US Senator Warren Introduces Bill to Simplify Tax Filing
warren.senate.gov
warren.senate.gov
Would it actually give people all the deductions and credits they could get through a detailed analysis? I highly doubt it. TurboTax doesn't ask 1000 questions for fun; most of them matter because of the insanity of our tax code.
It would probably put turbo-tax out of business though, this is true. The default, free, option is going to win against a paid product.
All this will accomplish is making sure that tax preparation is back where it was two decades ago -- where the Actually Wealthy hire a person to do their taxes and get the right deductions, and everyone else gets stuck with an opaque bill which they can't afford to assess for accuracy. This is a far more regressive system than what we have now.
Don't accuse me of being a TurboTax shill. I have nothing to do with them, besides doing many hours of complex taxes which would have cost far more in-person than with TurboTax (and no, I'm not under any circumstances blindly entrusting the IRS with correctly calculating ISO AMT nonsense.)
I understand the point you're making and it's a valid one, but that sentence really isn't actually true for most people.
If you get your income from one job during the year there's an excellent chance you have almost no variables to work with. Maybe owning one piece of real estate or a dependent or two, but the standard deduction tends to wash out almost everything else for most people.
What you're saying is somewhat true for most people who itemize deductions, but most people don't and have no reason to itemize deductions.
The people who don't itemize have almost no burden right now; you can fill out a 1040EZ or use TurboTax free edition.
The middle class is who is going to get screwed out of deductions.
Also even if you have a drop dead simple tax situation, it's still navigating and filling out a form that reads like the worst spaghetti code. "Go to line 31 on form XYZ". Even if it cost people 30 minutes, that's still less than just writing a check and putting it in the envelope.
Young me wants this so badly.
Who do you think is subsidizing the free edition?
It's time to kill third party tax products.
https://www.irs.gov/pub/irs-pdf/f1040ez.pdf
Its literally one page. The 2nd page is for the simplified instructions (full instructions / documentation is a lot more complicated... but if you qualify for the 1040EZ its a very very simple form)
If the IRS could put the 1040EZ online on a free website, that'd be great. I think I can support this Senate bill that is more or less suggesting that.
Unfortunately, I now own stocks, bonds, and am claiming deductions on mortgages and church contributions. So... I no longer qualify for the 1040EZ and have to use the more complicated form. But I bet a lot of normal people will benefit from the 1040EZ Form.
Intuit is simply rent-seeking, plain and simple.
> Unfortunately, I now own stocks, bonds, and am claiming deductions on mortgages and church contributions.
There is _no reason_ the IRS couldn't handle this data as well.
Paid tax preparers make a mistake on roughly 60% of the returns, while the typical person only makes a mistake on 50% of their returns.
So... yeah. In any case, I use $20 TaxACT but do miss Intuit's integration with ADP's payroll system and a lot of their databases.
In any case, the $20 to $50 you spend on tax-preparation software is honestly a serious improvement to the status-quo... of paying an unregulated, mistake-heavy part-time tax preparer to do the job for you at roughly $200+.
If we can switch everyone towards doing their own taxes with TurboTax Deluxe edition at $50, that would actually be an improvement. That's the sad state of tax preparation in the USA.
At $50 for TurboTax (which is still more than the $20 I pay for TaxAct), its still an adequate solution that beats the current status quo.
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So my question to you is: do you not realize how bad the status quo actually is? The average preparation cost is $200 according to the IRS, which is very far above "TurboTax Deluxe edition", and far far above any of the other 3rd party tax solutions.
If people would prepare their own taxes with TurboTax, life would in fact be better than the current state. Period.
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Now we can imagine the IRS creating a website and everything will be Rainbows and Unicorns, but lets not forget about the Obamacare website. Turns out that competent web-developers are expensive, that government employees aren't competent web-developers, and finally aren't even that competent at figuring out contractors.
