Benefits and Values of the LG Tax Simplification for Federal Government, Companies and Taxpayers

Robert Kao¹, John Lee²

Abstract: Taxpayers and companies prefer a simple and efficient federal tax system. This paper provides benefits and values by comparing existing federal tax calculation system and its linear and gradual (LG) tax simplification for withholding tax, income tax, tax return, analysis, projection, fiscal note, tax evasion, tax fraud, and tax reform. The federal tax system can be simplified by matching and reducing existing 7 tax brackets to 3 and eliminating existing 21-page Withholding Tables and 224 (7×4×8) formulas. Also existing 12-page Tax Table can be optional. They can be matched and replaced by 2 simple linear formulas and 1 existing formula practically. Most taxpayers with standard deductions and tax credits may do not need to do normal tax returns with the tax simplification, which would help federal tax administration and reduce related costs. The research finds benefits and values of the LG tax simplification, which may help our federal government or other national governments to evaluate and adopt the simplification, to benefit companies, taxpayers, and their government for reducing related costs. The saving values may be billions of dollars. 

Key words: tax simplification, federal income tax, linear and gradual tax system

JEL codes: G18, H21, H25, H71, C02