The US tax system is, by pretty much all measures, a bloated, contradictory, and overly complex mass of bureaucratic insanity. There's no time that I feel worse about my country than on or around April 15, as I struggle to figure out which targeted tax break I a) qualify for, b) saves me more money, or c) thought I would qualify for, but don't, and so have to rearrange funds at the last minute. What I wouldn't give to import the Kiwi tax system here.
And most times, I have it pretty good, at least on the margin. In good times, my family makes enough that our marginal tax rate is predictable, and significantly less than 100%. Clifford Theis at the Mises Institute details the problems the working poor face in the current system. Personally, I think the CBO should be required to produce these charts yearly for various family compositions (single, married with no kids, married with one, two, and three, and for single parents), just to show how the system is fundamentally broken.
And that analysis was done before the current health care "reform" proposals took shape. Were they to pass, they'd wreak even more havoc on the poor. The Cato Institute has posted an analysis showing that, on its own, the current health care proposals will present low income workers with marginal tax rates over 100%. Combined with other benefits, subsidies, and means tests, and it appears that the working poor would potentially face marginal rates of over 200%.
That is, to put it bluntly, insanity. Serious tax code and benefit allocation simplification is needed.
I'm having trouble reconciling Theis' ranting against "left-liberal do-gooders" with your apparently satisfactory experience with the New Zealand tax system (and the tax structures of the rest of the notoriously socialist developed world).
ReplyDeleteThe New Zealand tax code is ridiculously simple. There are three different rates that kick in at different income levels. There are no deductions, credits, or "adjusted gross income" calculations whatsoever.
ReplyDeleteNew Zealand taxes income at significantly lower marginal rates than the US does, once payroll taxes as well as state & local taxes are taken into account (there are no income taxes at the provincial level in NZ). It's usually better overall, though it's hard to compare given the vastly different treatment people in different situations receive here.
Figures O.1 and O.3 on this page illustrate it pretty well: http://www.oecd.org/document/6/0,3343,en_2649_34533_42714758_1_1_1_1,00.html
ReplyDeleteSounds good. Now try and convince Theis that New Zealand isn't a country of left liberal do-gooders.
ReplyDeleteI have no idea what Theis's position is on New Zealand, and it's pretty irrelevant to both my and his point. Do you think a tax system that provides the working poor with 100%+ marginal tax rates is wise, or even acceptable?
ReplyDeleteBut obviously some people who usually rant about those same "left liberal do-gooders" have wised up to the merits of the New Zealand system: http://www.heritage.org/Index/