I can imagine a future where the US Government raises wages for once, builds out some competent project managers, retains talent, attracts talent, finds a contractor who can help them develop this hypothetical website, and then hope that the next $500-million+ web-project is actually successful.
Or... you know. I can just recommend people to use TurboTax (or TaxAct). Which already works, and is better than the status quo.
You do realize that the IRS already gets a copy of your W2, 1099s, 1098s, etc, right? You can order up a transcript of the data that the IRS has on your file for a given year and they have a pretty complete set of data from all the various mandatory forms.
What they don't have (and can't have, because only you have them) is data you'd need for schedules C and E and much of the deductions for schedule A. Guess what? Intuit and your local "tax guy" don't have those either, unless you give it to them.
I worry more about the tax law changes that might come if people started paying EVEN LESS attention than today about how their taxes are calculated than I do about the IRS ability to execute this.
Clicking a webform and getting a bill or direct deposit divorces people from the fact that this is real money in play.
But at the same time, the IRS has no real competitive alternative to something like TurboTax. Sponsoring the creation of yet another tax-preparation software feels like XKCD Comic number 927
Given how damn good turbotax is, do you really trust the government to write something better?
Now if the government pledged to standardize API access between state and federal, and made it easy for startup companies to light a fire under incumbents, you get competition and government action/improvement.
Yes.
https://www.whitehouse.gov/digital/united-states-digital-ser...
EDIT: I both know people at the USDS, and have interviewed with them. They are passionate about getting tech in government fixed. I believe (if Congress doesn't defund them), they'll deliver.
But 18f is a relatively small project (~100 employees), and overall USDS is relatively new. Veteran's Affairs for example STILL isn't digitized and is almost entirely a paper-run system. USDS is likely going to focus on that as opposed to building out a new website for the IRS.
Just realistically speaking, the kind of project you are proposing will take years to deliver version 1.0, and there's no guarantee that the USDS team will even handle it as there are definitely higher-priority tasks.
You are grossly overestimating the US Government's capabilities. I'm not lying when I say that the US Government needs to
1. Create a budget (we're still under continuing resolutions here. A budget hasn't been passed since like 2012)
2. Raise wages for once to attract talent (it has almost been a decade without wage growth, very bad for morale). FYI: the government shutdown threats (ie: federal employees / contractors don't get paid randomly) aren't helping.
3. Build up the IT teams, and I mean more than just a single 100-man team at 18F. The entirety of 18F, as good as they are, are way too small to handle a project on the scale of "Recreate Turbotax for All Americans... for free".
4. Build up project managers in the meantime who can handle contractors.
5. Hire competent contractors to build things out.
6. Execute all the above while Congress continues to refuse to pass a budget and the Republican half of America seems like they're going to lynch "greedy" Federal Workers who don't actually have great pension plans anymore (only the older Federal Workers have the crazy-good pension plan. Any millenial / college age kid who gets hired by the Feds don't really see as many benefits)
There are some fundamental problems here that need to be fixed before the US Government can tackle a project like you say successfully.
EDIT: one of the leading Presidential Candidates (Ted Cruz) is on the record for wanting to "Abolish" the IRS. People in general don't like Federal Workers, and that harms recruitment efforts. Which harms the kinds of project you want to start up. Its partially a self-fulfilling prophecy at this point.
> Raise wages for once to attract talent (it has almost been a decade without wage growth, very bad for morale). FYI: the government shutdown threats (ie: federal employees / contractors don't get paid randomly) aren't helping.
This is hard to be fair. If you want to work in the USDS, you need to undergo a drug test (which is inconvenient even if you're not a drug user), an extensive security background check, and you can still be drummed out if they find something they don't like after you've already been working there for a bit (I asked). Compensation was fair though (~$132K/year, full medical benefits and TSP retirement plan access).
The tech industry is always going to be able to attract top talent better than government in this regard.
I agree with the rest of your post.
It has: https://www.irs.gov/uac/Before-Starting-Free-File-Fillable-F...
