Wednesday, February 22, 2012

The insanity of our tax system

My wife currently is studying for a her first exam in a class on the Federal Income Tax she is taking at City College (downtown SF).  I had forgotten how enormously complicated and convoluted our tax code really is.  You see, because I am self-employed I generally have filled out our (joint) tax return the same way every year, and do not have to deal with the many different permutations that the tax code covers.
Here is one example:

Persons not eligible for the standard deduction.  Your standard deduction is zero and you should itemize any deductions you have if:

* Your filing status is married filing separately, and your spouse itemizes deductions on his or her return.

In other words if either spouse itemizes they both have to.  In other words if either spouse uses the standard deduction, they both have to.  In other words, both spouses need to use the same type of deduction, even if they are filling separately.  My wife actually had to look elsewhere to clarify that is indeed the ruling. 

The current (2011) complete tax code now stands at 72,536 pages.  A great info-graphic can be found here:   http://politicalcalculations.blogspot.com/2011/07/2011-number-of-pages-in-us-tax-code.html.

While my wife pulls her hair in frustration trying to understand my own country's tax code, I have to ask, when will this madness stop.  It's sapping the energy and wealth, measured in the many hours spent trying to understand and fill out the information correctly -- either by doing it yourself OR hiring a professional to do the same thing.  This time and energy (or money, which amounts to the same thing) is lost productivity that could be spent creating better businesses and more jobs.






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