One of the many problems with a complex tax system of varying tiers, qualifications, handouts, exemptions, claimed dependancies and the like, is that it becomes increasingly bureaucratic by necessity.
We’re giving a handout… wait – what if they’re in prison, or overseas, or die before the cheque arrives? We have a baby bonus… wait – what about adoptions – do adoptive parents get anything? OK, so they do… what if someone puts their kid up for adoption the week after getting their bonus – do they have to give their bonus back, and do the new parents still get a bonus?
Supposing you want a consumption tax, but don’t want to tax food… wait, what about junk food? OK, so we’ll only tax junk food… wait, are we going to have to legislate a receipe for bread? When does it become cake? It starts out innocent enough, but before you know it, you’re legislating the allowed shape of bananas and cucumbers.
These all might seem like rather silly examples, but they’re a symptom of an overly complex tax and welfare system. In case you think they’re not considered, here’s an excerpt from the IRS website (the US version of the ATO):
Topic 357 – Tax Information for Parents of Kidnapped Children
You may claim a kidnapped child as your dependent if the following requirements are met:
- The child must be presumed by law enforcement to have been kidnapped by someone who is not a member of your family or a member of the child’s family, and
- The child had, for the taxable year in which the kidnapping occurred, the same principal place of abode as the taxpayer for more than one-half of the portion of such year before the date of kidnapping.
If both of these requirements are met, the child may meet the requirements for purposes of determining:
- The dependency exemption
- The child tax credit, and
- Head of household or qualifying widow(er) with dependent child filing status.
This tax treatment will cease to apply as of your first tax year beginning after the calendar year in which either there is a determination that the child is dead or the child would have reached age 18, whichever occurs first.
How twisted is that?
Of course, a 30/30 tax system doesn’t seem to have these problems, as there is a flat effective marginal rate of taxation, and no deductions.