I have relatively simple taxes but I did hire someone for a few years because I was receiving a 1099 for some part time work. I had no idea what to do to pay for this self-employment.
This bill would have made that process easier and free for me. My 1099s and all of that relevant documentation are provided to the government. If the government had estimated my taxes and sent them to me before I was required to file them, it would have given me a much better idea of where to start, while still leaving me the option of hiring a 3rd party if I thought it in my best interest.
Which, by the way, is ridiculous.
There is a very large swath of the US population (people like this, using 1040EZ) that should not file taxes at all.
The government already knows what you made, it already knows what it withheld, and it already knows your (most likely) net refund. It's a pointless, stupid, almost spiteful waste of time to make people go through these motions - almost daring them to get the numbers wrong ... the numbers that the IRS already knows.
Any substantive, meaningful tax reform needs to remove filing requirements for this type of taxpayer.
"The middle class is who is going to get screwed out of deductions."
I don't want to pick on you, but these two sentiments said so closely together proves that "middle class" means whatever the speaker wants it to mean.
Less-wealthy property owners might own property in a low-enough cost-of-living and low-enough-tax state (or have bought long enough ago) that their mortgage interest and property tax is still less than the standard deduction.
- Have a job that pays enough to get you in the top 5%
- Don't own a house
- Live in one of the 7 states without an income tax
That's going to be a very small set of frequent-travelling professionals. Also, having a top 5% income but no savings/investment income from previous years of saved top 5% income seems unlikely.
No it's not. It's a huge swath of technology workers (and other professionals) that live in cities with expensive housing. Many of the commenters on HN fall into this exact category!
You're right about savings & investment income, but that won't have anything to do with your deduction status for most people.
Once again, we are giving away more of our power for convenience.
In general though, it seems some of the most popular itemized deductions are:
1.) Deduct state income tax 2.) Mortgage interest 3.) Child-oriented tax credits
Most deductions seem to favor homeowners and families.
The default is to go with the standard deduction which would be throwing away money.
IANAL but as per the text of the bill you won't be "eligible" if you itemize.
" “During the term of this agreement,” the contract read, “the IRS will not compete with the Consortium in providing free, on-line tax return preparation and filing services to taxpayers.”10 The IRS would reaffirm its pledge to avoid developing tax preparation services in the 2005, 2009, 2014, and 2015 Free File renewal agreements.1 ... Today, fewer than 3% of eligible taxpayers participate in Free File, in large part because the program’s maze of eligibility requirements and product offerings are so difficult to navigate."
The problem being targeted is the backdoor deal where private companies (TurboTax) _prevent_ the IRS from providing free filing services. They then turn around and obscure features and promote their paid services so that less than 3% of Americans who could and should use the "Free" tier end up paying for the paid product anyway.
This legislation is two parts:
First, it requires the IRS to develop free filing services to allow Americans to file taxes without having to use third-party services. This is to reduce the requirement that Americans have to share their personal information with third-party corporations in order to pay their _Federal_ taxes. It will also bring some much needed competition to the market where products like TurboTax can't just lock features required by certain users behind paywalls by creating a Federal, free base-line.
Second, it _explicitly_ prohibits the IRS from entering into agreements with corporations which restrict itself from providing goods and services (specifically, "provide free online tax preparation or filing services"). The fact that corporations were able to do so in the past is disturbing, so this is a much needed change. The IRS is a governmental body for the people, it shouldn't be entering into agreements that benefit corporations and place burdens on the governed.
Tax code is still going to be a mess, especially for the more complicated cases, but this has nothing to do with the focus of this bill.
Given that complexity and what I firmly believe to be its intractability, this is a hacky but OK solution to make taxes less awful for most people.
[0] http://techcrunch.com/2013/03/27/turbotax-maker-funnels-mill...
What is the likelihood that we would get some sort of sweeping reforms like the ones you're looking for? What is the likelihood that the reforms you are imagining are even possible at all? (If you're a self-critical type, how certain are you that the reforms in your imagination would really help people that much?) Passing a bill like this would be a boon for hundreds of millions of people. It is certain, it is immediate, it is politically achievable.
