> The United States has a complicated tax code because it attempts to make things more "fair" for some people.

As opposed to the other countries with automated taxes, that don't attempt it?

One difficulty is that it's easier to pass a tax break through a budget process than to pass an equivalent "handout" through a separate one.

For example, in France if you have more than 3(?) kids, you get 70% off all train rides. That required this whole process to get set up (I imagine it was more through regulation than law but you at least need the budget to the SNCF).

The easiest way to get an equivalent thing through the US legal bureaucracy would be to do: "If you send us receipts of your train tickets and have over 3 kids, we'll deduct them from your taxes at 70%".

It "pays for itself" in the sense that the government doesn't have to give money to Amtrack, just give back money that was just given to it by the taxpayer. It doesn't require intergovernmental coordination, just the IRS. It can be passed through the huge budget process. Much easier than many other regulatory schemes.

Well, yes. For instance, Finland, where I live, has a very much simplified income tax collection procedure. Deductions for people with children have been eliminated. Deductions for mortgages are being eliminated. All this in the name of simplicity and, yes, fairness.

After all, if you can afford a mortgage, you are clearly well-off, so you should be taxed more.

(And there is a good point: Mortgage deductions distort the housing market. But rent subsidies distort it even more.)

> All this in the name of simplicity and, yes, fairness.

I think you agree with me.

Why is it fair to give a deduction for mortgage? Buying a home instead of renting is just choosing to invest in real estate instead of anything else you might invest in. Why artificially subsidize one extremely illiquid and volatile type of investment?

If you think that is bad, wait until you discover the situation in Australia.

In the US, you get a deduction for interest on your primary residence. In Australia, you cannot do that, but instead, you get to make a deduction of interest in any investment property you own against your personal income! Plus investment properties have a lower capital gains tax rate than other asset classes.

The tax laws in this country are fucked.

Can someone from US confirm the tax treatment of interest on investment loans? Are they counted as an expense? Can losses from an investment property be deducted against other income?

Also, in US is there any capital gains discount for property?

because you want to incentivize homebuying. Homebuying isn't just an investment. When your mortgage is paid off, it also means your cost of living when you can no longer work is much lower. It also means that you're less likely to be homeless or rely heavily on social services when you can no longer work. Homebuying also spurs a MASSIVE industry of homebuilding, and home furnishing, upgrading, etc.

If I buy real estate as an investment, I can deduct the mortgage like any business loan. Why artificially penalize owners who want to live in their properties over owners who don't?

One could argue that by subsidizing home ownership you redistribute profit from people that rent out housing to those that would have been renting that housing.

Mortgage interest is also deductible for rentiers. If owner-occupied mortgages were not deductible, it would be redistributing income from those who live in the properties they own, to those who own property and live elsewhere.

Yes, and by the same logic, subsidizing buying Apple shares redistributes profit from people that make iPhones to people that buy them. Why don't we do that instead?

That's isn't actually what subsidizing apple shares would do?

But the answer, is that people who buy and rent out property are generally better off than those renting, so redistributing income between them decreases income inequality.

This, in general, shouldn't affect most folks' ability to have a simple tax filing system.

Your bank already has records of things like mortgages which they [can] report to the IRS. You can figure out two-earner tax rates with a program or chart. People already report their children in the W2's. The IRS already has the information on file and I imagine they use it to filter out folks that might need audited.

Even with tax credits, a complicated tax system, and all that, there isn't a reason why this can't just be done upfront instead of after the fact - at least for most folks.

The UK has a similarly simple tax system as New Zealand. Taxes are taken out of pay every month, and that's it.

Every individual gets assigned a tax code, and that tax code defines how much is taken from your pay. That tax code takes in to account how many kids you have etc. etc.

The UK tends to approach tax deductions in a different way, preferring to subsidise stuff up front instead, so you never have to remember to file or figure out what your deductions are. You never paid out the money in the first place.

Do you get any kind of deduction for giving to non-profits/charities? I give about 12-15% of my gross income to non-profits/charities every year and get a generous tax deduction for doing so. The other thing that tends to be complicated with my taxes is selling stocks. How does the UK handle things like that?

With tax, others have answered that.

People don't tend to invest so much in stocks, instead settling for other instruments, like ISAs that already handle the tax end of things (https://en.wikipedia.org/wiki/Individual_Savings_Account). ISAs are an attempt by the UK government to encourage saving / investment by providing tax incentives to do so. Again, tax considerations done upfront vs after-the-fact.

If you do invest in stocks, you're liable for capital gains tax, just like in the US, but whether you need to file or not is dependent on how much you actually made. If you make too much, you'll have to file taxes yourself, but it's relatively straightforward.

The point is not that the system is perfect, but that it handles the case for probably >90% of the population, without stress or complications for them.

The "deduction" from donating to charity is paid to the charity, it is the amount of basic tax paid. It's called "Gift Aid".

There is no personal benefit.

https://en.wikipedia.org/wiki/Gift_Aid

It depends how you donate, but for payments direct from payroll (if your employer supports it) you essentially pay out of your pretax income.

For cash gifts the charity can claim back 25p in the £ on your gift. For property, land and shares you deduct it against your tax payments at the end of the tax year and claim for a refund.

In the UK people tend not to own stocks directly but through one of the various investment "wrappers" such as the ISA (individual savings account), which are tax-free for up to £15k/year investment paid in.

Stocks shouldn't be complicated; you've got a cost basis, a date of acquisition, a date of disposition and a final sale price. Withhold based on the deltas and you're all set right?

ESPP are complicated for me because my company withholds the taxes already, but that isn't reflected in the form I get from the stock company so I have to spend significant time every year refiguring out how to adjust and report everything while cursing myself for not taking notes the previous year.

Every country has a somewhat complex and unique tax code. Filing taxes is however much simple in some other countries compared to usa.

I doubt that it is the only reason, but I can tell you that it is the dominant force also outside the United States. I could not think of a better example for "perfection is the enemy of good" than tax systems.

Just throw it all out and call it good enough. If you really need deductions for expenses, found a business. For persons, expenses are indistinguishable from consumption.

One thing that makes it even more complex is state deductions. For example, in Massachusetts you can deduct rent payments to your landlord from your taxable income.