What we have here, in my view, is the classic distinction between "simple" and "
simplistic".
jgw argues for a simple tax system, while
p-i-a points to complexities that argue the solution is simplistic.
Life is complex, and economic activity is blindingly complex. As a result, the tax system is correspondingly complex. It contains both the general case and a myriad of special cases. What is "fair" in a general sense can be exceedingly unfair in particular cases, as
pondering points out. The tax system has been developed to balance out the joints between general principles and specific cases and, in some instances, manipulated to benefit particular groups. Moreover, as he also points out, people modify their behavior to take advantage of certain rules through "tax avoidance schemes". Two glaring examples are embodied in the last two Republican candidates' fortunes.
Mitt Romney made millions and avoided taxes by structuring business deals to take advantage of lower "capital gains" rates - as do most investors, but on a much smaller scale. Hedge fund managers and other financiers are the worst abusers. Donald Trump took advantage of "carry over" rules that were inserted into the code by real estate speculators (like himself) to avoid taxes for a decade.
The problem, of course, is reaching "fair". Simple, I agree, is good. (Hence my argument for treating all "gain" as "income".) But the devil is in the details - e.g., what is appropriately deductible to offset various kinds of expenses and losses. Should, for example, State taxes be deductible? Should religious institutions get exemptions? Should interest expenses count? In what circumstances? What about children? Child care? Health care expenses? Start up costs? Capital investment?
What about relative "burden"? Should the tax code take into account that a 20% rate on a poverty-level income has a much greater impact than a 20% rate on a millionaire's "quality of life"? How much "inheritance" is reasonable? Should the tax code be "progressive"?
On another front, should taxes be compartmentalized or earmarked? For example, FICA and Medicare are taxed separately from ordinary income taxes. Should they be?
Moreover, the tax code needs to be flexible as circumstances change or as behavior changes to adapt to it - market distortions and loopholes. One man's lifeline is another man's noose and becomes another's loophole. If the code favors screwdrivers over hammers, screwdrivers become fashionable, and hammers get dropped.
Be careful that simple solutions don't become simplistic.
