Would You Let the I.R.S. Prepare Your Taxes? (2015)
nytimes.com
nytimes.com
Instead, we play this game where the IRS provides a bunch of complicated documents, I guess which ones to fill out and submit, then wait 3 years to see if I was randomly chosen to see if I was correct. So it's very easy to make a mistake for dozens of years, then suddenly be penalized at random. It's the worst kind of selective enforcement - random enforcement.
And this is to help H&R Block and others sell "tax insurance", just in case you're randomly selected for audit and H&R Block was also wrong about which tax documents to submit.
The IRS have all the data - from employers, banks, Social Security, unemployment, and other government services. I might have most or all of the data, and could verify or contest items they have on file. Edit: So the IRS may not always have all of the data, and would still need a way for us to submit documents in some edge cases.
Very similar to the way police behave w/ regards to speeding tickets. Set extremely low speeds that don't make sense on highways. Allow most people to go 10-15 above. But then also sometimes choose random people to screw over when it's the end of the month and they need to hit their quotas.
I doubt people really speed because the limits have been set too low and the people know better what is an ideal speed limit.
I think people_think_ they know better what the speed limit is, and/or reason "well if 60mph is okay, 75 mph can't be that bad, I'm barely speeding and I'm in a rush". At least, that's the attitude I've seen with people who regularly speed.
If you were to raise the speed limit to 75mph, people would just use the same logic to drive 90mph instead.
There is no guarantee that a speed limit will have any effect on driving behaviors. The fact is, when driving, most motorists choose a speed in which they personally feel both comfortable and safe.
on a free-flowing section in 1992, the recorded average speed was 132 km/h (82 mph) with 51% of drivers exceeding the recommended speed.
The autobahn has a long history proving that people feel comfortable and safe at excessive velocities.
But 80 miles per hour is not an abnormal speed on the highway.
The posted speed limit is so rarely enforced, that it still isn’t a deterrent. For instance, the speed limit on GA 400 is 70. But you’d better be in the slow lane if you only go 70mph.
https://www.11alive.com/article/news/local/commuters-respond...
Do people driving on derestricted sections self-select and have cars better able to handle the speeds? Does anyone in Germany only drive on restricted sections?
You comment as if the derestricted sections are just some racetrack in the middle of nowhere for which people self-select. No, they're just roads going from one place to another, like any other road. And Germany doesn't kick out citizens who don't want to drive fast, or offer easy citizenship for those who do.
While it may seem counter-intuitive, the Autobahn is safer than many motorways which have speed limits.
Whereas US interstates - with speed limits of 70 mph - have an average of 4.5 fatalities per billion kilometres travelled, the Autobahn only has a fatality rate of 2.7 per billion kilometres.
So it seems that 130 km/h (81 mph) is not all that excessive.
Luckily there are plenty of places that have done just that that we can learn from. WI just raised a lot of its highway speed limits to 70mph for example.
Anecdotally, people used to drive in the 75mph range before the speed limit was raised and would deal with the occasional ticket for 10 over. In the general case, the average highway speed seems to have stayed at 75mph after the change.
I've noticed something similar in South Dakota where the speed limit is 80. I rarely saw someone go more than 5 over, and would frequently encounter people driving at 75mph.
Q. Wouldn’t everyone drive faster if the speed limit was raised? A. No, the majority of drivers will not go faster than what they feel is comfortable and safe regardless of the speed limit. For example, an 18-month study following an increase in the speed limit along the New York Thruway from 55 to 65 mph, determined that the average speed of traffic, 68 mph, remained the same. Even a national study conducted by Federal Highway Administration also concluded that raising or lowering the speed limit had practically no effect on actual travel speeds
https://www.motorists.org/wp-content/uploads/2015/05/speed-l...
Well, there's a surprising turn of events on HN: an appeal to discard the findings of a study in favor of one poster's suppositions, and another's anecdata. :-)
This is one of the reasons experts argue that you NEED to set the speed limit at the natural speed people will drive at; otherwise, you will have a big speed difference between the majority who drive at the comfortable, faster, speed, and the 15% who are driving slower at the speed limit. You want the two groups to drive at the same speed.
