Thank you Gratis, six minutes. Now past 11. Today's programming is made possible in part by The Advocates of Minnesota Public Radio contributors include the McKnight Foundation working to strengthen families and communities and US Bank serving our communities for 68 years. Good morning, and welcome to midday on Minnesota Public Radio. I'm Gary Yankton. The clock is ticking for millions and millions of Americans maybe for you tomorrow is tax day Across the Nation April 15th and millions and millions of people are just now coming face-to-face with the fact that filling out all those tax forms can be a real headache. The IRS says it takes the average taxpayer nearly sixteen hours to do their taxes are that's the average person it will take much longer. If you aren't average and paying your taxes is very expensive. It's estimated that Americans spend 150 billion. That's what Abby 150 billion dollars a year. Just trying to comply with the tax system. There are lots of plans afoot to make the process a lot simpler and less expensive flat tax a national sales tax, but critics say those tax plans raise another issue that surface is at this time of the year tax fairness this hour on. Midday. We're going to take a closer look at tax simplification and tax fairness. Chris Farrell is with us prices, Minnesota Public Radio senior business and economics editor and you can hear me to squeak on our son money program. Also joining us this morning is the dean of the Minnesota tax system state. Senator, Doug Johnson from Tower Senator Johnson has been the chair of the Minnesota Senate tax committee since 1980 that covers more legislative sessions. And anybody in Minnesota History. We also invite you to join our conversation. We're talking this hour about ways to make the text tax system Mor payer friendly. So give us a call to 276 thousand is our Twin City area number to 276 thousand. If you're calling from outside the Twin Cities, you can reach his toll-free at one eight hundred two for two. 2 8 2 8 2 2 7 6 thousand or one 800-242-2828 Senator. Thanks for joining us this morning to be here though. You haven't stopped talking about taxes Chris Ferrell. Let me start with you. Is it to fair to say that the tax system is really complex or is this just a case of people who are kind of adverse to doing math and taxes and the rest is kind of whining 15 minutes. Most people are not wanting a tax system is complicated and was disappointing as we've been talkin about Simplicity making the pass code simpler. What is getting more complicated 19th 1997 tax opened up a whole new slew of income limits and we have six capital gains tax rates and we had this monstrosity called the Roth IRA with its own set of rules. Different from the traditional IRA. So I think the tax system is complex. It has been especially complex for small business. But what Congress has managed to do is make it even very complex for working and middle-class people Senator Johnson the individual income tax form. Anyway looks pretty simple overall. Do you think we have a fairly simple system in Minnesota or is that is that short to Minnesota for him? Just the tip of an ugly Iceberg. Certainly. I would agree with Chris at the 1997 federal tax code changes really really made the federal income tax more complicated. He mentioned the capital gains changes, but different rates depending on when you buy or sell a stock the other Roth IRA as compared to the traditional IRA. Problems for individuals and also small businesses and I find it kind of disappointing of what Congress did in that act and also ironic all that now they're talking just a few short months after really really messing up the federal tax code and complicating it that they're talking about the simplification. I wonder if that's not just a little statement rather than we are real desire to do I simplify the code or a policy-maker. How is it that that these things can be created like this? How how does a system like this get great in the first place and get so complex and let me start out by being very honest. I have cared that tax committee since 1980. The federal tax code is too complicated for me to complete my own income taxes, you know, when we do a tax legislation at the state level we have technical tax experts. Help us draftees tax bills, but that that Federal code in and my particular income situation with my wife. We need a professional tax preparer had to do art to it to do our income tax. I think if you look at the state code, but we tried to do a 1987 was too dramatically simplify state income taxes particularly for those that are non itemizers and we had a one-page form that. Just worked out federal taxable income and I think that the experience showed that many many more minnesotans in fact could complete their there state income taxes, but what's happening even in Minnesota is there's that creeping pressure by constituencies legislators who want to add I knew credits new deductions and we're gradually losing that one page form and there are worksheets that weren't required in 1987. Even out complete the state income tax having said that I think that we would have to be