Tax reform an issue of definition

In a letter published on Oct. 20, a reader sets out his “ideas for tax reform” and ends with a solicitation for comments on it.

His definition of income is “cash or wages that you see for the first time in a calendar year.”

Taken on its face, this would mean loan proceeds constitute taxable income. Fancy paying 25 percent on your mortgage loan?

This provision highlights a defect in most proposed tax simplification schemes, including most “flat-tax” proposals. The current system owes much of its complexity not to the computation of the tax, but on deciding what is taxable in the first place, and often for good reason.

This story was originally published November 8, 2017 at 7:22 PM with the headline "Tax reform an issue of definition."