On the other hand, a single tax rate is absolutely essential, in terms of economic efficiency and simplicity, when it comes to returns on business investment. The United States has three corporate tax rates, with the lower 15-25 percent rates phased-out in a way that imposes the highest marginal rate on companies with puny profits.

Then we add all sorts of extra tax rates on the individual returns from corporate profits. Capital gains taxes vary from 18 percent to 35 percent, depending on how much time passed before it made sense to sell the asset and pay the tax. That is a policy no economist could possibly explain, much less defend.

Half of all dividends pay zero, the rest pay five different rates. Congress is currently wrangling over how much "the other half" should pay, as though that has nothing to do with the fact that half pay nothing. The amount of interest expense deducted far exceeds the amount of interest income taxed at various rates. Capital taxes are an incoherent mess, causing maximum damage for very little revenue.

The main reason the individual income tax is so complicated is that it tries to collect different tax rates on each dollar of investment income, depending on who earned it and how. If such income was taxed at a single rate, a reasonable tax could easily be collected at the source. With a flat tax of 15-20 percent on interest income, for example, banks and brokerages could simply withhold that much before sending you the check.

It is only because we try to charge Smith a higher tax than Jones on the same amount of investment income that individuals are required to report reams of information about investment returns.

It doesn't work. Taxpayers can often arrange their affairs to keep assets in tax-exempt funds and foundations, or in the hands of relatives in low tax brackets. Half of all dividends, three-fourths of all capital gains and a big share of interest income are untouched by the individual income tax.

A low, flat tax on investment income is the simple way to simplify. Zero sounds like a nice round number, but I might settle for something less simple than that.