very very cautious and watch carefully what Congress and the president might do as far as the federal tax code my reason for saying this and I have not analyzed all the flat tax proposals and Congress in detail, but my concern is that with a one rate flat tax and in fact many middle and and low-income minnesotans could be hurt a depending on how they do it. One thing that happens in Congress is parsley good intentions gone. Awry plus that desire to hide the true cost of a benefit. So you want encourage savings. So you end up with this thing called the Roth IRA you cut the capital gains rates, you want to help middle-income families going to college you have the Hope Scholarship you end up with a child care tax credit you end up with all these credit deductions often for a very good purposes for good reason, but what's the cost of them? It's very nice. If you can put it into the tax code cuz you don't have to say well we're going to spend 18 billion dollars on child care this year. Now you going to put into tax code, but then these these deductions in these credits, they interact with other deductions and other credits and other income limits and a lot of the complexity comes from Good Intentions gone, awry. Add to my office and then propose a certain credit or deduction and I fight every time you say well why don't you go to the appropriation or the finance committees in the in the legislature and try to get an appropriation for whatever you are your purpose and good causes. And as you said Chris they are many good many good causes and I try to tell them to go sell it to the budget Committees of of the legislature. Well, you don't like to do it that way cuz it's tougher if you can come and get it into the tax code as you say it's more of a hidden kind of spending and it and it doesn't and it doesn't the many cases benefit the general taxpaying public in Minnesota and sew in a weave weave in their soda done a pretty good job of not once again cluttering up our tax code from what it was in 1987, but there are huge pressures that to do that and to try to him Randy's the normal budget making process in the legislature tomorrow is the tax deadline April 15th. If you haven't filed your income tax forms yet. Tomorrow is the day and date today. We thought we would talk a little bit about proposals to make the whole process a little easier a little simpler tax simplification is the subject this hour and a state senator Doug Johnson has joined us a longtime chair of the Minnesota Senate tax committee. Chris Ferrell is with us, Minnesota Public Radio senior business and economics editor. And if you'd like to join our conversation Twin City area number is 227-6002 276 thousand or outside the Twin Cities 1 800 to +422-828-227-6000 or one 800-242-2828 Chris the flat tax plans and there are variations on it. But the basic concept that would it make the system simpler and would it make system fairer It would make the Cent the system simpler. You would end up paying a flat tax of 17% on your income or 19% on your income. Depending on what is the number we end up with an associate with Aflac tasks would do is patch consumption or text you earn in a week all that tax your earnings been in the ways task consumption what your savings are free of taxes so you can save your money for your taxes and then we passed your earnings. So it's if it's it it is a simple system. So I would tell I would tell the taxman how much money I got paid and then I would multiply that by the percentage 20% or whatever. It is send that check to the government in that VA. For example, you own a home. I own a home. I deduct my interest payments. I bought the house based on some vague calculation that I'm going to be able to deduct my interest payments when you move to a world of flat tax you can no Go to doctor interest payments on your home mortgage. Now. The assumption is cuz you can't stop any of your interest payments. Also don't pay taxes on the interest that you make that your earn it. So if you put your money into a certificate of deposit, you're not going to pay any taxes on that interest income like you do now at least I'm Shin is alright interest rates will come down in that environment and will be an adjustment in the housing market and you won't lose much money, but it's a big adjustment is a big change you get rid of charitable contributions. We have a whole sector of our economy the nonprofit sector of economy, which is built on charitable contributions were asking the nonprofit sector of our economy to do more these days not less if you think about welfare reform non-profits haven't asked her really contributed in that section of our kind of you get rid of charitable contribution. It's a big upheaval to get to this simpler system. Then there's a second question that you Rage which is fair and that is a philosophical issue. Is it a fair system to have a progressive income tax system. Low income people say pay zero up to some point and then you pay 15% and then 20% of every wanted design your your progressive income tax system. Some people say that's fair but they're also loopholes in that does not so Bill Gates doesn't