Small World: A Form 1040 you could learn to love

Henry Precht

Henry Precht

By Henry Precht

BN Columnist

I’ve started preparing my income tax return. Didn’t Obama say he was banning mental as well as physical torture?

If so, he didn’t take into account those rare citizens who not only believe by paying their taxes they are buying citizenship, but who think they themselves ought to be able to figure out the amount they owe. No hired agent, no computer program, only a quill pen. Maybe because ordinary citizenship is deeply discounted by big money people who dominate our politics, Obama and the Congress calculate we, the tax-indebted, are too stupid to prepare our own returns.

Just to keep us in our (downtrodden) place and insure that we face problems in interpretation, the government has stopped mailing out forms and instructions or even shipping them to public libraries as in olden days. The experience of searching out answers on the Internet gives one pause for reflection. Inspired, I’ve reflected on some revolutionary ideas. Not Thoreau’s recommendation that we opt for jail time to express discontent. Rather, how we might change the tax law for a measure of simplicity and fairness.

In a word, the income tax law ought to revert (almost) solely to its original purpose: revenue. Income taxes ought to provide the wherewithal to fund government operations. Although a convenient instrument for policy fabrication, tax law ought not to have anything to do with transforming society, rewarding classes of favored citizens, strengthening the economy or other perhaps laudable, but irrelevant purposes. Let it bring in the money necessary to balance appropriated outflows and basta! Here’s the way my revised 1040 form would shape up:

Total up all types of income — with one exception (savings, capped) — e.g., earned wages, pensions, profits from sale of property, investment income, gambling, and inheritance. Multiply the total by the percentage stipulated for your bracket — a low rate for lower incomes, higher for those who can afford to pay more. No cap on size of total income taxed, however: The earner of $10 billion would pay the same tax rate as the earner of $1 billion if in the same bracket. Subtract from income the number of dependents times a stipulated amount (as now).

Eliminate all deductions and current law distortions, by removing from the form all state and local income or sales taxes paid plus property taxes, health care costs, interest paid, education and welfare benefits, earned income credits, etc. Exception: Allow gifts to approved charities up to an overall cut-off ceiling. Subtract that total figure from income.

If removed from the form, how would the necessary and desirable purposes of these terminated deductions be covered, you ask? By agencies specialized in dealing with them, i.e., HHS (health and welfare) would replace grants for medical costs and earned income. The Education Department would make grants to cover assistance for schooling needs. Per capita revenue sharing would increase Washington’s aid to states and local governments. State and local taxes might therefore be cut, thus compensating for the elimination of the federal tax deduction.

What about interest paid on loans? Many borrowers will be partly compensated by their lower tax burdens and also because their finances would be improved as savings (bank deposits and bond interest, company dividends, etc.) would not be taxed (the exception predicted above) except over a set ceiling. Encouraging savings for investment instead of borrowing for consumption will produce greater income over the longer term.

In case of an emergency – war, recession, natural disaster — the tax rates could be raised or lowered to keep the budget in balance.

The product would be a large post card size 1040 showing the components of total income, a subtraction for dependent exemptions, another subtraction for charity gifts, and the remainder multiplied by your bracket’s tax rate to give the amount owed to Washington.

There are probably details that I am too inexpert to raise, but the principle is what matters. Taxing is to raise money, not change behavior.

Of course, this concept will appear horribly revolutionary to those who have loaded the tax law with their special needs. Lawyers, accountants, real estate agents, bankers and the like will be getting in line for earned income credits — except there won’t be any.

They’ll have to apply for poor relief.

Henry Precht is a retired Foreign Service Officer.

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