April 15 has arrived, the perfect day for some thoughts about taxes.
Earlier this week, published reports suggested that Michigan's governor is open to moving from a flat tax to a graduated scale that will resemble the federal income tax code.Governor Granholm suggests that a progressive tax system could replace the Michigan Single Business Tax, which was passed last year and has been terribly unpopular in the commerce community.
Michigan's bleak financial outlook would be hurt by this transition. The federal tax code's graduated scale, where those who make the most money pay a much higher rate is seen by many as fair (I don't count myself among them, but I suppose that's a different issue) and this has been accepted for many years. My personal feelings aside, the federal income tax is unbelievably intricate, and it is this complexity that encourages both errors and dishonesty. The simple principles of a flat tax, where everyone pays the same rate, make it much harder to confuse or cheat. A flat tax is more straightforward and far more efficient.
A more prudent option for Michigan may be to lower the flat tax rate and eliminate deductions. If the rate were dropped from 4.35% and deductions were eliminated, a tax form could be the size of an index card, and could be completed without the help of an accountant or Turbo Tax. This smaller form could show taxable earnings, money withheld, and the amount owed/overpaid. Instead of making the state income tax more difficult, why not make it easier?
This is not only a question about taxes, it's about leadership. State government needs individuals who will look at new ideas and make things more efficient for citizens.
I'll close with a quote from Justice Oliver Wendall Holmes, a conservative, who once said "I like to pay taxes, with them I buy civilization."