Thrope (She/It)]

True, but a young family buying a 170k starter would have to pay 209k, assuming 23% fair tax. I struggle with how to fix that. If we allow some type of exemption then we open the door to a million others and a similar tax code to our current.

You could say that young families should buy used homes, but the supply of small (cheaper) used homes for sale would decrease. Rich people don't need starter homes that they can later sell to less wealthy people. That leaves corporations that would buy them as rentals, which would lead to a nation of lifelong renters and lower overall wealth.

I see that as the only flaw in the fair tax idea. What do you think we could do about that?

[MWAocdoc]

First of all, it's not a problem in need of a fix. Second, in a "free" market the prices would adjust to meet the demand. Thirdly, attempts to "fix" such situations almost always backfire and lead to unintended consequences elsewhere as the "problems" cascade. And finally, there is no right price for a house and if there were, you would not be the person to tell the rest of us what that price should be - and certainly not officials who are frequently bought and paid for by special interests to fix prices to suit themselves. Only you can be trusted to decide for yourself what the right price for a house is.

[Á àß äẞç ãþÇđ âÞ¢Đæ ǎB€Ðëf ảhf]

There is nothing that can be done to make a single tax palatable. Last I checked, local, state, and federal taxes came to about 40% of GDP, $36,000 per person per year. SSA deductions are ~13%, sales taxes are ~10%, fuel taxes are on top of sales taxes, property taxes are 1-2%, the list is endless. That 23% fair tax leaves a 17% hole. If it were the only tax, people could deal with a 23% tax on houses and cars. But it wouldn't stay fair and it wouldn't be the only tax.

[psmoot]

While that's an appealing idea worth considering, I'm confident the Byzantines would immediately start getting different rates for different products (don't forget to include services!) and lobby for essential products to be exempt.

Just look at any state sales tax and you'll get an idea of how complicated it can get. You get goofy things like I get charged sales tax when I eat at a restaurant but not when I get somethign to go (so always tell McBurgers your meal is to-go, even if you intend to eat there).

[Á àß äẞç ãþÇđ âÞ¢Đæ ǎB€Ðëf ảhf]

When I was a kid back in the 1960s, I remember reading a newspaper story on the Sacramento pols debating whether cheese/peanut butter and crackers from vending machines were taxable snacks or tax-free food. Their conclusion was that if the vending machine package included that little plastic spreader so you had to smear it on the crackers yourself, it was food; if it came pre-combined into sandwiches, it was a snack.

[Uncle Jay]

How about eliminating the income tax and replace it with a national sales tax?
Oh, wait.
That makes sense.
What was I thinking?
My bad.

[Rossami]

Drives up the black market and is pretty steeply regressive.

It's not necessarily a bad idea but it has its own share of adverse consequences.

[Spiritus Mundi]

I can get a deduction for feeding feral cats but not for having a watchdog.

I feed them fancy feast with a crushed up light bulb. We do I get my deduction?

[Spiritus Mundi]

Fair. Tax. Now.

[psmoot]

I don't think changing from income to sales taxes solves the lobbying and complexity problem. Interest groups and control freaks have enormous incentive to get special case treatment for their favored causes. A sales tax will start simple and rapidly become as complicated as our income tax.

Don't get me wrong: a little brush clearing wouldn't be bad. At least we'd get a few years of simplicity.

The root problem, however, is concentrated benefits, distributed costs. Until you find a sustainable mechanism to combat that, and I don't know of one, we're always going to be fighting a defensive battle.

[Ed]

John blames politicians and special interests for this mess, and he should know better.

We have the politicians that we select. We pick the ones that promise to do something about and spend money on what we care about. We shun those who say "sorry, can't/shouldn't do anything about that" so much that they never even reach the point of being considered politicians -- they are just the cranks sitting at the end of the bar muttering to themselves.

The characteristics of politicians as we know them are finely tuned and adapted for one purpose: getting elected. Period. There may be local variations, but the system always optimizes for behaviors resulting in getting elected.

It is a mystery to me why this is so hard to understand.

[Á àß äẞç ãþÇđ âÞ¢Đæ ǎB€Ðëf ảhf]

You are soooo naive.

We have the politicians that we select.

Bureaucracies grow, never shrink except by outside pressure, such as competition or bankruptcy. Government bureaucracies have no competition except by war.

That is why we have a stifling suffocating government, and "we" have almost nothing to do with the politicians we end up with.

[Ed]

We are so far down the road (with almost everyone latched onto a government teat in one way or the other) that it may well be irreversible.

It's hard to imagine a mass movement to change this -- unless people all of a sudden start preferring taking away from others more than they like getting for themselves.

But it's hard to think of a better illustration of survival of the fittest than our "democratic system." And naive or not, the literal reality is that the voters ultimately control the definition of "fit."

[MWAocdoc]

Whatchoo mean "we" white man? I did not select ANY of them! "None of the above" is not on any ballots other than Libertarian Party ballots, and if a majority chose NOTA in an election, it would not result in any fewer politicians in office. What we have now is a direct and exclusive result of the "two party system" in which election districts are almost all either red or blue, with a few purple ones that switch back and forth depending on the most recent gerrymander. The only alternative is to eliminate all the legislative and Congressional election districts; hold all representative elections "at large" state by state; with every candidate who files for the offices on the ballot using a ranked choice system and multiple pass counting until all the allotted seats are filled. That way almost 100% of the voters have a representative to their state legislature and Congress that they actually selected; and representatives from more than two parties can caucus together and negotiate legislation en bloc.