pay any taxes because it lupul's I don't actually know that but you know, it's probably a reasonable assumption. Therefore we're going to acknowledge reality and so you can't have a progressive tax system about loopholes to what we're going to say is we're going to text everybody to 90% And so at least the wealthy will pay something what it does turn out though, cuz you will from a tax point of view increase income inequality in the country because it will feel so I have a lot more savings. Center what do you think about us a good one rates a flat tax and I think that probably if you pulled the people this country, that's a great. Let's get rid of this complicated attack system not knowing what the consequences are for their individual families and I would be particularly concerned that it would not adversely impact on many middle-income families. I think it's put I think that certain low-income families could be hurt as well. Chris. One of the determiners would be how high would the standard deduction be that's right. If if there was going to be a flat tax cuz that you know, what that standard deduction more than compensate for the elimination of the mortgage deduction and the charitable contribution as an example with the two that you mentioned for minnesotans who have a Fairley High a burden of taxes in Minnesota the current federal system actually result in some benefits for minnesotans in that up. It's like a subsidy to to Minnesota and that you can deduct your your state income taxes, which are fairly high in Minnesota is compared to the nation and you can deduct your property taxes. That would probably be gone under a flat tax and so in some circumstances higher tax states, like Minnesota could be a loser in that process. And again, you have to look at this at the standard deduction and whether that would be compensated. My guess is that that some middle-class families would come all better but but many many potentially those that own homes and have a fairly large mortgage interest payments would be losers under the process. Do you suspect people are willing to pay if it if it means our taxes are going to go up how much would they be willing to pay for a simpler system of postcard system that for the taxpayers? That's the bottom line. How much do they pay? And you know, we have a fairly complicated property tax system soda, and but what the taxpayer who gets tough the tax bill on their house or their a business their biggest concern is what are my taxes this year as compared to the previous year and and that's the focus. So I think if if if people in our state or other states knew that simplification meant that they were going to be paying higher taxes, they'd lose interest in simplest gation the very quickly and then the other big proposal is to retail sales tax of these radical reform proposals the big changed. And the retail sales tax. Typically the number that I've seen revolve somewhere around 20% in order to get rid of the income taxes then replace of the retail Sac tax system. And that would be just going to the grocery store or the hardware store or wherever you pay. Your retail sales tax is right now it would include you're preparing my taxes. I would pay you would charge me at 20% So it's retail sales on all goods and services again. There's a lot of questions about that is or how regressive is it then if you try and make it less regressive cuz you want to help out low income people. Then you reintroduce complexity into the system may be less than we have now, but you reintroduce complexity. Plus there's a large body of work that shows when you get anywhere near 20% tax avoidance. Just simply skyrockets. Which brings us to the next question we have now A system that depends on voluntary compliance, although the IRS of course checks up on you. But essentially it's a voluntary system have we found any evidence that the system has become so complex that it is cutting into the willingness of people to pay their taxes. He's on that but at but I guess I think that's occurring, you know, where people just throw their hands up. They're going to be good citizens, but they can't figure any of it out. So they just throw it in the wastebasket and walk away from anything that happens, but I think it's pretty it's pretty well-known that a lot of income gets does not become taxable there for the for the very wealthy. Has Chris mentioned the loopholes in the law how many of which have been closed incidentally but they're still at the opportunity but you know the system absolutely it is very complicated in certainly the the IRS and others don't audit all the income tax forms that come in on other light pink. There's been more of an effort to do that, but we certainly have an imperfect system and then you live in a world where part of your world you pay your income taxes and part of your world many people live with an underground economy will pay cash for someone to come in and do some home repairs or they have childcare and you know, they pay cash for childcare. There's a whole vibrant underground economy, which is essentially tax avoidance economy. And I think most people actually