Now that you have had a couple of weeks to cool down after paying income taxes, let’s see if we can bring the temperature back to simmer.
Almost everybody agrees that the federal tax system is bizarrely complex, unfair and incomprehensible. And almost everybody agrees that nothing substantive is likely ever to be done about that.
The reason is obvious enough: Every one of those obscure technicalities saves money for somebody. You want your tiny little tax break? Sure, just give me mine.
But for many ordinary taxpayers like me, federal income tax keeps getting easier to compute. It’s the Montana tax system that is increasingly byzantine.
I heard an idea floated on MSNBC the other day that the federal government already has most of the information it needs to compute your taxes, thanks to W2s and 1099s, so why not just send you a tax bill every spring?
If the number sounded fair to you, you could pay up. If not, you could wade into the complexities of the federal tax code and figure the tax for yourself.
The idea, according to MSNBC host Chris Hayes, is drawing opposition from a predictable source – large tax-preparing companies – and from a less predictable source: anti-tax activists. The activists fear that making taxes too easy to pay will make Americans insufficiently angry about paying taxes.
Montana, on the other hand, freely stokes the fires of anger. Increasingly, the Montana tax form takes longer and longer to fill out while the federal form keeps getting shorter and simpler.
This was not what I expected when we moved here a couple of decades ago from Texas, a state with no income tax and a high sales tax. Income tax always made more sense to me as a revenue source: more equitable and efficient and even more transparent.
Sure, income tax states impose that one long day of misery every year when you have to actually figure your taxes, but I’ll take that over the daily hassle of counting the government’s pennies.
Quick, how much does it cost to buy an item that sells for $3.69 after you have added an 8 percent statewide sales tax and a 1 percent local option tax? Whatever the answer is, you don’t have the right change.
When we moved here, I figured the Montana income tax form would look something like this:
1. Enter the amount of federal income tax you owe for 2013.
2. Multiply the amount on line one by 0.3.
3. Enter the amount of Montana income taxes withheld or otherwise paid in 2013.
4. Subtract line 3 from line 2.
5. If the result is a positive number, please remit. If the amount is a negative number, this is the amount that will be refunded to you.
6. Go outside and soak up some Big Sky. It’s spring!
But no. The instruction book for Montana’s Form 2 is 48 pages, plus the actual forms. It takes a full-page worksheet to calculate the refund you get on your federal taxes and another full page to figure whether Social Security benefits are taxable. And there are worksheets for capital gain exclusions, pension and annuity exemptions, mortgage insurance premiums, and on and on.
Then there are the credits: the college contribution credit, the qualified endowment credit, the energy conservation installation credit, the alternative fuel credit, and 25 more.
None of that is the worst of it. Lots of taxpayers like us are better off taking the standard deduction on federal taxes. But Montana has a lower standard deduction, and it begins withholding taxes at lower income levels.
That means we wind up filling out a few simple federal forms while wading through all of the ugliness of the state’s itemized deductions, keeping track of medical expenses, business expenses, charitable contributions and so on. It easily takes three or four times as long to figure our state taxes as federal taxes.
Then, after all of that, if I were really smart I would figure our taxes twice. Lots of Montana couples can save money by filing their taxes separately rather than as a joint return. The only way to be sure is figure your taxes both ways.
What geniuses came up with this system? Why haven’t they been publicly executed?
I never thought I would write this sentence, but compared to Montana’s tax system there is no getting around it: The federal income tax is a thing of crystalline beauty and simplicity.