Usonian income taxes are crazy complicated and a pain to deal with. They shouldn’t be, especially for normal people: Only people performing complex income related activities should have any need for a tax accountant. There are so many modifiers to promote certain behavior and demote other, but it is very inconsistent and confusing and irrelevant stuff often has to be read through by people for whom it doesn’t apply. Promoting behaviors is good, but it needs to be simplified drastically.
One important step to both simplify income taxes for regular people and allow more accurate targeting for behavior modification is to fully separate out personal income from business income. Sole proprietorships, partnerships, and corporations will all have their income taxed in a completely different system than personal income. Business money must be kept in a separate account and transactions monitored separately. For all businesses, any money going into personal accounts for personal uses will be considered employee compensation and taxed in that system. A small sole proprietorship with no capital investment and no retained earnings might pay out all earnings as employee compensation, have no business taxes, and thus business income tax filing will be a simple filling out of a form showing revenues, payment to one employee, and 0 dollars income. For most small businesses with some capital investment, there will be a small business account and a small amount of retained earnings that is taxed. They will have a form similar to the 0 dollar income business, but will have some earnings and will thus go through more steps with deductions and credits and tax payed in to determine taxes owed. Larger, more complicated businesses will still have the same type of form, but will have more subforms that apply to them and will be able to afford accountants to deal with them.
The personal tax form will be like above, but instead of the line for business expenses there will be a line for number of dependents. Instead of a choice between standard deduction and itemized deduction, there will be a simple deduction of the poverty line of income based on the number of dependents. If this line deducted from income brings taxable dollars to zero or below, no taxes will be owed and that is all that is needed to be filled out, unless welfare is to be handled through the income tax, in which case the negative number will still need to be modified below with deductions and credits to calculate reimbursement. After this, the number will be modified by a simple list of deductions and credits and the taxes already payed in to find total taxes owed who owes who. All of these incentives will apply to all people. The form will be kept simple by having a single line for a collection of related incentives that are calculated on a subform. Subforms are small things, most of which can be grouped multiple per page and are supplied with the normal tax form. Only more complicated items or situations require larger, separate forms.
The forms should be simple enough that they can be filed quarterly by everyone, so people don’t have to remember or keep track of things from a long time ago and won’t have as large of an anxiety build up when tax time roles around. It will also provide more continuous feedback about financial situations, allowing for more frequent adjustments of behavior by the people and service provision by the government, and allow money to flow more freely between the government and people.
I had some other ideas when I began writing this but forget them at the moment.