A few days ago, I was adding to this blog and mentioned that Mitt Romney had 2 good ideas and how one of them might help solve the fiscal cliff problem. But I didn’t mention that other idea.

And nobody asked. I was wondering if nobody was paying close attention. Maybe they were just in awe of my explanation of the first idea and didn’t think about that second idea that I just left out there. Or maybe they just didn’t care. But I do. So I’ll tell you about that second idea.

It was just a matter of seconds between the first idea (which I though was absolutely brilliant and may solve that pesky fiscal cliff problem) and that second idea. In itself, the first idea won’t cause the economy to boom but it may help us from sliding into a second recession.

The second idea won’t cause the economy to boom either. It won’t even stop a second recession. At least I think not. But I have been wrong before. I don’t think it happens that often but I know people who disagree.

The second idea probably is not even in the ball park of modest middle class tax relief when it comes to saving money on your taxes. But it is huge in reducing the middle class a pain-in-the-ass aspect of doing your taxes.

What is the idea?

Here it is:

… every middle-income taxpayer no longer will pay any tax on interest, dividends or capital gains. No tax on your savings. That makes life a lot easier.

If you’re getting interest from a bank, if you’re getting a statement from a mutual fund or any other kind of investment you have, you don’t have to worry about filing taxes on that, because there’ll be no taxes for anybody making $200,000.00 per year and less, on your interest, dividends and capital gains.

Of course you want to be sure I am just not making this up. So if you are not the trusting type, you can look it up at ABC News: Debate transcript.

So how does this reduce the pain-in-the-ass aspect of doing your taxes for us middle class types. I do my own taxes so let me give an example. I’ll just make up some stuff here so some over-zealous IRS agent doesn’t want to check my taxes.

Say for a wedding gift someone gave someone else (not me certainly) 1 share of XYZ corporation which the gifter thought was going up (after all everyone needs XYZs) and would make the giftee and spouse rich by their 10th anniversary. To make it more likely this one share would lead to a fortune, it was enrolled in a Dividend ReInvestent Plan (or DRIP) which would reinvest dividends and so forth in additional shares.

By that 10th anniversary the happy couple now own 2.583 share of XYZ with an approximate market value of twenty bucks. Then XYZ get new management and someone figures out that the company is spending way too much money administering these small DRIP accounts.

So the couple gets a letter from XYZ saying that the plan will be terminated unless the stock holder has at least 50 shares in the plan. So their options are to take the $20 or invest hundreds of dollars more. Not surprisingly, they take the money.

Then come tax time, they get a statement from the company. And then they realize that they need to fill out a tax form.
But the IRS doesn’t ask for much – just when they bought the shares and what they paid.

The problem is they misplaced all those quarterly statements they have been getting for 10 years as their dividends reinvest. So now they need to creatively come up with some figures that make sense. They could look up the value of the stock each quarter or maybe just make up numbers that seem to make sense. But how do they figure out how many shares or what fraction of a share they bought each time?

So it is just a matter of figuring which quarters the company paid dividend and how those reinvestments compounded to give them a total of 2.587 shares. Now they wish they paid a bit more attention to their math teachers.

Then after spending a few hours on that, they figure that they made a profit of $ 1.87. But they are not finished yet. They have to figure out how to apportion this between long and short term capital gains. This doesn’t take too long, just adds a bit of insult to injury.

But if Congress had only taken Mitt’s suggestion and modified the tax code, tax-time would be so much easier. After all if you have such a large tax code, there is really not much of a reason not to tack on a few pages that may relieve some of the pain.