It has already been implemented in some European countries.
Nonsense. The tax preparation software did fine in the 80's and 90's when doing your taxes on your computer was a niche thing.
Propping up a tax software industry for the benefit of the few people who benefit from it is a drag on society. Why should I subsidize the R&D of the software to handle your complex taxes?
I think you're really oversimplifying things. A free option is great, but a paid option can still exist and thrive as long as it provides some kind of added value.
In fact a free option can actually increase the market for a paid option as more people get frustrated by limitations of the free option and discover value in the paid option.
I'd much rather the government just give me a tax bill and then I could only worry about doing taxes myself if and only if it was actually worthwhile to do so.
> It would probably put turbo-tax out of business though, this is true. The default, free, option is going to win against a paid product.
That is largely what this is:
https://turbotax.intuit.com/personal-taxes/online/free-editi...
This is where it is now - plus the non wealthy end up paying TurboTax $200. This bill would save them the $200.
> This bill would save them the $200.
First, most people pay turbotax $50-100. $200 would be deluxe + 3 states, which is highly uncommon.
And it's highly likely it would cost them MORE than $200 in credits they are not automatically given by the IRS. The IRS does not know what you donated to charity, properties you own which get credits for, educational tax credits etc.
It will spit out a number with a refund, sure. But this change will take more from the lower-income and middle-income proportionately than from the wealthy.
But it could if provided with the data.
In some cases, free federal filing already exists!
https://www.irs.gov/uac/Free-File:-Do-Your-Federal-Taxes-for...
Funny, I thought the part where they take your money was the evil part.
Until we resolve that root cause anything else is like applying a bandaid to a severed vein.
There are /many/ discussion threads about what such a resolution might be, some of which include Basic Income Guarantee / Universal Basic Income.
The top 1% receives 19% of all income and pays 49% of all income taxes. The top 10% pays 82% of all income taxes. What exactly do you plan to do, to make it more fair?
Most other developed countries have dramatically higher income taxes on their middle classes and have less progressive income tax distribution in terms of who pays. Which is why the US has roughly 50% higher median household disposable income than what Sweden, Britain, or Germany do: it's thanks to much lower taxes on the middle class (in those countries it's used for eg healthcare; in the US, people have a choice as to what they do with that disposable income).
http://taxprof.typepad.com/taxprof_blog/2015/03/joint-tax-co...
That is to say: for the marginally lower taxes we pay in the US relative to other developed countries, what do we get? With healthcare, it turns out: not much! Not only do we have to pay our healthcare ourselves, on top of our tax burden, but we pay hyperinflated prices at that. Our insurers operate like cost-plus defence contractors that take the spiraling provider costs and just pass them on to the policyholders.
For paying ever so slightly higher taxes, our W. European/AUS/NZ/Canadian brethren get a lot more social safety and peace of mind for their money. We mostly get a military-industrial complex and corporate welfare.
This is relevant to the question of how we implement taxation and how we distribute the tax burden.
If you have money to pay for experts in knowing all of the loopholes to exploit, and the types of investments / 'responsibilities' that special interests have had written in as possible deductions (the top n%) then the effective tax rate (per unit of currency) paid is less.
Edit, adding this:
I suppose you've also asked what I would consider fair. I find it easier to reach a stance of agreement that the current system is /unfair/ and needs a fresh start, so I hadn't elaborated on the outcome I'd like to see from such a process.
I would find a system with a simple, preferably automated, process to be more fair.
I would find a system where the more you make, the more you take home, to be fair.
I would find a system where the more you make, the higher your relative rate of being taxed to be fair. (Is anyone REALLY worth 100 other people? 1000? At what point to you reach the true value of life: priceless (free)?)
