Friday, January 11, 2008


Fools support the "FairTax" because it would imply that no one has to file a 1040EZ ever again. I will be charitable and assume that Mike Huckabee is such a fool.

I have a proposal. The federal government introduces the "we will do it for you" program in which you authorise them to collect all the information related to your taxes, they collect it and they figure it for you. Along with your 1040 they send you a proposed filled in 1040. If you ignore the mailing, that determines your rebate (or what you owe). Otherwise you can just file a 1040 and they ignore their own calculations (law requires them to erase the data and not use them to detect evasion). That would be simple.

Oh I would also definitely and in any case withold more each month and make sure that almost everyone got a rebate after filing (or decided to not bother). This is a no brainer. I can see why Republicans haven't done this as they want people to hate tax day. I have no idea why the Clinton administration didn't do this, that is, make a tiny middle class tax cut which had no effect on amount withheld on paychecks but appeared once a year as a big fat check.

I guess some Arkansas governors are more cynical than others.

Now I have some sympathy for people who hate tax day.

I have filed the form which takes an estimated 6 hours to fill in (this was to take a deduction for my Italian taxes in the one year in which my income was well above median income for a US 2 parent family).

I live in Italy a country with a very complicated tax system. I have never filled in a 740 (Italian 1040). It is all handled by my employer. The reason for this simplicity is that investment income is "taxed" at the source, that is taxed at the same rate no matter what the recipients other income is. This is horrible, but only the still communists object, because everyone knows that everyone would evade.

A tax on payroll income can be collected without bothering the workers (how much time did you spend filling out your FICA tax returns). A tax on payroll and self employment income could be imposed bothering only the self employed. Such a tax need not be regressive like FICA. It could be fairly progressive except that the super rich would pay almost nothing (as in the fair tax). The FairTax already includes measurement of monthly income on top of the whole huge consumption tax machinery (which will not prevent evasion and everyone who has taxed consumption or value added knows that rates can't be that high).

If Huckabee proposed taxing only labor income, he would have a much better way to make April 15 an ordinary day. Also it would be clear how populist he really is. The fact that he has a strictly worse plan which is even more regressive and is accepted as a populist shows how defective our debate is.

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