100 Million Unnecessary Returns

What this book actually teaches

Michael Graetz's central argument in 100 Million Unnecessary Returns is that the American income tax system is not just complicated — it is so structurally broken that incremental simplification cannot fix it. Graetz, a Yale law professor and former Treasury Department official, proposes replacing the current individual income tax system with a combination of a value-added tax (VAT) and a simplified flat tax on upper-income earners, while providing a payroll tax credit to protect low-income households. The result, he argues, would eliminate the need to file a federal income tax return for approximately 100 million Americans — roughly two-thirds of all current filers.

The book opens with a systematic accounting of how the U.S. tax system arrived at its current complexity. Graetz traces the accumulated layering of credits, deductions, phase-outs, alternative minimum tax provisions, and carve-outs that Congress added incrementally over decades — each individually defensible, collectively unnavigable. He is particularly pointed about the way tax expenditures (deductions and credits that function as spending programs) have grown to the point where the nominal tax rate and the effective tax rate bear little relationship for many taxpayers. The system, he argues, cannot be simplified — it can only be replaced.

The VAT proposal is the structural core of the book. Graetz argues that a VAT in the 10-14% range, combined with eliminating individual income taxes for households earning below roughly $100,000 (indexed), would raise comparable revenue while dramatically simplifying compliance for most Americans. Upper-income households would continue filing returns under a simplified flat rate structure. The payroll tax credit provision is explicitly designed to address the regressive nature of a consumption tax, which otherwise imposes a higher effective burden on lower-income households that spend a greater share of their income.

Graetz's treatment of the political economy of tax reform is as important as the policy proposal itself. He explains in detail why politically attractive simplification proposals consistently fail: the existing complexity is not accidental — it reflects the accumulated legislative victories of interest groups that benefit from specific provisions. A VAT is politically toxic in the United States because it is associated in public perception with European-style government expansion, and because retailers and consumer advocates have historically opposed it. Graetz is realistic about these obstacles while arguing that the status quo is not stable over a longer horizon.

The weaknesses deserve acknowledgment. The book was published in 2008, before the Affordable Care Act added substantial new tax complexity, before TCPA 2017 restructured corporate and individual rates, and before the political environment shifted in ways that make bipartisan tax reform even more difficult to envision. The specific income thresholds and VAT rate proposals are dated. And Graetz writes for a policy and law audience — the book is dense with legislative history and structural analysis that will engage tax professionals but slow down general readers. It does not read as a popular economics book.

Essential reading for tax professionals, policy wonks, and anyone who wants to understand why tax simplification proposals consistently fail and what a structurally serious alternative to the current system would actually require.

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About Michael J Graetz

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