Americans know the tax system is excessively-complex—not for most taxpayers, but definitely for businesses, especially small businesses. Even so, the average taxpayer must compute their own taxes even when the State and the IRS already withhold tax money and receive W-2 and 1099 forms from employers.
Consistency and Reduced Paperwork
Tax collection bureaus—the IRS and the State comptroller’s offices—must modernize. They must provide taxpayers with a tax summary and allow amendment with any additional incomes or deductions, thus automating away most tax filing.
States must align their tax law with Federal tax law. When filing an amendment with the IRS, the IRS should relay that amendment to the State in which the taxpayer resides, allowing the State to automatically account for any State reporting requirements which include only the information reported to the Federal government.
States and the Federal government must provide a simple form of small business B-Corp LLC, with centralized online filing and simple filing guidelines. Articles of Organization, Bylaws, and Operating Agreements may require lawyers; filing these documents and remaining compliant should not.
Simplified Personal Income Taxes
The IRS should move to a simplified form of personal income taxes. A system such as TaxGNI would eliminate filing statuses by replacing personal exemptions with a household equivalence scale, and eliminate tax brackets in favor of a percent-of-per-capita-GNI computation to determine the tax rate on a progressive tax curve.