Make 'Em Wider

Botero's version of the Mona Lisa.

For Colombian artist Botero, perhaps these fat images symbolized prosperity and contentment.  In these days of retrenchment, perhaps some widening of the tax brackets is needed. Economists of the neoclassical bent try to calculate the deadweight loss of the income tax. That is the loss of welfare to society from the price and collection-cost effects of a tax over and above the income effects. For instance, tax avoidance, record-keeping, and tax planning are associated with all systems of taxation. Price effects reduce the revenue base through a myriad of pathways. the higher the price, the greater the effect. The number of studies seem to be endless.

After 95 years of the income tax in the U.S., How does the current system stack up in international comparisons? Check the World Bank. While the amount raised is modest, and it is rather more progressive than most systems, the time and effort to comply is rather onerous. So much could be done to simplify the system yet again, like it was attempted in 1986, and many times before.

The most simple system of course is a flat comprehensive tax withheld at the source of payment. We could move in this direction rather easily for most folks today, if we wanted, by widening and reducing the number of brackets again.