live in both are participate in both economies rather than just saying it's one or the other The other thing where does show up and you I'm sure you see me Senator Johnson these annual reports from the I believe it's the IRS. There's his tax cap averages something like a hundred billion dollars and what it looks like. It's just a lot of people making mistakes on their tax forms or not actually trying to evade taxes. They simply make a lot of mistakes in doing their tax forms and and that there has been a lot of studies showing that we're tracking the shower about tax simplification. Is there a way to pay the pay the tax man his due and not to make it so complicated and in the process of simplifying it. Is there a way to keep some fairness in the system. That's our subject this our our guests. Chris Farrell is with us, Minnesota Public Radio senior business and economics editor Center Doug Johnson has joined us from his home in Tower. He is the longtime chair of the Minnesota Senate tax committee. And if you'd like to join our conversation if you've got some questions or comments about How to make a tax system simpler give us a call or Twin City area number is 227-6002 276 thousand outside the Twin Cities 1 800 to +422-828-227-6102 for 22828. And of course a reminder if you haven't done your taxes yet tomorrow is the day April 15th is today is the day to to get to work on that. There was a study done a few years ago indicating that for people who really want to do the right thing here they get there they work their way through the system and they find out that they're they they have a question. They call the IRS. You think that would be the place to get your information from in about half the time the IRS gives you the wrong information. That doesn't that indicate that there is something seriously wrong here absolute has a very good indication of what's wrong with the system. What? Turn to one of these radical systems that are that seem to pose some problems. Is there a way to take the current system and Tinker with it enough that would would really make a difference. If I think you could do a fair amount with the current system part of it would be and I know this may be calling for Nirvana, but it would be what Center Johnson was talking about having a lot of the good things. We like to happen in our society be done on the the budget expenditure side. Not on the tax site may put it out there tell people we're spending this amount of money on this. We believe that you know, that that we should help out more paying for students to go to college. We should just help out more we're going to spend this amount of money this year doing it. Here it is. That's the amount if people get upset about it. They can vote against it or they can vote to increase it not hide it and the tax forms of that would do an awful lot. Then there's a whole series of proposals in Congress, which will cause For the modified or the muddled flat tax they move toward simplification. And the way they do to see they tried to preserve the two main deduction that matter for the three main deductions that matter home mortgage deduction the charitable contributions and the fact that you're not going to mess with the municipal Bond financing that accept nature Municipal Bond financing. That's a pretty tough one preserving those and then trying to get rid of most of the other deductions exemptions loopholes. You don't get rid of the capital gains a differential between the capital gains tax rate in the ordinary income tax rate in a number of other things and the the trade-off that you that you're offering the people use to the extent that you do this you're going to bring rates down you maintain a progressive system, maybe two rates, but you'll bring rates down as far as you possibly can. We know it can be done. You can simplify without it without the flat tax and certainly isn't the one you mentioned the federal Congress. In fact that I remember was the efforts of of the former Senator Bill Bradley. I working with the of the Reagan Administration. They made me a juror tax implication in their 1986 tax bill, but you know, it's really gotten cluttered up since then. I think they should move back in the direction that that you mentioned that Chris. I think it would be politically impossible. If not poor policy. They ever get rid of the mortgage interest deduction or charitable contributions or the municipal bond interest that you that you mentioned and Minnesota we proved in 1987 that we could simplify the Minnesota state income tax that called. We went to the one page short form. Was it easy to do it? It was a terrible terrible experience in 1987. When we did that you cannot imagine the pressure you get from groups or individuals and through their legislators when you try to get rid of something in the tax code and they don't want to hear about what why don't you go through the regular budget expenditure process and I can still remember 1987 when we simplify the tax code and I had an unbelievable number of letters. I had a long table at the end of the session of letters that I still had to answer at the conclusion and and