I finally got around to filing my taxes for 2008.   I generally owe taxes, so I’m never in much of rush to file them.  Every year, my taxes become more complicated to my general displeasure.   I’m happy to pay my fair share in taxes.  I don’t feel unjustly burdened by the actual amount of taxes I pay, but I am becoming more irate about the overly complex tax code.

I accept that much of the added complexity is of my own making.  My taxes have steadily gotten more complicated over the years.   When Ifirst graduated from college, my taxes were blood simple.  I didn’t have a mortgage, owned nothing in terms of stocks, and had no money on which I earned interest.   Today, it’s a much different story:

  1. I have a personal mortgage
  2. I sold over 20 different securities last year (mutual funds, stocks, options, etc)
  3. I earn taxable interest, federal exempt interest, and federal and state exempt interest
  4. I own a rental property
  5. I have business income - I earn about $40 a year from AskDong.com
  6. I’ve steadily increased my charitable giving

Printed, my taxes were over 45 pages, and my taxes could easily be more complicated.    I’m single and I have no dependents, which automatically makes my taxes more simple.   The Alternative Minimum Tax does not apply to me.    Even with the rental property my taxes shouldn’t be this complex.

The problem is the tax code has become increasinly obtuse with every passing year.   Half of my taxes are taken up by calculations that only determine that I don’t need to make those calculations.  Student interest has not been a deductible expense for me in years.   As my salary has increased, I’ve given up more and more deductions.  I’m OK with not having those deductions.  What I’m not OK with is the shoddy and fragmented tax code that all us have to spend undue hours wrestling with.   There are too many different phaseouts for far too many different deductions.

Policy makers have fallen in love with carving out different pieces of tax code with the best of intents, and pitifully poor execution.  Who doesn’t want to encourage higher education with deductible interest?  Phasing out that deduction make sense as it should only be benefitting those who really need a leg up.   I may not have a problem with each specific aspect of the tax code, but taken as a whole the tax code is bloated and confusing.  

I spent about 4 hours this past year doing my taxes, not including all the time I’ve spent over the past year making sure I had records.  There are deductions I missed because I couldn’t find receipts.    There are dates for stock purchases I had to make my best guess on because I no longer have exact records.    At the end of the day, I’m very conservative with my taxes.  I’d rather pay slightly more in taxes,  and despite TurboTax indicating I have a very low audit risk, I still  worry about it.  

Taxes should not have to be as complicated as it has become.   I’ve always believed the better the tax code the simpler it is.   Lump all deductions in one category.   Phase all of them out as necessary, but all at once instead of provisions hitting at different points.  Better yet, increase the standard deduction so that most people don’t even have to worry about deductions.   Unify all the different retirement vehicles so everyone gets X dollars to invest tax deferred (401k, IRA, Simple IRA, etc) and Y dollars tax free (Roth).   The Government needs to tackle the issue of Tax Reform, not because it needs to raise or lower taxes, but because it needs to make the tax code understandable and more accessible to the average tax payer.