The current maze of the tax code is so complex and bulky that it is not possible to figure out in advance what a change will accomplish. So, any change begets unexpected results (food cost increases due to ethanol tax breaks is a great example).

However, I do know that my taxes have gotten simpler since my income has gone up because my family has been subject to the AMT for the last four years. In effect the government has decided that I am not eligible for the home mortgage and local property tax deduction or the dependent exemptions. We should simply apply the AMT across the board as a flat tax system and simply adjust the standard exemptions and tax rates to match the revenue needs.

It would be interesting to see what percentage of the population can actually make full use of the home deductions currently. My guess is that they benefit a swath of people in $50,000 to $100,000 family income range and then over $250,000 per year and that the total percentage of the population is under a third.

My daughter is a senior at college. Her Federal and State tax returns are 23 pages long for less than $8,000 of annual income. She had a small intern job that gave her a 1099-misc with non-employee income in box 7 which triggered the Schedule C series for less than $2,500 of income. Then there were the myriad of tuition tax credits and deuctions to work through for a few hundred dollars in savings. It is insane that a college student virtually needs a CPA to do her tax return for income that is half the poverty level. Her complex tax situation coupled with our AMT effectively means that our tax returns are about the same length for radically different incomes.

Folks, it is time to simplify the tax code a lot. While we are at it, I agree with Mr. Gross that the carried interest capital gains tax makes no sense for people just managing money. If they want to be taxed at the capital gains rate, they can write a check and deposit it into their hedge fund and then handle the tax gains and losses like their investors while sharing in their fortunes. The rest should be ordinary income like any Joe working a job.

It would also be simple to add into the tax code that executive bonuses (say top 10% of a firm) that exceed some reasonable percentage (say 50%) of their annual salary have to be vested over a three year period and tied to corporate performance over that three years (payouts go up or down depending on the company performance during that vesting period) and enforced by only allowing the company to write off the bonuses one-third at a time as expenses. This would force the managers to think about the impact of their actions looking out further than the end of the current fiscal year. a system like this would allow good performaners to still make obscene amounts of money (probably more than before because the peroformers who blow up would not end up extracting as much cash out of their firms) but would punish people who take unsustainable risks.

We should simply apply the AMT across the board as a flat tax system and simply adjust the standard exemptions and tax rates to match the revenue needs.

Allowing the application of the AMT to continue to creep into the ranks of the non-wealthy is essentially a substantial middle class tax hike. I don't think it's good policy or politics to have middle class families, or even well-off families, paying the same tax rates as the extremely wealthy.

I agree completely that the code needs to be simplified. But a progressive tax does almost nothing to complicate things; it's figuring out different kinds of income (ordinary, short/long term gains) under different rules (deductions, exemptions) that's complicated. Once you've got your adjusted gross income, all you do under a progressive system is look up a number in a chart; that's not complicated. (And since most people can't do basic math, they'd probably do the same under a flat tax system too.)

So yes, let's scrap the code and start over. I think it's a process that might have to happen ever couple of decades as a relatively clean system gets cluttered by various interests through the legislative process. But let's not pretend that a flat tax has much to do with simplicity. It would be easy to have a system that treats all income the same, has a progressive structure, and still could be filled out on the back of a postcard (as Steve Forbes was fond of saying, though falsely implying that only a flat tax would meet that requirement).