My anecdata does not support this. When roads are not congested, I can see that most drivers accelerate from ~70+mph to ~80+mph right ofter the speed limit sign changes from 60 to 70.
That's separate from how fast they think is safe on the freeway in general from a physical standpoint. If there were no limits posted, they'd go even faster.
So basically I'm saying that both you and the parent poster are both correct. It's just that more than just physical safety is being taken into account.
All this proves is that they don't want to go much more than 10 over the limit, AND the speed at which they feel safe is at least (but maybe higher than!) 80mph.
If you've ever gone much faster than is customary for a road (say 110mph following a cop), and then slowed down to say 90mph, it will feel quite slow. If you then don't set about consciously lowering your speed, you will even find yourself creeping back up.
Humans are notoriously bad at perceiving what-if dangers and being aware of our own limitations. The level of difficulty we perceive is what's required to keep up with the expected - road curves, passing other predicable cars, etc - not because we're anticipating surprises.
Another example is outdriving one's headlights - either the sheer amount of deer that get hit, or when you flip on your high beams in a fog and actually become aware of how little you could see.
Driving through rural areas you must have experienced the sudden ~30mph sign, signifying a town coming up. Did this "drive what you feel" approach line up there too? When the town was at the bottom of a hill?
For context, I've done around 25k miles cross-country non-interstate. I've concluded that what the individual states choose to sign as the general maximums has more to do with local culture and politics than with general terrain.
With respect to the engineering safety of the sudden 30mph sign (which I assume is in a rural area on an otherwise small highway); yes that sounds like you're describing what is typically called a "speed trap". A real traffic safety engineering standard SHOULD call for a clearly posted and graduated reduction in speed as approaching the town at a /bare/ minimum. However, a true engineering solution would isolate the town and the highway entirely. The point of the highway is to be a high speed transit corridor and it is inefficient and unsafe to route such a thing through a dense residential or commercial area. Instead there should be an exit system that leads off to a side path for such a town. I would prefer an actual barrier that encloses the typical route and possibly caps or bridges over it (maybe with a park) for existing situations that have developed in days with less good planning. In any such cases a designated detour route should also be constructed such that it is possible for "oversized loads", emergency response teams, and post disaster travel to route around failure in the now enclosed sections.
There are plenty of towns large enough for highway bypasses and traffic lights. The ones I'm talking about have one good road, maybe two if they're lucky enough to be the intersection. I indeed appreciate when there are graduated signs so I don't have to use the brakes, but this obviously costs money they don't all have, and isn't needed by people who already know the road. Talking about traffic engineering is laughable for such places - if your goal is to pass through as quick as possible, you could just take the interstate.
If there was not revenue generation, if the fines were required to go only in to the state or federal general budget, I believe the situation would shift towards one of the safe engineering solutions I outlined above instead of the revenue generating status quo you see today.
However, people have vastly different "feelings" for what is comfortable. I've been in multiple different driving experiences in an awd subaru where I was going 30 under the speed limit because the weather was terrible and people were flying past me in their 2wd cars.
Shit, I even had an experience where I and literally 75% of other cars full on stopped on the side of a highway with our hazard lights on because we couldn't see more than 200 feet in front of us and people were still driving 30 mph past us. I shit you not that was one of the scariest moments of my life because as the visibility got worse and worse, everyone starting putting on their hazard lights and going like 30, most cars turned off but we thought it was OK until the rain and fog got so bad the cars in front and behind us completely disappeared in the grey rain/fog. We drove for about a minute going like 25 MPH (I was slowing down to get more comfortable because I was freaking out) and I risked turning off onto the shoulder preying I didn't randomly ram one of the cars pulled off and we got lucky and were able to sit their until it got better.
My personal anecdotal evidence on this, having recently driven cross country on I-80 (mostly 80MPH speed limits) and through Montana on I-90 (Again, mostly 80 MPH) shows that people drive at a speed that is safe for them. My car, and those that also seemed to drive a few MPH over the limit were all newer, highly capable vehicles, and the largest added risk was the chance of running into excessively slow moving traffic. When the visibility dropped, I slowed down, and when the visibility was clear, there was no additional risk in pushing it up a few MPH.
I've driven in parts of the country where the speed limit is 75 or even 80 and that wasn't my experience. There were not a lot of people blowing past me doing 95.
