I asked ChatGPT to reform the U.S. tax code. These were the results.

The U.S. tax code is notoriously complex, comprising thousands of pages of regulations, complicated rules, unfair loopholes, and 80,000 IRS employees managing it all.

The last major overhaul of the tax code was in 1986, signed into law by President Reagan. However, subsequent legislative changes have reintroduced many loopholes and complicated the tax system, resulting in a tax code that spans nearly 75,000 pages.

Many politicians, from the left and right, have suggested and promised to reform the tax system. Ben Carson famously suggested a 10% flat tax based on the biblical practice of tithing. Bernie Sanders has proposed to tax all income over one billion dollars at 100%.

Due to political biases and congressional gridlock, meaningful tax reform has been stalled. To explore potential solutions, I turned to ChatGPT, which is based on an LLM with comprehensive knowledge of the U.S. tax code.

After reviewing the complexities and inefficiencies, ChatGPT proposed several changes aimed at simplifying the system and promoting fairness.

1. Simplify the Tax Structure

Consolidate to Three Tax Brackets:

• 10% for income up to $50,000 (after the standard deduction).
• 20% for income between $50,001 and $200,000.
• 30% for income over $200,000.

Increase the Standard Deduction:

$25,000 standard deduction for all taxpayers, making the first $25,000 of income tax-free.

2. Remove Several Deductions and Credits

• Remove most itemized deductions, retaining only essential credits like the Earned Income Tax Credit (EITC) and Child Tax Credit.
• Treat long-term capital gains and dividends as ordinary income, taxed under the same three tax brackets.

3. Corporate Taxes

• Implement a flat corporate tax rate, such as 20%, and strengthen international taxation rules to prevent profit shifting.

4. Tax Filing Simplification

• Introduce pre-filled tax returns from the IRS for review and adjustment, easing the filing burden.
• Enhance IRS support services with improved online tools and customer service.

5. Maintain Incentives for Socially Beneficial Activities

• Retain a simplified charitable deduction for donations above a certain threshold (e.g., $1,000).
• Offer tax credits for renewable energy investments and energy-efficient home improvements.

6. Automatic Adjustments for Inflation:

• Index the standard deduction, tax brackets, and other key thresholds to inflation to maintain their real value over time.

This plan aims to create a simpler, more transparent tax system while ensuring fairness and equity across different income levels. The elimination of most deductions and credits simplifies the process while retaining key incentives supports socially beneficial activities.

There you have it! Simple enough! But would it work?

Do you think the majority of Americans would approve of this AI-generated plan?