Tuesday, September 5, 2017

Tax Reform

Since I worked for the IRS this year, I'm pretty eager to hear about the major tax reform that's being planned. Sadly, we're not getting a lot of details, partly because they're subject to change, and partly because the news reporters don't understand taxes.

There are two types of taxes: personal taxes and business taxes. The tax reform is going to tackle both kinds at the same time. This can lead to three options:.

1. Both are fantastic. Everyone's taxes go down by 25%, businesses can afford to hire millions of new workers, and everyone gets a raise. America is great again.

2. Both are awful. Everyone's taxes go up by 25%, the new laws are so confusing that it takes forever for people to do their taxes, and lots of people get hit with penalties for doing taxes wrong. Every business decides taxes are so bad, they move to Canada, and half the jobs in the country disappear. America is sad again.

3. One is good, the other is not. Unfortunately, they'll come as a package deal, so you can't get one without the other. In effect, they'll be holding the good reform hostage, in order to pass the bad reform.


These three options are also possible, on a smaller scale. Let's pretend the tax reform affects five things on the personal tax form. It could be the case that all are good, all are bad, or some are good and some are bad.

It doesn't help that people disagree on what "good" tax reform is. I am totally in favor of combining lines 9a and 9b on tax forms, which are ordinary and qualified dividends, respectively. That seems good to me, as it makes the tax forms simpler and should result in more revenue. People who own a lot of stock probably think that is an awful idea, as it will result in them paying more taxes.

I guess I'm saying most people believe "good tax reform" is defined as "whatever causes me to pay less in taxes", more than "whatever makes tax forms easier" or "what is more just".


Trisha Gaurav said...


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