Tuesday, April 08, 2008

That Time of Year

I’ve been pre-occupied--as I am every year--with our tax return. We have a complicated tax profile that is way out of proportion to our income bracket. If any of the political candidates had a credible program to simplify the tax code, I would support that candidate in a heartbeat even if it meant that my bill would be, say, 10% higher, and in our case we’re talking about an increase of thousands of dollars.

The value of tax simplification lies in the dozens if not hundreds of man-hours that a middle-class family like ours wastes in record-keeping, calculations, and researching stuff that we don’t work with every day. And I’m not even including the difficulty of building a financial plan, which involves modeling future scenarios under tax rules that could drastically change next year (and not in the direction of simplification).

For 2007 we’re adding a few pages to our return because of DPAD, which sounds like a videogame accessory. The Domestic Production Activities Deduction encourages domestic manufacturing activities, and it has some value to us because we have a small investment in a manufacturing business with export sales. So I’ve had to read up on IRC Section 199. Make no mistake, I’m happy to get DPAD, but I’d also be happy to give it up if everyone else gave up something too. © 2008 Stephen Yuen

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