How costly is complexity? Q.How costly is complexity? A.Tax compliance imposes three major costs: taxpayers’ time spent filing returns; their out-of-pocket costs of keeping records, hiring preparers, buying software, and the like; and government costs of administering the tax system. All of those costs increase with the complexity of the tax system, but their magnitudes are difficult to measure. Read more about How costly is complexity?
What is the personal exemption? Q.What is the personal exemption? A.Personal exemptions for both taxpayers and dependents provide that only a person’s income above some defined basic level is subject to tax. This helps ensure that the poorest households are not subject to the income tax. In 2017, the personal exemption is $4,050. Read more about What is the personal exemption?
What is carried interest, and how should it be taxed? Q.What is carried interest, and should it be taxed as capital gain? A. Carried interest, income flowing to the general partner of a private investment fund, is generally treated as capital gains for the purposes of taxation. This tax preference is viewed as an unfair, market-distorting loophole by some but consistent with the tax treatment of other entrepreneurial income by others. Read more about What is carried interest, and how should it be taxed?