[Ed]

Not disagreeing that this is an attractive outcome. But there is no way to get there, without overwhelming support from voters.

A mass democracy requires mass action. A few of us cranks yammering on down at the end of the bar ain't gonna do it... because most voters don't care enough to support third parties, to support options beyond the orthodoxy, to support candidates who will aspire to the ideals you mention -- even if it puts their own political careers at a disadvantage. (Those candidates that try to do so, with rare exceptions, wash out so early in their putative political careers that we don't even think of them as politicians.)

For most voters, I think it's partly inertia, partly lack of imagination, partly fear of the unknown, partly because they won't want to risk their position on the teat (or worse, give up their own positions even as their neighbors continue to suckle away), and probably lots of other partlys.

The system has evolved specifically towards characteristics that keep the powers that be in power. Knowing how to manipulate voters is part of that, but ultimately, that's on us, the voters. (Down at the end of the bar, you and I can't be manipulated, of course... it's all the other stupid ones that keep us stuck where we are.)

[Longtobefree]

1. Nobody likes a whiner.
2. You pay Megan way to much.
3. Your taxes are only as complex as your lifestyle.
4. I do my taxes online for free in 10 minutes.

[Á àß äẞç ãþÇđ âÞ¢Đæ ǎB€Ðëf ảhf]

2, If he saves more than he pays Megan, he's ahead.
3. His lifestyle includes his investments from making a lot of money, and the business of producing these videos.
4. He's not stupid. If he could replace Megan with 10 minutes online, he would.

[psmoot]

1. He's a professional whiner, much like Andy Rooney. We listen because he's an articulate and entertaining whiner who has a point which applies to all of us.

2. And he (and all the rest of us) would be even further ahead if taxes were simpler and no one needed to hire Megan. I'm sure she's a nice person but her job is deadweight loss. Society would be better off if she spent her time figuring out finance for a new startup rather than doing taxes.

3. Remember, this ain't really about Stossel, although he uses himself as an example. But his point stands: why should his life be more complicated just because he's rich? It's still a deadweight loss. I'd rather he spent time recording videos than collecting paperwork for Megan.

4. 'Nuff said.

[I, Woodchipper]

exactly as intended

[docduracoat]

I use an accountant but I tell him the exact opposite.
I want every legal deduction.
When he tells me there is a deduction for the largest SUV as a “farm vehicle”.
No farm needed.
I take it.
My second job lets me put more money in an IRA?
I do it.
I can deduct my home office as I use it to bill for the second job?
I do it.
I laugh when I hear they’re going to hire 87,000 more IRS agents to go after the wealthy .
As a doctor, I’m in the top 10%, and I hire an accountant and a lawyer to make sure everything I do is completely legal .
I’m certain all the other wealthy people do the same thing.

If you want to catch those who don’t pay all their taxes, go after my air conditioner repairman, who gives me a discount for paying in cash.
I’m certain my waitress doesn’t report when I give her a huge tip.
Do you want to collect more money, go after the blue-collar workers

[MWAocdoc]

What if we don't WANT them to "collect more money," Doc?

[MWAocdoc]

"American colonists ... raided British ships and dumped their tea into the Boston Harbor to protest a tax of "three pennies per pound.""

To be fair, three cents in 1773 would be 35 cents now. A thirty-five cent tax on a ten dollar bag of tea would be significant even now!

[Me, Myself and I]

There are some free tax apps available, such as Open Tax Solver (https://opentaxsolver.sourceforge.net/index.html) and USTaxes (https://ustaxes.org).
But I haven't tried either, so I don't know how well they work.
Either way, the tax system is way too complicated.

[Uncle Jay]

"I shouldn't have to spend so much money on an accountant every year. But I don't really have a choice."

Of course you don't have a choice.
Wise and progressive governments like North Korea do not allow the masses to have a choice.
Thinking should be an exclusive domain for out obvious better who take the time and trouble to oppress us daily, and let's face it, choice only confuses the people who might eventually start to think counter-revolutionary thoughts that would disrupt the peace, quiet and tranquility of our glorious socialist slave state.

[DaveH]

How much does Intuit [TurboTax] spend on lobbying?

[Kungpowderfinger]

What part of BOHICA is hard to understand?

[TJJ2000]

Eliminate all deductibles. They’ve been picking winners and losers all along.

Is anyone seriously so diluted as to think a car, house and bed aren’t standard ‘deductions’ to keep a job? If individuals got “deductibles” like businesses did no one would be paying taxes.

The other 1/2 of the winners/losers BS is ‘income’ based taxing to begin with. That literally encourage laziness and discourage productivity. The fed should just send a per-head/acre BILL to every citizen and those who can’t afford it can go find their local welfare office. This would’ve kept the feds-size and scope in check all along.

I actually support eliminating income tax all together and going back to when each State funded the Union. Pretending it's a Union of People instead of a Union of States is 1/2 the reason it's gotten so Nazified.