Our taxes are far too complex. Even the Treasury Secretary can’t understand our tax law. Every year about this time, people start writing about solutions to make taxes simpler.

I’m sure this solution has come up before, because it apparently is all the rage in Europe, but this is the first time I’ve seen the recommendation that we keep the tax system incomprehensible and just have our local, state, and federal governments tell us what they think we owe and bill us:

It's already a reality in Denmark, Sweden and Spain. The government-prepared return would estimate your taxes using information your employer and bank already send it. Advocates say tens of millions of taxpayers could use such a system each year, saving them a collective $2 billion and 225 million hours in prep costs and time, according to one estimate.

That’s the response of a dependent mind: Daddy, my taxes are too complicated. Can’t you just tell me what I owe?

The intelligent reaction is, if taxes are too complex and too expensive to calculate, make them simpler.

First, because the obvious next step is for the government to take that “estimate” and withhold it from your paycheck. The mechanism is already there, and they already know what you owe, so why not just keep it? If you think they missed something, you can file an appeal.

But second, because hiding tax calculations just makes cronyism that much easier. Who is for such a plan? Big government proponents such as “Austan Goolsbee, who served as the chief economist for the President's Economic Recovery Advisory Board”. Who is against it? Tax reformers such as “Conservative tax activist Grover Norquist”.¹

This proposal violates one of the three bedrocks of fiscally sane taxes: simple, obvious, and unobstructive. By making the tax calculations even less obvious, it becomes easier to engage in cronyism, hiding special tax breaks for political benefactors and hiding special tax barriers for their competition. Making taxes less obvious makes it easier to make them more obstructive.

Remember, government is not free. Someone has to do those calculations. This proposal doesn’t save the wasted time and resources of our current tax system, it just hides the cost and most likely inflates it even further². If Goolsbee or Paul Caron really cared about the wasted time and resources of our current tax system, they wouldn’t hide that waste behind the government veil where it will never be fixed. Which means that they probably see our current incomprehensible tax system as a feature rather than a bug. Bad government needs taxes to be as incomprehensible and unknown as possible.

Liz Day claims that conservatives have also supported such a plan, linking to a 1985 speech by Ronald Reagan. It’s a great proposal for simplifying the tax code. It is not a proposal for “just let the government do it”. Instead, he says things like:

Over the course of this century, our tax system has been modified dozens of times and in hundreds of ways, yet most of those changes didn’t improve the system. They made it more like Washington itself—complicated, unfair, cluttered with gobbledygook and loopholes designed for those with the power and influence to hire high-priced legal and tax advisers.

But there’s more to it than that. Some years ago an historian, I believe, said that every time in the past when a government began taxing above a certain level of the people’s earnings, trust in government began to erode… until there would be a breakdown in law and order.

Death and taxes may be inevitable, but unjust taxes are not.

I’ll start by answering one question on your minds: Will our proposal help you? You bet it will. We call it America’s tax plan because it will reduce tax burdens on the working people of this country, close loopholes that benefit a privileged few, simplify a code so complex even Albert Einstein reportedly needed help on his 1040 Form, and lead us into a future of greater growth and opportunity for all.

The power to tax is the power to destroy.

We’re reducing tax rates by simplifying the complex system of special provisions that favor some at the expense of others. Restoring confidence in our tax system means restoring and respecting the principle of fairness for all. This means curtailing some business deductions now being written off; it means ending several personal deductions, including the State and local tax deduction, which actually provides a special subsidy for high-income individuals, especially in a few high-tax States.

Two-thirds of Americans don't even itemize, so they receive no benefit from the State and local tax deduction. But they’re being forced to subsidize the high-tax policies of a handful of States. This is truly taxation without representation.

Emphasis mine, because that’s one of the things I see every year when I do my taxes: that high-tax states get subsidized. Reagan was right, the system should have been simplified in that manner. State and local taxes should not be deducted from federal taxes.

Only after all of this does Reagan use the term “return-free”. He envisioned a tax code so simple that you didn’t need to fill out a return because the tax code was so simple to calculate.

He did not envision a return-free system made necessary only because of a tax system made far too complex by special provisions and complicated, unfair gobbledygook.

I’d love to see Reagan’s proposed simple tax code restored today. Then, when the system is so simple you can do it on the back of a card, only then, can we talk about a “return free” system.