This is easily tested in the western U. S., where there exist states with speed limits of 75mph or higher. There's a point at which I quit getting passed, and start being the one doing most of the passing. That point is just a bit north of 80mph. Anecdotally, same point it was when speed limits were lower. IOW, when I'd ride the interstates of AZ or WY twenty years ago, my ratio of passed/passing at 90mph was about the same as it is now.
But surely someone has done an actual study on this.
Not my car, I often look down and see that I'm going 90 when it feels like I'm going 70.
Car chassis are very performant nowadays.
I've pushed a rental Merc past 180 km/h (110 mph) on a reasonably well-paved outback road, and it was downright unpleasant to drive at that speed from the vibration. On a smoother highway I would guess it'd still become unpleasant past 200 km/h (125 mph).
Personally, I also found driving at those speeds too mentally taxing. The lack of time to react, the lack of maneuverability, and the huge braking distance were just too stressful. You couldn't let your thoughts, let alone your eyes, off the road for even a second.
On that particular trip, I had driven for 18 hours (excluding short breaks and a 3-hour nap), most of it at ~100 km/h. If I had the option of driving 180 km/h the whole time and save 8 hours, I would not take it.
That said, if there were no speed limits, I'd probably drive 130-150 km/h (80-95 mph), depending on the road, which isn't far from what volkk said.
Then again, MA speed limits tend to be lower than surrounding states.
Drivers mostly go the speed they are comfortable with, which is a function of the roadway’s design and conditions. Traffic engineers are learning that you can’t just slap a 30mph limit sign on something that feels like an interstate highway, but must instead use the road’s physical characteristics to slow drivers down.
Also, it goes against traffic design principles, even in the US. (see: 85th percentile)
I'd rather there were NOT any speed limit enforcement at all UNLESS there's another infraction.
Even more ideally self-driving cars would just save us. However until then I'd prefer that laws like Washington State's 'keep right except to pass' were strongly enforced.
I recently drove from Tuscon, AZ to Cleveland, OH. All 8 states I drove through have them, but somewhere around Misouri signs get smaller and less frequent, and they stop being strictly enforced. Ohio recently started pushing to enforce this law. It seems as exits get more frequent and less lanes are available, (road maintenance in 4 season territory costs a lot, so there are more 2 lane highway spans than 3-4) lots of drivers decide that the speed limit +x MPH is fast enough for everyone, FU if you're behind me. I'd guess it added +/- 8 hours to the trip.
My experience as a young lad with a high powered Nissan Skyline certainly reflected this many years ago. I had almost-daily "random vehicle and license checks"...
Itemized deductions could be a "dispute" item, where you would login, switch from Standard to Itemized, then itemize your deductions. It could possibly recall this setting, and even the deductions, from the previous year's input.
It would be nice to get this streamlined! taxes are such a chore.
Too bad there's a multi billion dollar industry - tax preparation and accounting - supported by taxes. It will never happen.
Financial institutions and other companies already give the government a copy of the form they give you for self employment income and taxable financial transactions.
The states also report state taxes and property taxes(?).
This would cover most taxpayers. If you have anything more complicated you would have to add it. This would also make enforcement easier, it could for the most part be automated.
Or heck, let me just tell the charity my email address, and then tell the IRS that all the donations for that email should be credited to me. People who want more privacy can "just" sign up for bespoke email addresses.
Most people already claim the standard deduction and with the new tax reform 95%+ of tax returns are going to claim the standard deduction this year. As part of the hypothetical bill could also require more organizations (charities, local governments) to report to the IRS.
I have business income the IRS doesn't know a thing about before I fill out my schedule c, but prefilled forms for all the stuff they DO know about would still be awesome and super helpful.
Inuit and Quicken subsequently lobbied to end those programs and even bar the IRS from running similar programs...
They did the same thing in Canada too btw.
So how is it that lobbying alone is enough to persuade lawmakers to take the side of Intuit et al.? And which lawmakers are so easily "bought" at the detriment of the public? I'm just as pessimistic as anyone when it comes to the corruption of our government, but this seems like a pretty black and white issue. There must be more to it...