The best approach that I've seen so far mentioned is to tax assets. Property, objects, financial instruments (dollars to contracts of various sorts) all have a market value. You are not directly taxed on your income, but your net worth. Obviously there would be some forms of shelter (deferred net worth, like for retirement. Insurance buffers, etc).
If the top 10% earn 45% of all income and pay 82% of all income taxes, that means the bottom 90% are earning 55% of all income and paying 18% of all income taxes. Which is another way of saying, the bottom 90% are paying a very low tax rate.
And in fact, another important thing is extremely obvious as a connection to this:
The bottom ~50% in the US pay nothing net in income taxes. This is a pretty well known tax fact.
That means the bracket between 50% and 10%, that 40% group, is paying an increasingly very low rate as you go down the income scale, as the 10% to 20% bracket is carrying a high share of that remaining 18% income tax revenue base just as the top 10% group is. Put a very simple way: the bottom ~70% of income earners in the US, pay an extraordinarily small share of all income taxes, and inherently must have a low tax rate given their share of the income base (but that's also another trivially easy stat to retrieve).
Explain to me again how anything I said is incorrect or disingenuous, and or how the rich aren't paying their fair share of income taxes. The sole argument you have left that I can see, is to claim that the top 10% should go from paying 82% of all income taxes on their 45% income share, to paying 100% of all income taxes off of that 45% share of national income.
This however comes close.
https://en.wikipedia.org/wiki/Progressivity_in_United_States...
A fair tax system would not have a hump, or a ramp that then levels off, but would instead be a slowly rising graph with a continuously accelerating rate of being taxed, such that past some arbitrary point that extra return for every unit earned is virtually nothing (reflecting the stratospheric difference that already exists).
I say that would be fair because I believe that even a truly exceptional person, let us say that they are unquestionably a genius instead of merely someone particularly good at business, is not worth 1000s of times or more what someone else is worth.
If you're earning more than 1000s of peoples worth of taxes, you should be /paying/ like you're 1000s of people (without the per person tax credit).
In absolute terms yes. Individually, and as a proportion of their total income the bottom 90% are paying more than the top 10%.
I may be in the minority but I believe governments shouldn't discriminate based on income for the same reason they shouldn't discriminate based on gender, race, religion, sexual orientation, etc. All people should be treated equal in the eyes of the law.
While I do think that there is room for individuality and competition, I don't think that it's logical that someone can be three orders of (base 10) magnitude better than average. Any such level of compensation / wealth is surely an irregularity that should be corrected by tax (law).
What you are talking about is equality of outcome.
I'm talking about equality before the law.
They are 2 different things.
https://en.wikipedia.org/wiki/Equality_before_the_law
I'm not sure what you mean by better but it's perfectly logical to me that someone can provide 3 orders of magnitude more economic value than someone else. The more leverage there is the more the differences between people will be exaggerated. By leverage I mean capital, education, technology, outsourcing, etc. I find it perfectly reasonable that someone who builds a product that enriches millions of lives should be paid orders of magnitude more than someone like a waiter who only services 1 person at a time.
It doesn't make sense to me that someone providing more value to society should be forced to pay more. That seems unfair to me.
HN: the place to go to hear rich people described with a straight face as an oppressed class.
> The best approach that I've seen so far mentioned is to tax assets.
How do you propose to automate the taxing of assets? I have a piece of artwork. How much is that worth? I have a fairly complete set of mechanic's tools. I have computing equipment. I have... I'm in favor of taxing consumption (as proxied by a VAT), but taxing assets seems like a senseless boondoggle, especially if that now means there's a database of what people own sitting out there.
This is false.
Almost none of the complexity of the tax code comes from this. The complexity comes from counting up how much income you have. After that it's a trivial calculation to determine your tax owed.
- 3 jobs (2 for me cause I changed mid-year, 1 for my wife)
- Some investment earnings (both cap gains & dividends)
- I was part of the Google class action settlement
- Some random 1099s
- Itemized deductions mainly just cause I live in a high tax state (NY)
- The deductibility of state taxes (still kinda weird to me how this works)
- Foreign tax credits (Probably actually necessary, but tricky)
- The AMT
- Forms 8959/8960 (Can't this be built into the rates?)
