Recently I have done two posts on income tax. One post was a on a tactic used by people to evade tax by putting money in another country. The last post was on the pathetic performance of the call center used by the tax department.
So after my challenge of dealing with capital gains I've been thinking about what causes tax systems to become so complicated.
Too many times whiners get to the politicians and request changes to the tax system that would benefit them. Politicians see this a way of getting votes when they need them. Politicians also think that if they meddle with the tax system, they can "improve" the economy.
Then the government always has ideas to give us a good deal. In Canada they set up something called the Registered Retirement Savings Plan. The idea was to let people start a savings deposit and not have to pay income tax on it until they take the funds out. You would not be able to take any funds out until you reach retirement unless you wanted to pay tax on it. The idea was that when you retire your tax rate would be lower and in this way save money. So try keeping track of this account. There was a maximum you could deposit. There's a minimum you could take out at the end.
The government has all kinds of economists and accountants who design tax systems that at the same time benefit people and bring in needed revenue for the country.
I could bore you with other examples.
So why not tax everybody on a standard rate. There would be different rates for income level but that's all. No exemptions. No write offs. No sneaking money off to a foreign country.
I'm willing to bet a nickel that if everybody was taxed the same and did not have loop holes that the tax rate would be lower. Wouldn't that make everybody happy! Or is this just too simple to fly?
Well it was a good dream anyway.