the pressures are are are very very great. It's very easy. In fact to add a new credit or deduction because there's a constituency behind that but to try do to simplify the system is very very difficult and I wish the Federal government, I would not have undone much of the simplification from 1986 but it becomes a political agenda and candidates for either federal or state office. They issue position papers and give speeches for this tax credit for this new deduction or whatever and in what happened in Congress, of course is President Clinton got his tax credit and deduction agenda in the Republican caucus Republicans in the Congress got theirs and both of their proposals Republican and Democratic like further complicate the tax system. Lots of colors are on the line here with some comments and questions about tax simplification. And if you'd like to join them again our number in the Twin Cities to 276 thousand outside the Twin Cities one 800-242-2828 and we'll get to some of those collars in just a moment Chris Roberts on the next All Things Considered some cities in southeast, Minnesota where he at Administration program to free up money for the Upper Mississippi river front will restrict local property rights concern is the creeping. Form of government camel's nose Under the Tent the toll in the door sort of thing. All things considered begins at 3 on Minnesota Public Radio k n o w FM 91.1 in the Twin Cities pretty nice spring day across Minnesota today cloudy to partly cloudy eyes ranging from the mid-forties and Northern Minnesota to the low 60s in Southeastern Minnesota Twin Cities partly cloudy through the afternoon with a high 55-60 right now a ferris guy in the Twin Cities and 49° programming on NPR is supported by the University of Minnesota Cancer Centers open house a science fair for grownups and kids Sunday April 19th information at 6 to 48484. We're talking to her about the tax simplification. If you have a question or comment give us a call or I guess this is our state senator Doug Johnson and chair of Minnesota send a text committee. Chris Farrell is with us, Minnesota public radio's business and economics. Hyrum every week on our sound money broadcast and it's a first caller is from Burnsville Kevin. Go ahead place kind of a hybrid between a flat tax or you're not incorporating anything else and having the progressivity of the more income you get the more you pay in. I am at a certain level you don't pay anything and starts from there. So you'd have let's say the first $20,000 is free. And then you'd have what type of 2250u unicum 25% and then maybe another 30% over 50,000 something like that level but it's my understanding that there have been several proposals that have a graduated a flat tax like the caller is is mentioning. That's right. You like a straight formula mass for me when equation easily come up with you just ask someone who's like a math major or whatever. I mean simple program nothing major out there the problem is that the calculation side the actual math is fairly simple. It's what are you going to put in there? And how are the phase-outs going to be but there was a one proposal Center Johnson de Medici proposal which is a goes from the progressive income tax goes up to about 40% and then it has this super Ira attached to it, which is all your savings is is tax-free. So one way of thinking about it as a progressive income tax system like this gentleman is calling for plus a super Ira the problem is when you actually get into writing the rules and the phase-outs and moving your reintroducing complexity back into the system a philosophical question Center. What about the idea of using the tax system for to make policy social policy with scenes at the root of most of the deduction? Some complications that get introduced. Is that a good idea or should we just use the tax system as a way to raise revenue? Nothing more nothing less could be used for social policy. I believe that that should be done in the budget expenditure committees in the legislative Slater or the Congress having said that the federal Congress and to a lesser extent the Minnesota Legislature does do social policy in their in their tax code. I think we've done a pretty good job since 1987 of of not doing math. And as I mentioned earlier in the program I try to divert and encourage folks to go to the budget expenditure committees. They don't want to go there because if they can get into the tax code it doesn't have to be reviewed every year like would have to be in the in the District committees in the legislature, but that certainly is a goal that I tried to To stick to and you know, it's texture. You don't you're not always the most popular person when you when you do that, but the other thing we do in Minnesota is we try to conform to the federal tax code and that was particularly difficult this year for a policy standpoint because I am in my colleagues felt that the federal government had done such a lousy job in their 1997 tax bill and we had some real reservations in the senate about conforming to the new Roth IRA, which incidentally is a very popular program. But as we analyzed