Almost everyone (from what I understand) agrees, so it's a pretty clear case where we should be able to call out those lawmakers and say "you're obviously only doing this for the money/job security - you can't even pretend to be against it on principle."
(1) ignore it completely if it's not getting sufficient media coverage to cause outrage or (2) control the coverage by making it seem as if the public is divided, typically using various forms of poor (but effective) arguments, statistically invalid polling, and research that only gets published if it produces the desired result
I'd say this falls into the first category.
The lobbying is a big part, but the other part is anti-tax ideologues in Congress want to keep the tax process as painful as possible so that people are as angry as possible about taxes, to maximize support for and engagement on anti-tax policies.
Also, the complex nature of the US tax code means that the people who've put effort into gaming the system and the dishonest also stand to lose if move to a more reasonable system.
So it's really not just about the campaign contributions but actual substantial interest groups.
Maybe it would have been clearer if they said "position" instead?
I used to think it was Americans for Tax Reform, now I think Tax Policy Center is the closest thing, but while Bankman has worked a lot with them in the past, in this article they seem at least ambivalent if not opposed to it.
Any other suggestions of which nonprofit lobbying organizations can be used to offset the impact of Americans for Tax Reform, Intuit, and other organizations who favor tax complexification?
Also note that the "pure flat tax" idea earlier in this discussion and the "universal basic income" idea discussed elsewhere on this website have the same problem: the promised simplification comes from eliminating a bunch of special programs, exemptions, benefits etc., which is impossible.
Is this true or an urban legend?
In 2016 Intuit's revenue was something like $4.7 billion. And they spent $2 million lobbying against bills that threaten the fundamental nature of their business?
That seems absurdly low to me.
It looks like this information is published by the senate under the "Lobbying Disclosure Act of 1995"
https://soprweb.senate.gov/index.cfm?event=getFilingDetails&...
opensecrets.org has a more easily-browsed index linking to the senate reports: https://www.opensecrets.org/orgs/lobby.php?id=D000022016
This is one of the reasons i provide to Intuit recruiters when they try and get me to interview for them. I am not working for the company actively working against my best interests.
We in the tech community don't always have the luxury to work for a company who we absolutely love and respect, but I draw the line when it comes to companies that actively engage in this type of concerted effort against citizens.
Apparently the lobbying by Intuit is actually fairly minor compared to the opposition by Republicans. Some group of Republican legislators came together and agreed to oppose all tax increases, and also agreed to oppose many types of tax simplification. The thinking being that the more painful filing your taxes is, the more people will have a negative perception of taxes in general and be opposed to tax increases.
[0] https://www.npr.org/sections/money/2017/03/22/521132960/epis...
> Flat tax doesn't even simplify anything.
BEGIN QUOTE
Fewer brackets are simpler to administer, but one bracket is simplest of all. Under a pure flat tax, the taxman takes the same cut from the last dollar you earn that he took from the first. The appeal to high earners is obvious. But the administrative elegance of such a system is not so immediately apparent. Because every dollar is taxed at the same rate, it does not matter to the tax collector how many dollars are going to whom. Thus, in principle, the taxman could simply withhold 20% of a company's payroll, without needing to know who was paid what. Add a second rate of tax, however, or a personal exemption, and the tax collector must find out how much money is going into each pay packet before he can be sure of collecting the right amount from the right person. In America, for example, the tax collector needs to tax the wage packets of 130m or more employees, rather than simply taxing the payrolls of 8m or so enterprises.
END QUOTE
The mistake you're making is assuming that the tax system can only be simplified on the individual level, but as the quote above demonstrates this isn't true.
Certain changes to the tax code do entirely away with the need for the government to exhaustively audit large parts of the economy.
Another quote from the article demonstrating such a case:
BEGIN QUOTE
In Canada, Australia and the European Union, for example, staple foods, but not restaurant meals, are exempted from value-added tax. [Therefore] hot roast chicken is taxed, but cold roast chicken is not. “Does anyone expect tax administrators and business owners to have thermometers on hand when they do their tax calculations?”
END QUOTE
In this example, by progressively taxing food you're creating the accounting problem that the government theoretically has to track economic activity down to the level of whether a chicken was warm or not when it was sold.