- Self Employment Tax (an artifact of the deceptive way SS & Medicare taxes work)
- The worksheet for calculating capital gains tax seems a bit crazy
Well, the idea is that the federal government is only taxing your income, and money that your state has taken away doesn't is your income. It's not a bad idea, but the problem is that it means that no-or-low-income-tax states end up subsidising high-income-tax states. Moreover, there's no easy way to itemise other forms of state taxes, e.g. sales or property taxes.
It really should be done away with.
But the part I actually think is weird/complex is the way it ties tax returns together from adjacent years.
For my 2015 federal return I don't deduct my state taxes on my 2015 income, I deduct state taxes I paid in 2015. Those can be two different things. I just find that a bit weird.
Every time I think I've finally got it figured out, there's always some weird new situation that throws a wrench in things. Common things like buying/selling a house, moving to a new state or locality, death of a parent, etc. I honestly don't know how most people ever manage to do it correctly, much less optimally.
This year it was 2 different banks that got IRA reporting wrong. Last year, Turbotax "interview mode" would not let me enter some crucial figure correctly. Previous year it was clients not sending 1099s (and agonizing over whether to just report manually or wait for the form). Two years before that it was a RITA (local tax authority) screwup.
I tried hiring a local CPA to take away some of the pain, but he ended up making a $5K mistake, and it took hours of my time to correct. I've had a good accountant in the past, so I know they can make a huge difference, but they are very hard to find.
If you have the data already then why am I also calculating it by hand and sending it? Why don't you just tell me what I owe you!?
http://www.theatlantic.com/business/archive/2016/03/the-10-s...
There is no need for two entities to do the exact same work in parallel.
I'm not terribly hopeful that this particular bill will pass, but I'm glad to see Warren bringing the issue up.
A few lobbying groups, like AARP and the NRA actually can bring votes to a candidate and that is where the real power is. They have a list of people who care about their pet issue and can send them mail saying "candidate X proposed HR.1337 which does foo; Candidate X fights for your rights."
Until recently, the only organization with a large list of people who were frustrated with turbotax was Intuit. However, Twitter, Facebook, and Reddit now both have records of large numbers of people griping about taxes. Why has Facebook not yet exposed an API that let you advertise to people who are frustrated with a given concept? It seems like a great way to find folks that have a certain pain point.
Anti-tobacco legislation was passed due to powerful lobbyists.
While of course the more money you make the more you pay, generally the effective tax rate is signanfncitly lower for higher net worth individuals. This is due to loopholes, business expenses, and various writeoffs.
For example, I just did my taxes and my effective rate was 18% (I am not wealthy, but above the average income level).
I have a LLC for my startup and can write off quite a bit of business expenses to offset the business income.
Every year you have to pay a flat $800 to the state of California. Sucks if your business is not making that much, $800 can be a significant cost.
Self employment tax hurts bad. Basically this is Medicare and social security. Can be a huge amount owed seperate and in addition to income taxes.
Does it ever! I owe over $100K in back taxes, and the majority of it is SE tax. Income tax accounts for a relatively modest portion.
Self-employment tax is assessed against gross personal income (aka net business income off Sch C, in my case) prior to any personal Sch A deductions. In my case, the latter proved to be quite significant, especially since I was paying a lot of interest on a mortgage for much of the period in question. So, I had years where my taxable income for SE tax purposes was (just making up numbers here), say, $50K, while my net income for federal income tax purposes was something like $19K.
All this to say, an LLC is in no way required in order to deduct lunch with one's friends. :-) One can do that with a sole proprietorship that has no registered entity or other formal dimensions, effectively immediately. Business expenses can be deducted on the 1040 Schedule C, and anyone who considers themselves to have expenses related to self-employment may avail themselves of that.