it we saw that it's tax expenditure cost was fairly minimal in the first several years, but the tax expenditure cost at grown to over 50 million dollars by the 1906 1907. A biennium and there's some real questions about whether or not the traditional IRA is not in some way superior to the new Roth IRA. But having said that we did that can form for two reasons. It would have really complicated Minnesota's tax system even more if it wouldn't have had had had some form and also they become so popular that that legislators were getting a lot of pressure to conform on the Roth IRA, even though it might not be the greatest tax policy in the world Bob your question. Please flat tax concept ever since the last presidential election that what I seem to be hearing was talking about a switch over to a totally flat tax because it would simplify the tax system. But all that would do is change the calculation of the numbers on the chart that everybody looks up anyway. And Sonia and to change to a flat tax wouldn't really affect the weather at the complication of the taxes. But what it would do is eliminate the deductions that we can take and then it sounds awful like increase the percentage we have to pay when we finally do look up on that charger for income is below 50000. So it seems to me as fairly straight and obvious that it would hurt the average taxpayer while while helping the people who are in the high-income back is because it would bring their percentage down and then the people in the higher income back if they tend to have most of them coming to terms with capitals game and not so much and turn to straight in, now I know is rates all got cut as well and it just seems that the whole tax burden is being shifted to a lower-income people that's going to come in here Chris. If nothing else the flat tax would simply make things a lot simpler. It would make things a lot simpler. It does make things a lot simpler. The one of the few fun tax books to read now admittedly where we're pressing the margin hear about something fun at that butt hole in her Bush go to Economist at Stanford University wrote. This book called a flat tax and it's out in the second edition and it does lay out all the permutations of the flat tax and they're they're using I believe a figure of $36,000 family of four before you would start paying any income tax before the flat tax kicks in a lot of middle-income people would see their tax rates go up slightly though. They would see it go up a little bit and then wealthier people would see their tax rates go down to the extent that however, they would pay taxes. I mean that is very clear. There is no such thing or you know, there's less of a reality of tax avoidance on the wealthy or level but there was a philosophy underline the flat tax. It does need to be taken. Seriously what's driving the flag tax is parsley a desire for Simplicity. It's partially a desire to get the government of the business of social engineering so If I want to spend my money on charity, I will spend my money on charity government's out of this business. However in the third Parts is strong Believe by number Economist that we need to increase savings and investment and if you create increase savings and investment, you'll boost economic growth and that benefits everybody that is far more important than some of the questions about an equity they've been raised about the flat tax. So if it's a serious proposal and it has some very important trade-offs that need to be thought through I'm skeptical about it, but it does lie towards Simplicity in what's the the authors are attempting to do is increase savings investment, which they believe will increase well for everybody Bob, you're a question Place quick the president's wife pay their taxes this year in round numbers. They made 569 thousand a P90 2016 % take my example. For instance. I made 24000 last year sale. Employee taxes paid in 8400 IP 35% good God, how am I supposed to live on this meager income? Secondly when I combine it with my wife's income, the percentage dropped a little bit. It drops down to 29 and 1/2. The government is killing it. I mean, I have no money left over at the end of the year when I finish writing my check today. I'll have $1,300 to my name. I can virtually no savings account. I try to put money away to retire on I can I can't afford health insurance. I mean isn't there somebody in government who could get a brain and see that somebody like myself who who make it between 20 and 30000? I mean I should get a big excuse me a pat on the back of a purple heart for working for myself number one, but why am I taxed at these ungodly rates it mean if I leave 500,000 16% I mean to explain this to me. I'm I'm really stupid. I can't figure it out. Wonderful government people explain it to me and I'll listen first of all, you're you're not stupid and you you share the frustrations. I think of an increasing number of of taxpayers. I know in my own personal family situation. I had to go to the bank yesterday and take a short term loan to to do the estimated taxes and a regular federal and state income taxes. So there is a huge burden and