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?
Annette Nellen, CPA, Esq., is a professor in and director of San Jose State University’s graduate tax program (MST), teaching courses in tax research, accounting methods, property transactions, state taxation, employment tax, ethics, tax policy, tax reform, and high technology tax issues.
Annette is the immediate past chair of the AICPA Individual Taxation Technical Resource Panel and a current member of the Executive Committee of the Tax Section of the California Bar. Annette is a regular contributor to the AICPA Tax Insider and Corporate Taxation Insider e-newsletters. She is the author of BNA Portfolio #533, Amortization of Intangibles.
Annette has testified before the House Ways & Means Committee, Senate Finance Committee, California Assembly Revenue & Taxation Committee, and tax reform commissions and committees on various aspects of federal and state tax reform.
Prior to joining SJSU, Annette was with Ernst & Young and the IRS.
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