Obviously, it would be wise to ensure that your business is a legitimate going concern and is in pursuit of revenue and profit. The IRS is not fond of businesses, LLC or not, whose sole raison d'être is to serve as a vehicle for business deductions. :-)
In the same way me not hitting you in the head with a baseball bat encourages you to keep on living.
via https://en.wikipedia.org/wiki/Standard_Oil#Monopoly_charges_...
"In 1904, Standard controlled 91 percent of production and 85 percent of final sales."
"The federal Commissioner of Corporations studied Standard's operations from the period of 1904 to 1906[31] and concluded that ``beyond question... the dominant position of the Standard Oil Co. in the refining industry was due to unfair practices—to abuse of the control of pipe-lines, to railroad discriminations, and to unfair methods of competition in the sale of the refined petroleum products''"
From the DOJ complaint, "The evidence is, in fact, absolutely conclusive that the Standard Oil Co. charges altogether excessive prices where it meets no competition, and particularly where there is little likelihood of competitors entering the field, and that, on the other hand, where competition is active, it frequently cuts prices to a point which leaves even the Standard little or no profit, and which more often leaves no profit to the competitor, whose costs are ordinarily somewhat higher."
> Some economic historians have observed that Standard Oil was in the process of losing its monopoly at the time of its breakup in 1911. Although Standard had 90 percent of American refining capacity in 1880, by 1911 that had shrunk to between 60 and 65 percent, due to the expansion in capacity by competitors.
Which would clearly be impossible if Standard Oil was a monopoly. Your quote from a politician with ulterior motives does not prove a monopoly and even sounds economically dubious.
Presumably this bill would break the grip that TurboTax has on the market by, say, enabling cheaper and/or free solutions. But using the alternatives would not be in any way simpler than using TurboTax. And TurboTax is not that expensive (<$100 for federal+state).
Of course they'd prefer another Health.gov style spending bill to build another sprawling web service, with the added perk of keeping the friendly government contractors well fed, instead of something that requires the real hard work by the politicians. And simplifying such a complex policy as the tax code would be real hard work.
Instant gratification that can be draws congratulation is always preferred to risking your political reputation attempting to solve the hard underlying problems - especially when they are riddled with special interests as the tax code has become.
Certainly this happens to some engineers, too.
Why not just automatically file unless the tax payer elects to file something different?
They already have all the wage data submitted to them from employers.
The corresponding UK system, "self assessment", is reasonably slick online, although you have to put in all the information yourself. It's used by about a sixth of the population: https://www.gov.uk/government/news/hmrc-sees-biggest-digital...
The cited 13 hours is insane, and I never needed a 3rd party to help me. But the US fax filing system is by far the simpliest. I only needed 2 hrs to file them every year. In Austria and Germany it needs 5-10 hours, and they have insane buerocratic hurdles. The US have a very simple PDf to fill out, and an excellent explanation. In Germany I have now monthly stupid HTML forms to fill out with manually entering >50 zeros.
So I cannot really understand what's so complicated.
TurboTax was able to hook into my investment accounts and automatically pull all of my data. It worked great. All the IRS needs to do is provide an API to let a range of software do the same.
Also, use of "average" here is criminally misleading. The "average" person doesn't spend $200. And the "average" tax return isn't $2000. TurboTax free edition is perfectly sufficient for a plurality of users.
1.) If we make it easy to file taxes, that means it's less painful and makes it harder to sell the cause of lower taxes as a political issue.
2.) If a citizen gets a bill from the IRS saying, "you owe X" the average person isn't going to risk fighting back with their own set of facts, and is possibly going to pay too much.
Personally I don't share the anti-tax advocate's world view or opinions, but I understand the argument and especially understand the danger of argument #2. I'd still be in favor of this law though.
The lack of support very likely has more to do with who is presenting it and the approach used.
No, it's because they think that will end up with the Government sending you a tax bill at the end of year, which they're philosophically opposed to.
