Saturday, April 3, 2010

5 Myths about your taxes

Washington Post opinion "5 Myths about your taxes" (April 4th, 2010) offers an ill-concieved dismissal of tax "myths." Among them is a non-sequitur rebuttal to the notion that "Americans are overtaxed." Another suggests that the claim "Most people's tax returns are way too complicated" is erroneous, while giving no support for the argument.

Bottom line: We may hate our taxes, but we pay far less than people in other wealthy countries.

This does not take on the form of an argument to Corrections. Just because Americans pay less taxes than people in other countries does not mean that taxes are too high, or too low. The suggestion that European tax rates at optimal levels would amount to a joke to an economist. The only sensible way to argue optimal taxation is the Ramsey Tax problem or other optimal taxation arguments. Simple comparisons between countries give no insight.

The Post then claims that taxes are not too complicated:

But most Americans have relatively simple tax returns. Nearly two-thirds of us claim the standard deduction and don't have to itemize our deductible expenses.

However, it also gives data that its claim is not true.

Small wonder that three out of five tax filers pay someone to prepare their returns, and another one in five uses software.

When four out of five people need help filling out their returns, and three cannot do it on their own, it seems self-evident that taxes are too complicated for an individual to fill out on their own. If they could, they would not pay others or take up their own time with the frictions of having others fill out their paperwork. Corrections recognizes that it would be in the interests individuals with a very high shadow wage to pay others to fill out their taxes, but suggests that when three fifths of the population meets this criterion, it appears true, by definition, that taxes are too complicated.

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