Simplifying the tax code does away with needing to solve that problem entirely, and eliminates some of the current incentives for tax avoidance and other fraud.
1. https://www.economist.com/special-report/2005/04/14/the-case...
No, because the idea behind a flat tax is to eliminate most or all of those deductions, the same way they've already been eliminated for people who pay AMT instead of normal income tax.
E.g. the case of the warm and cold chicken being taxed at different rates, as described in the linked Economist article.
It's common in places with such a distinction in the tax code for some stores to sell packaged cold food clearly intended to be eaten on the go, and then to conveniently offer a customer-operated microwave on-site partly as a way to avoid paying a tax that distinguishes between food sold as groceries v.s. take-away food.
I'm not advocating for flat taxes, but it is correct to say that such proposals in general do away with such emergent absurdities, and decrease the need for government bureaucracy.
The complexity of the formula generating the lookup table doesn't affect the users of the lookup table, so I disagree: number of brackets has no meaningful effect on complexity of manual preparation.
Removing deductions has nothing to do with the tax curve. You could do that with the current curve and tweak it accordingly.
In theory, but (serious) advocates of the flat tax generally are proposing both.
In New Zealand, for example, all prominent advocates of flat taxes are also proponents of not following Australia or the UK's example of having GST/VAT exemptions for some categories of goods.
Alternately, you could even have a progressive, flat tax with a standard deduction of $150,000 and like a 40% rate. I’m surprised the Democrats haven’t proposed that just as a publicity stunt.
So high earners get a larger tax reduction from deductions than low earners. There's not really a way to do that with a 0% bracket (and in fact we have both a 0% bracket and deductions).
See what Milton Friedman had to say about tax code complexity. TLDR: it gives politicians the ability to curry favor or punish and it’s the source of their real power. The power to tax is the power to destroy. A flat tax with a single standard deduction effectively declaws the government from being able to pick winners and losers based on from whom the campaign donations come.
No, it's not.
> People that oppose flat taxes do so because they want other people to pay more. People that oppose flat taxes do so because they want other people to pay more. It’s that simple.
Some of the richest people oppose the flat tax. And they do so because they want people poorer than themselves to pay less than they would in a flat tax scheme funding the same services.
> See what Milton Friedman had to say about tax code complexity. TLDR: it gives politicians the ability to curry favor or punish and it’s the source of their real power.
Maybe Friedman said that, but it's wrong; the monopoly on violence does that, and the tax system isn't particularly special among the avenues by which the power that monopoly grants can be applied.
That's a decently idealistic viewpoint, but "complicated" doesn't necessarily mean "broken". For example, pretty much all Unix-style operating systems have not only a ton of now-unnecessary code to handle text I/O from 1960's teletype machines, but they even come with a "terminal emulator" that literally emulates the behavior of a 1960's teletype machine. That's how the command line works. You would never design it that way from the start, it's complicated, it's crufty, and it's vaguely horrifying, and yet it works and solves virtually all of the real problems that real people would have with that system. Just like letting the IRS fill out the first draft of your tax return.
This is exactly the reason I do my taxes by hand on paper every year.
Intuit and friends are a red herring: https://www.huffingtonpost.com/grover-norquist/grover-norqui...
Also, IMHO, few people have messed up US tax policy like Grover Norquist. Even if you don't agree with that particular humble opinion, he is, at the very least, a figure with his own agenda to push. He's far from an unbiased source.
My take on this remains what it's been for decades (offensive words, but I'm not sure what would fit better) :
"I'm not surprised that politicians are whores. I'm horribly disappointed that they're cheap sleazy whores."
https://www.npr.org/2017/03/29/521954033/stanford-professor-...
And California may lean blue on the federal level, but it is a very anti-tax state (Prop 13, etc.).
The Howard Jarvis Taxpayers Association is one of the most powerful political groups in the state and has been doing the same schtick as Norquist (though, when Jarvis was alive, under a different name), since Norquist was still in college.
It's not pure blue, now, either, and more to the point, the Democrats in the California electorate are not a hive mind of stereotypes.
> But the effort the parent described is from 2004, so what matters are the politics of modern CA.
The Norquist-before-Norquist Howard Jarvis Taxpayers Association is one of the most powerful political forces in modern California, too.
