Friday, October 08, 2004
Mickey Kaus Confuses AMT and Tax Reform
In a recent Kausfile, Mickey Kaus discusses the role AMT could play in reforming the tax code. He challenges the conventional wisdom that the unintended application of AMT to middle-class taxpayers that has resulted from inflation and wage growth in the middle-class needs to be countered. His contention is that if reform of tax code to a simpler (and, by inferrence, more fair) calculation is desired the mechanism for such a change already exists in the AMT and that rather than reducing the number of taxpayers affected by AMT we should allow it to expand in applicability until tax code reform is a fait acomplit. While it is an interesting idea, and one I could likely support, he cuts it down at the knees by rolling out the following non-sensical evaluation:
Mickey asks "What am I missing here?" What you're missing is that it is not only immoral but counterintuitive to ask the taxpayers to pay more for less service. A key goal of tax reform is not just to more fairly balance the burden, but to reduce the cost of paying and collecting taxes. Taking Mickey's suggestion to an extreme, if everyone payed the AMT there wouldn't be much work for the IRS to do, now would there? As such, isn't it reasonable to expect to lay less for simplicity that ultimately benefits the government and reduces their costs? A better way would be to rework the AMT such that it is a slightly better deal than most taxpayers with standard deductions will get. By offering a lower-cost alternative that will be attractive to most taxpayers it allows the IRS to concentrate their auditing capacity on a smaller number of complex filings. This plan, like the 1040EZ, is a win/win that simplifies the filing process for more Americans, reduces the required overhead of an already over-sized government agency and allows that agency to more effectively and efficiently focus its operations on cases that really require scrutiny.
| "They just pay the simplified tax, which is maybe a little bit higher than the old complicated tax. (You want simplicity, you pay a bit more!)" |
Mickey asks "What am I missing here?" What you're missing is that it is not only immoral but counterintuitive to ask the taxpayers to pay more for less service. A key goal of tax reform is not just to more fairly balance the burden, but to reduce the cost of paying and collecting taxes. Taking Mickey's suggestion to an extreme, if everyone payed the AMT there wouldn't be much work for the IRS to do, now would there? As such, isn't it reasonable to expect to lay less for simplicity that ultimately benefits the government and reduces their costs? A better way would be to rework the AMT such that it is a slightly better deal than most taxpayers with standard deductions will get. By offering a lower-cost alternative that will be attractive to most taxpayers it allows the IRS to concentrate their auditing capacity on a smaller number of complex filings. This plan, like the 1040EZ, is a win/win that simplifies the filing process for more Americans, reduces the required overhead of an already over-sized government agency and allows that agency to more effectively and efficiently focus its operations on cases that really require scrutiny.
