Transparency as a principle of good tax policy means taxpayers should understand taxes and how they apply to them. Despite lots of data on a filer’s Form 1040, the one number people focus on is the amount due or refund. Clearly the better number is total federal income tax liability. And better yet, people should also consider other federal taxes paid – payroll, and excise taxes, as well as various state taxes. Computing one’s marginal and average tax rates and knowing how they compare to other taxpayers is good. Knowing where the money goes is also good.
Some have proposed taxpayer receipts, but I think they generally are too vague.
I’ve got a short article – Transparency for individual taxes, in today’s AICPA Tax Insider. It suggests ideas for getting more information to individuals so they can better understand their taxes. I also suggest a chart to use – by the filers or their return preparers, to help get this data. You’ll see a link in the article to a word version of the chart so you can modify it for your needs.
What do you think?