(Also, in 2004, California was less bright blue than modern CA; it had just recalled the Democratic governor and elected a Republican replacement, after all.)
Not..entirely true.
My 2016 taxes were professionally done, but we somehow forgot to include one of the something-something-1099 forms from a brokerage firm. The brokerage reported some RSU stock-sells to the IRS but didn't report the cost-basis, and so the IRS assumed the cost-basis was $0 and thus taxed the full sale as income (effectively double-taxing all the RSUs). They just sent a tax bill for something like $20k plus a bunch of fees and interest.
It's an accounting-error so we won't owe much, but I doubt we would have seen this mistake if the IRS had just told us a total amount to pay. We have two tech-job incomes both of which are highly-dependent on equity, so we'd almost certainly end up getting a CPA to run all the numbers again anyway.
I'm a fan of reducing bureaucracy of double-reporting tax info, but I'm personally unwilling to trust that the IRS and various banks / brokerage systems are up to the task of generating trustworthy data (and/or erring on the side of the taxpayer in situations like this).
This is for the people who right now are paying some company to essentially and unnecessarily siphon off some of their tax money.
Obviously. You should read categorical statements like this one as, "The IRS [often and in many of the most common cases] have all the data."
That's a generally-applicable, useful, mental substitution that saves us from unnecessary and constant waffling and equivocation in everyday conversation.
And, in any case, the question isn't, "Will the IRS ever make a mistake?" Obviously they will. The question is, "Will the IRS make fewer mistakes than the mass of folks who don't itemize and who have simple tax situations?"
I think that's clearly true.
So they only know your revenues, not your expenses. And this applies for business as well as personal.
Lots and lots and lots of people don't have any expenses. They don't itemize. They don't want, have, or need any of the stuff you're protesting about. They have a job. And that job reports their income to the IRS. End of story. Case closed. That's it. That's their entire situation.
You're imagining another kind of person, but I'm not talking about that other kind of person.
Similar, yet ... stupider...
Did some standard stock buy/sells in a year, and the brokerage reported all the sales as full income, and no original cost, so they'd reported that I'd had something like $120k in 'income' ... No penalties for them for filing bad data, but it took me a while and some CPA time to respond accordingly. :/
That's basically how it works in many european countries. Filling is finding 10mn to log in the tax service's website, verifying that nothing looks out of whack and validating.
My CPA friend told me that Money Magazine used to send fairly complex personal income tax packets to 50 different tax preparers annually (grain of salt: I haven't been able to find the article). She recalled that the best year had about 4 preparers get the same calculation as the plurality.
How weird is it that this is not the norm? In Sweden, this is exactly the way it works. You get a piece of paper every year saying "according to what your employer and other instances have reported, here's what we think you owe". You can dispute it, but best of all: if you have nothing to dispute, you can OK it cryptographically (look up "bank-id"), or even OK it via SMS, by sending a pre-generated code given to you on paper. If you do, you get your payout (if any) just a month or two later.
This is because the IRS would make less money. It is like a poker game. Their number can only be smaller than yours. If you go under their number they penalize you. If you go over their number they keep the difference.
It's also patent nonsense.
Calling a declaration patent nonsense is not "name-calling". Stuff which is "attacking and name-calling" however include:
* insinuating that the IRS rejects pre-filling declaration because they "would make less money" despite them having supported that effort
* declaring that tax declaration is "like a poker game" and that it's "just a fact" is
* insulting other commenters, as ransom1538 has done and I have not
> Moreover it's unsubstantive to just declare "nonsense" without explaining anything to the reader.
Why would I need to substantiate a disagreement with an unsubstantiated assertion?
You disagree that americans pay more than they should? [1]
[1] https://www.nerdwallet.com/blog/taxes/2018-tax-report/
Or you disagree that paying less than you should has consequences?
https://www.hrblock.com/tax-center/irs/tax-responsibilities/...
People like you ruin this message board.
It would be really great if you can elaborate your point. For example, why do you think it is nonsense? What line of argument or examples can you provide to make your point?
Here’s an example:
@GP
Perhaps stating it as a fact sounds a bit too strong me. How did you come to realize this fact? Do you have any source or “experiential evidence” for stating it as a fact. Perhaps I misunderstood your analogy but I would be very happy to hear your full point.