I often think you know, the federal taxes are much more significant than the state taxes all old Minnesota state income taxes still by the higher in the country, but I often think now what kinds of benefits do we get from the federal government for all those taxes that we pay and I mean the list of things you got National Defense, of course. but it just seems like at the state level where a lot of your taxes are going for Education as an example of the federal government has basically gotten out of the business of education and I guess my bottom line is And I'm a Democrat. So I suppose it's not traditional to say this but I think that governments spend too much too much money and I think the federal government and the state government have to do a better job of spending taxpayers money. So those taxes can be reduced. I ask you this little history here Chris in the old days back before JFK. I think we had a top tax rate in this country of 99 at that time were just the rich people paying most of the taxes and the little guy getting off or where the rich guy is avoiding the taxes and little guy still getting the 90% rate came down and slow is 28% of the day thinking in in 96 was because the wealthy were not paying the taxes and that was a. Of time where there was an enormous gap between the capital gains tax rate. And the ordinary income tax rate and it was the lawyers and accountants Full Employment Act at that time, which was how do you transform ordinary income into capital gains income and they are there was all kinds of Shenanigans in a lot of the problems that that that people are still dealing with the day about some of those I don't remember in the 1980s no, real estate limited Partnerships and railroad limited Partnerships and dry oil. Well limited Partnerships and whatever anybody could sell you and all they said was looking I got an onion and it doesn't you know, you going to avoid taxes well in the end these things were terrible investment. So we moved a little bit away from that World Slightly late, but at 90% the reason why their crew to be this desire to bring down the tax rate was no one was paying that right. So let's bring it down and parsley capturing. The the sense that is still out there and part of the appeal of the tax rate is look we got to bring it down to pay something. That's my recollection of the of the 1986 Federal Tax Act. Simplification is that there was a shift of the tax burden from the wealthiest people in this country on to the middle in and low-income people at 86. It's actually write six and salt to the listening audience. I think that you should demand of your elected officials whether the federal or state a level that if they're simplification that they're not just shifting those tax burden from the from the wealthiest members of our society under the middle end and low-income people and I think typically with a flat tax in the way. It's designed. My biggest concern would be what does it do to middle-income taxpayers and they should know up front that many of them. In fact would get a tax increase rather than a decrease through the simplification that would occur if I could briefly also mention to eat. Fried national sales tax in Minnesota, but I think even independent analysis of our of our state's tax burden would would show that it's it's it's pretty fair. It's fairly Progressive design for middle and low-income people and in the case of the sales tax, we do not tax food. We do not tax clothing. You do not text a prescription drugs. So we've we've tried to design fairness into both the sales tax in to into the income tax and the independent analysis would confirm that all of our burdens are high week and they have a fairly a fairly reasonable and fair method of taxing income in our state Joe your question, please A couple of years ago my dad died and left me a few thousand dollars and last year. I put it in a mutual fund and I'm saving up for retirement and then found that I had to use the long form even though I hadn't taken any even though I didn't have any actual income from this stuff. It seems that these mutual fund thingies buy stocks and and some of them give dividends and you have to report those in one place in the capital gains. You didn't get another place and it's really kind of weird and I was thinking it would be a whole lot easier either. There's got to be a lot of people in the same boat. A lot of us are trying to save for retirement have a few thousand in mutual funds are few thousand in stocks or something. I had to suggestions one is if you don't actually take any money out then I think that Your dividends or whatever they call him should be deferred until you do. I mean if you're not taking any money out of the damn thing, why should you have to pay taxes on it? I mean, I know you have to pay a capital gain when you sell the damn thing, but if you're not selling it, why should you have to pay tax on it? And if and if that's too complicated or or something, why can't they put for small amounts? All like on the short form? I always used to use cuz I just had my salary on the short form. It says if you have interest under $400, you can report it on the short form. Well, if if they insist on taxing these silly dividend things that you don't actually get why can't there be a line on the short form for those things quick comments on the East Paseo again for a couple more College. First of all, I'm hoping our economy continues to grow and that we can actually cut income tax rates. As soon as we get in into a position to be able to raise the standard deduction that tends to help people use the short form instead and maybe Chris you can expand on that. He's captured on something to taxation of mutual funds. It's just a pain. It's a nightmare. No one enjoys it is he's he's capture something that is very true part of the problem that we always running is we're moving more and more training economy. I think is one of the perversions of the 1997 Act is if you are making an income of $40,000 a year and you know, it's from labor or you're making income pretty clothes that before you put in a close to $40,000 a year and it's and it's more on Capital, you know, you have very different tax rates removing tour the system where Depending on where your income flow is coming from you. I can't have different tax rates in one of the definitions of equity in the tax code is that people of equal incomes pay no matter how you to find it pay fairly equal taxes better to clip Dividends are clipped coupons than 10 work with your hand finds have not been as popular and item to purchase that the tax-free and many people have no seen this rapid growth in mutual funds are other kinds of Investments where you know, some of those I've been running like 20% a year and people have been putting their money in those and of course the capital gains are our taxes and you know, I had to get the time you you get that capital gain and so, you know, there's an upside and a downside when that happens in the NBA. We have time for one more call her. I think Jim. Go ahead. Thanks for taking my call. All I'd like to say is that every time somebody talks about texting notification? I think most of us better reach for a wallet with you and I yes but simpler doesn't mean I'm non-progressive after all when you fill out your taxes. What are you doing by going to something like a flat tax? That's just a table look up its it to try to sell a non progressive tax system. Because it's simpler is Ludacris other things that are difficult. I haven't finished my taxes things that aren't so difficult have to do with your schedule C is if your small business man or something like that, if you're just a wage-earner, it's simple enough. Well 16 hours as the eye. IRS just your average run-of-the-mill guy 18 minutes for you. And when they twins Wendy's isn't supposed to call in and talk about selfie selfie being self-employed and self-employment taxes. I have sympathy for them from my own family experience. It is very very high before we run. Here it is there a likely going to be anything significant happening here this a great political issue people talking about this a lot but it is anything likely going to be running around the country and you know, you have these meetings and you can do some fundraising and what makes me disappointed is I guess in in all naivete. I thought that you know, the simplification been part of the presidential election part of the whole discussion and then you end up with this 1997 Abomination. So I'd like to actually see some action as opposed to you know, let's stop the tax system. 4 years from now and you don't have to come up with something new by then. It's it's it's the rhetoric is way too heated better. You think anything is a practical matter is going to happen with us or we'll let there just be around for a while as I can a campaign issue credits and deductions and application of the tax system. I guess my advice to to go to the listeners would be government try to control spending and get my tax rates cut and I mean the experience in in 97 as Chris said that terrible changes they made net federal tax code. I mean, it's a it's a it's a it's great. If you're up an accountant that does tax returns, but it's really become more complicated. Thanks a lot for joining us supposed to be like you. State senator Doug Johnson from Tower Minnesota longtime chair are the Minnesota Senate tax committee and Chris Farrell Minnesota Public Radio senior business and economics. Editor. Once again, I'll reminder a nasty reminder in case you forgot tomorrow is tax day April 15th. That's the day you are supposed to get your income tax forms in and you have a small I would that be 24 + 12 36 hours 36 hours and 5 minutes to do. So. Midday, Minnesota Public Radio will continue in a moment. It's been a long hard year for the people of the Red River Valley struggling to rebuild their homes communities and lives After the flood of the century. I'm Rachel reabe join us for a special to our Main Street broadcast live from East Grand Forks tomorrow at 11 on Minnesota Public Radio know FM 91.1 in the Twin Cities. Today over the noon hour. We're all going off to the National Press Club us Postmaster General Marvin Runyon at the Press Club. Now for Garrison Keillor.