The Tax System is Broken... in Just The Right Way

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My Other Channel: @HowHistoryWorks

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#tax #finance #money

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The Federal Tax Code when written out from beginning to end is about two thousand six hundred [2,600] pages long.

Depending on who you ask it can be as SEVENTY THOUSAND [70,000] pages IF you include all of the relevant legal rulings on the contents of the code itself.

This snowballing complexity would be a big enough headache by itself, BUT the biggest problem of all, is that the Federal government only collects about a dozen different taxes…

The guidelines on what these taxes are, how they are calculated and how they are collected take up a total of about 250 pages… everything ELSE in the code is allowances, credits, deductions, offsets, incentives and deferments.

And that’s just FEDERAL taxes, things become EXPONENTIALLY more complicated when local and state taxes are included as well.

Now it doesn’t matter if you believe that all taxes are theft, or if you think that the rich should be taxed out of existence, the CURRENT system is broken in JUUSSTT the right way.

Ok so it’s no secret that tax loopholes benefit the rich… and that’s for TWO reasons… HOWEVER most people choose to just focus on one.

The first reason is because wealthy people can afford to pay the billable hours of accountants and tax lawyers to set up their personal finances and business structures to take advantage of these loopholes.

According to the National Association of tax professionals the average cost to prepare an individual tax return in America in 2023 was two hundred and forty eight dollars [$248].

That’s ALREADY more expensive than it should be BUT tax services go way up from there.

Tailored tax services that submit the paperwork required to take advantage of some of these loopholes can cost tens of thousands of dollars every year to put together. That means that it’s only worth it for people that can save hundreds of thousands of dollars in tax by diligently structuring their affairs.

The SECOND reason that tax loopholes only benefit rich people is because… they are the ones that pay tax.

But distorting already highly problematic markets is just the first problem with the loophole arms race.

So it’s time to learn How Money Works to find out why our taxes are so hard to fix.

[Aarrenrhonda]

Tax code changes taught me to build resilience into my portfolio. Diversification is key! My set manager helped me spread my investments across different asset classes like stocks, bonds, and real estate so that a positive tax code cha age here can help minimize the impact of aa negative tax code change there adjustments.

[WaltersWatching]

Real OG's remember when the federal income tax was a temporary emergency measure to fund the war.

[ivan]

It's not broken; it works perfectly: people who work get taxes deducted automatically from their paychecks, while the oligarchs pick and choose how to pay their taxes and can use various techniques to completely mitigate taxes.

[Marqan]

I like how in most videos we arrive at the conclusion that financializaiton of housing is a cancer to soceity.

[codyhecht]

Oh YES. Another HMW video telling me more about how everything sucks and is broken and how I and everyone I know are powerless to do anything about it,

[notarabbit]

I make like no money but I always freak out about making sure I get my taxes in before the deadline. Then I heard the IRS is going to "start going after" people who make 400k+ per year and just don't bother to do their taxes because they don't feel like it

[cirelesten]

My income is taxed
My spending is taxed
My owning is taxed
My use of gov is charged.

Wtf

[GengoSenmon]

The truly infuriating part is they know the number!🤦‍♂ They know how much taxes you owe, but you have to play a guessing game...and the penalties for being wrong are stiff...

[WhiteCarBlackWheels]

thats the craziest part... i was a big 4 auditor, i worked at a real estate private equity, and then in finance for a defense contractor. the reality? i wouldn't touch my taxes w a 10ft pole!

[jimreed]

The easiest way to simplify the U.S. tax system is to take everyone who has any role in make the tax laws or writing the tax code (including politicians of course) and require them to do their own personal taxes by hand without the help of software. There might not be much change in the first year, but after that things should get much simpler very quickly. If you want to guarantee it, you could also add the requirement that everyone required to do their taxes by hand will also be audited.

[dosmastrify]

7:46 They took away my education credits because I forgot a book receipt. Yes, a $150 book. It took away my $4, 000 education credit

[MKPAK]

How can we expect those in power to make a change -when the change itself would mean being unable to benefit from a broken system.

Here's the big picture:
Those in power need a lot to afford their current lifestyle or status. As long as the system is broken, they'll maintain and milk it for as long as possible.

[flinch]

Its not "loopholes". Complexity equals corruption. Politicians wanted that, and rich people hired lobbyists 10x smarter to get nuances inserted into mad policy that provided relief that was opaque to the average staffer writing summaries for members of congress, knowing the member never reads the bills they vote on or existing statutes incorporated by reference. To end loopholes... end progressivism codified in the tax code.

[priceprice_baby]

Aussie here, our real estate tax loopholes are properly fucked. But then so many people jumped onboard that it's pretty much impossible to reduce those incentives without committing electoral suicide. Even though I own a home and from now on will probably benefit from the rules, it sucks for anyone trying to buy their first home or afford rent

[jamesodell]

I am 75 and most of my income is from dividends which I am paying a marginal 15% rate on. I can not understand why I should pay a lower rate then people who are working.
If Jeff Bezos gives his fortune to charity either during his lifetime or at death it escapes taxation, this is a very expensive problem for the U.S. govt.. I don't have a problem with his wealth not being taxed until he sells it or otherwise disposes of his Amazon stock, but at some point it needs to be taxed.
One reason a lot of tax loopholes are hard to close is because members of Congress benefit for them and they are not going to vote against their own self interest.

[WaltersWatching]

Someone tried to rob me on the street and I said nah and they ran away, did I just find a robbery loophole?

[Cubz]

In Portugal we have a complex system but very accessible. There's automatic deductibles, and you just need to press a button.

[victoriancu]

Its not even that. Its that we don't even get anything for the taxes we pay. Sure you pay 40-50% taxes in Europe, but at least you get something for it.

[DaganLaffey]

How hard would it be to "start over"

[blaze]

I'm a big supporter of value taxes. The problem is they need to replace existing taxes, not in addition to.