And of course companies like TurboTax spend a lot of money feeding that.
https://www.propublica.org/article/how-the-maker-of-turbotax...
Simplifying the filing without simplifying the tax code, is putting a bandaid on a gushing wound that is getting worse every year.
That’s not really comparable to this proposal, which doesn‘t change who pays the taxes, and doesn’t rewrite the tax code, but just makes the paperwork more convenient for everyone.
There is nothing about having reasonable progressive taxation that is regressive. You can get rid of the writeoff exceptionalism and just institute a quadratic curve from $0 to $1 billion and have the percentages go from 0% to 90% or whatever you want your upper bracket rate to be.
Then integrate the curve at your income. Super simple progressive taxation rather than the piecewise writeoff everything hellhole we have today.
And that doesn't even touch on how bad capital gains taxes are, which is where real wealth is made and where the owner class makes their killing bleeding the many of their wealth, which is partially caused by a biased tax code in their favor. Simplified progressive capital gains would also be a tangible boon.
This does +absolutely nothing+ to simplify the tax code, this is solely about "simplifying" tax preparation and filing.
It makes it easier to file online for free, and makes it so the IRS can't get in bed with Intuit, HR Block, etc.
We need real tax reform - not smoke and mirrors.
That's not a bad thing in and of itself.
> That's not a bad thing in and of itself.
You're absolutely right.
However, this is being touted as tax [code] reform... which it's definitely not.
Your tax preparation expenses are already tax deductible, so making it "cheaper" doesn't really help anyone.
We need a simpler and more fair tax code - but we're not getting any of that with this bill.
This is a distraction, and good PR for someone potentially poised for a VP ticket...
This would be an expensive endeavour for the government to develop. They aren't great at building usable software or web services as the health insurance site demonstrated. I'd rather they invested time doing what their good at, which is managing policy. Investing time in this instead of simplifying the existing policy is of questionable economic cost.
Private industry is more than capable of building software to make filing taxes easier. But there are limitations on their ability to do so if the tax code is so complex.
Additionally, simpler software is cheaper than one managing endlessly complex requirements.
That's win-win as far as I'm concerned.
Sadly, this bill doesn't even do any of these things...
It's essentially going to have the government make tax preparation software... and we already know they aren't good at making software.
As another comment already suggested, private industry is far, far better at software than the government will ever be, and they are already capable of making simpler software - but the current incredibly complex tax code doesn't allow it. The software has to be complicated because it's dealing with a complicated tax code.
But, anyone who's used TurboTax or HR Block et al, recently will attest to the simplicity of these programs already. Sure, it takes a long while to complete everything, but the most difficult part is gathering your affairs before sitting down. You essentially type data into the boxes the software tells you to. I recon no human being is capable of hand-filing taxes these days -- even the professional tax filing services are using this (and similar) software!
The only way to make it less of a hassle, is to simplify the tax code.
The hiccup could be if people were consistently overestimating their taxes, but it looks as though for the median citizen that's unlikely (most people don't itemize and take the standard deduction at that income level).
And before the Progressives start rioting, its easly possible to make it somewhat progressive. Then we can foreever argue if it should be more or less progressive.
The amount of time saved by people and more importantly buissnesses is quite extraordinary. Additionally it would make finding tax cheaters far easier. The IRS could be much smaller. That also has positive effects on privacy.
The book "The Flat Tax" was released in 1981 and was implmented in some of the countries that became free after the collapse of the USSR.
I highly recommend this 1h podcast with the auther of the book: http://www.econtalk.org/archives/2007/04/rabushka_on_the.htm...
The variation I would envision would be an apportionment among congressional districts. This would allow tiny states like RI to still contribute, but maybe not on the same level as larger states as CA.
Then under this, it would be up to each individual state to decide how it is going to collect taxes for each of these districts.
Then repeal the 16th amendment and replace it with a new apportionment amendment.
We would still be stuck with the current state tax code for each of the respective states that we have now, but we would get rid of the massive Federal tax code.