Tax Day

It's Tax Day. I am sitting here doing my taxes and feeling depressed.

For some odd reason, I've found that I am unable to do my taxes before the deadline. I will often finish gathering all of my tax documents in January and February. But when I sit down to finish my taxes, I get so depressed that I am unable to finish the tax.

This is the only task that affects me so deeply. And I really don't know why.

Actually, I do know why. I get depressed because the way the United States goes about taxation is absurd.

In the current system, the government collects taxes from our employers and business relations. We have to clutter our living spaces with petty little documents then refile all of the information to the IRS.

If the IRS decides there is an error in our taxes, the IRS rains down upon us like a ton of bricks.

If Americans had a functional political system, we could very easily streamline the process.

I dislike this antiquated tax system. This year, I decide to take a stand for sanity. Early this month, I launched a KickStarter Campaign to publish a book about tax reform.

The reform I propose is quite simple. I want our government to create a computer program that calculates and collects taxes to eliminate the need to file a tax return.

The reform suggests that Congress start an Open Source Program to create an account based alternative to the current income tax system. I named the reform The Object Tax after Object Oriented Programming. I named the reform after a design methodology because the reform is not about changing the tax code. The goal of the reform is to use computer technology to streamline the process of tax collection.

The reform creates a thing called "A Tax Aware Account" as an alternative to payroll withholdings and an annual return.

The Tax Aware Account would include all the information needed to calculate a progressive tax. Taxpayers would get their whole paycheck deposited into the account. They would pay taxes when they withdraw the money for spending.

Lets say you earned $1000 and your progressives tax rate was 20%. When you withdrew the money, the account would send $200 to the government and you would get $800.

The Tax Aware Account includes all of the information needed to pay your taxes. This way people wouldn't have to file a tax return. (If a person's tax status changes during the year. They would record the change in the Tax Aware Account which would calculate the effect of the change and create a transaction to reflect the change.

I must emphasize. The program creates an alternative to the existing system. The taxes collected in the new system are based on the old system. People would only use the new system if they found it more convenient.

I like the approach of creating alternatives better than the audacious approach used by programs like PPACA and The FairTax which force a reform on the entire nation at once.

I want to publish a book on this reform proposal because it includes some unique insight on taxation that I have not found in other works about tax reform.

For example, this reform changes the flow of money. In the current system, the money flows from employers to the government. With the Tax Aware Accounts, the money flows from taxpayers to the government.

The bureaucracy tends to form around the flow of money. Because our tax dollars flow from employers, the government aligns itself to employers and large corporations. Changing the flow of money so that it comes from individual accounts would make the bureaucracy responsive to the needs of the people.

Let's face it. The fact that Walmart and other big corporations write huge checks to the government each month gives these huge corporations additional clout. If these same tax dollars flowed from Walmart workers to the government, the government would be less attentive to the corporation and more attentive to the worker.

Changing the flow of money also transitions the income tax from a tax on production to a tax on consumption.

My articles on consumption taxes makes one extremely important argument that many economists seem to have missed: In order for a tax to be a true consumption tax, the money has to flow from the consumer.

Supporters of the FairTax want to replace the income tax with a national sales tax. The advocates of the FairTax believe that a sales tax is a consumption tax, but they miss the subtle point that since the money flows from the producer, the FairTax is still a production tax.

From the point of view of the producer, a sale is the moment when one realizes profit from production. A huge sales tax dampens production at the most important moment in the production process ... the point of sale.

The Object Tax is a true consumption tax because the money flows from the consumer when the consumer prepares for consumption. The FairTax is a production tax because the money flows from the producer at the point of sale.

The Object Tax also brings up some fascinating discussions about the role that the Open Source Movement could play in implementing public policy.

In our current way of doing things, Congress bids out contracts to huge service providers. The service providers with the best inside connections usually win the contract. The contractor then builds a huge monolithic program. The contractor is often monolithic nature of their program to accumulate even more wealth and power.

The effect of this approach is that it concentrates wealth and power in a few hands.

The goal of the Object Tax is to create a computer program that collects taxes.

Rather than seeking a single provider, the reform launches an Open Source Project that would invite thousands of service providers to create a base of common code that could be used be used by hundreds of thousands of companies. This reduces the concentration of wealth and power that occurs in the status quo.

There are some other really cool things that would happen if Congress launched an open source program to create an account based alternative to the current income tax. For example, the open source project could be designed so that it is extended by state governments to collect state and local taxes.

If programmed properly, the Tax Aware Accounts could provide a single point from which to collect federal, state and local taxes.

While the Object Tax is really just an thought experiment on my part, the project introduces insights that might be of value in other attempts to reform the tax code.

My Kickstarter Project has been up for several days and has received zero backers. It runs until May 13, so I get to spend a month checking a project that most likely will receive zero support for a month. yippee, hooray.

Anyway, I have to get back to my taxes. If you hear a person jumping off a bridge in despair. That's just me. I get depressed at tax time because I know that there are better ways to go about collecting taxes than this stupid system of payroll withholdings and an annual return.