A Small Tweak and a Large…Tweak

In his Wednesday Wall Street Journal op-ed, Travis Nix reminds us of this tidbit regarding IRS private letters that’s buried in President Joe Biden’s (D) latest budget proposal:

IRS private letter rulings—the agency’s written answers to individual taxpayers’ questions, which the IRS itself says cannot be relied on as precedent.

Here’s a small tweak: make the IRS stand by its rulings by making those rulings binding on the IRS, applicable to all taxpayers, and precedential. And require the IRS to answer the question that was asked—to issue its letter ruling—within 30 days of the question being asked, or failing to do so authorizes, as a matter of tax law, the questioner to answer the question (formally, via its tax return) in its own way.

Nix’ overall op-ed was centered on another item buried in that tax portion of the Biden-Harris budget: a lengthening of the time the IRS has to reach into the past to look at inadvertent tax errors in a taxpayer’s filing. The proposed time would be extended from three years into the past to six years.

However [emphasis added].

Since the IRS already has unlimited time to audit the returns of companies that seem to have deliberately omitted income they knew was taxable, the new regulation would largely target unknowing omissions that result from unclear regulations.

That brings me to a large tweak. The whole question could be entirely eliminated by rewriting our byzantine tax code to have no income tax at all on businesses and to have a single, low, flat individual income tax rate on all income regardless of source and with no subsidies, deductions, credits, or any other “adjustments.”

Such a code would allow individual tax filings to fit on the proverbial post card (but maybe stick it into an envelope for mailing, for privacy’s stake):

Line 1: How much income did you have this tax year? ______

Line 2: Insert income tax due ([10]% of Line 1):           ______

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