Tuesday, October 13, 2009

Puzzling over Taxes

So now that I have finished my 2008 taxes, I now turn to 2009 tax planning.  A great site I found for this is:
http://www.dinkytown.com/java/Tax1040.html
Naturally my personality likes to do taxes myself - why because it is a puzzle; a game; a system to understand.  And with Turbotax it is also a computer program to analyze.  What a complicated web of intra-dependencies.  Full of what if -  what if I earned more income?  what if I had more deductions?  what if I had more capital gains?  and it goes on and on. 
And it is always interesting to try to understand what loop holes Congress was trying to close, what social engineering they had in mind for the credit or deduction and whether it achieves the result is the constant debate.
So is there anything I can conclude from all this wasted productivity analyzing the taxes?  Not really.  It is like a fingerprint - the code is uniquely applied to each person (and rarely to a group).  Why?  Are you blind, how many kids, in college, married, unemployed, house, farm, self employed, rental property, moving and it goes on and on.  Taxes are as unique as our DNA. 
In fact there are about 113 million plus households in America.  So it is an easy math problem to figure out how many variables would create 113 unique outcomes -  2 to the n power where n is the number of variables.Try less than 27!
So when our esteemed Congressmen believe they are looking out for a group of people with a key credit- that may be conceptually true but it adds yet another variable that affects each of us uniquely.  Even if you said everyone (yes everyone) gets a $1 rebate, it still means that on the margin each of us received a different blended average benefit (e.g. everyone has a different and unique average tax rate).  
It makes my head swim to think of this complexity.  And for what gain?  To let those same Congress people (not all men) play with the social engineering of where to spend the taxes collected. Stay tuned for that blog.

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