Usually everything is filled-in correctly anyway. Takes 5 minutes for ordinary tax payers like me.
No, not all companies do that. Maybe “most very large companies”, but that's a different thing altogether.
Austrian tax returns are much simpler because in the majority of cases they don't exist: Your employer and your banks automatically withhold the correct amount of taxes (capital gains are taxed at a flat rate and don't influence regular income taxes). Marriage status doesn't matter for income tax as the same tax brackets apply to everyone. Deductions are much less common but if you have any deductions you can let the government know and they'll automatically refund your tax within a week or so.
One reason why Austrian taxes are so much simpler is because there are much fewer special cases: The US has all those different credits and deductions that lower the taxes in certain situations, e.g., the "First-time homebuyer credit repayment". Meanwhile in Austria all those subsidies for, e.g., lower income people aren't included in the tax system, but are available via completely separate programs (e.g., if your income is very low the government pays parts of your rent and helps you with heating costs in the winter, but you have to submit a separate application for that).
Not sure which system is better. One thing I noticed is that in Austria I never applied for any subsidies even while being a low-income student (why would I apply for social services if I don't really need them?). Meanwhile in the US my tax advisor makes sure that I get all the credits and deductions that I'm eligible for.
The only non-trivial bits are things like capital gains, work expenses, donations, but these are all things that you should be tracking in a spreadsheet as they occur through the year, and you'll have a number at the bottom of that spreadsheet that you can just copy over to your return (like I did with my capital gains, for example).
Even as a contractor in the past (keep in mind, in Australia, a contractor is a sole proprietor business), filing my return was as easy as copying income/expense totals from my invoice/receipt tracking spreadsheets into the return, adding any new depreciating assets to the list (that persists on their servers and gets recalculated each year) and submitting.
I don't have any interest accounts or private health insurance, but these would be some of the other things that get automatically pre-filled. And it's been this way for well over a decade now.
The only thing you have to worry about is the end of year form. What you submit is usually a good first suggestion and the german IRS equivalent will send back a proposal. If you don't do anything, that's what they collect.
Of course, the tax forms in germany are rather... complicated, there is a lot of pitfalls, though generally unless nobody at the IRS spots it either, you'll get a correction back.
I think the IRS is super paranoid about people hiding information from them, and then never being liable for the taxes. Right now, if they miss some income, you might report it to them on your return, and they get money they didn't know they were entitled to.
I thought the letter with "pay us this amount of money" was great, though. Wish they just sent that at the end of the tax year.
Yeah, why do people pay out all that stupid money, when its as simple as just not telling the taxman? Really, if it was like that then tax evasion would be pretty simple...
I have the feeling that apart from lobbying USA loves to hate taxes. To make paying taxes overly-complicated adds to that feeling. When you only need to pay 100$ at the end of the year after one or two clicks (or you can get a paper copy mailed to your home and pay at the bank) makes it less painful.
People of the US won't trust a damn thing the government does, probably for pretty good reason, and the whole country suffers for it. IRS can adequately track and report your taxes, even refunding them if they're too high? HELL NO, gotta blow most of that potential refund on a tax adviser to prove that I could get refunded! HMRC can adequately track and report your taxes? Actually, most of the time yes. No need to file unless it's a more complicated setup.
Lobbying by companies like Turbotax (Intuit) and others is largely behind this. I think many Americans would be ok with just paying a bill the government sends them which is based on information that they know the government already has.
These groups, combined with tax preparation companies, prevent any meaningful attempt to make paying taxes easier.
Which is so stupid because so many people have no idea at all what they pay in taxes because of employer withholding. I knew more than one coworker who thought they didnt pay taxes because they get a check back at the end of the year. They had no idea how withholding worked until I explained it to them. Note that these were otherwise smart adults (software engineers).
Increasing tax transparency would lead to surprise at how little we actually pay in taxes.
http://time.com/money/5224749/how-much-americans-pay-taxes-i...
Which makes me think that it's not so much about people being informed as people being annoyed. I don't dread tax season because of what I owe, I dread it because of all the nonsense hoop jumping I know I have to go through on pain of massive fines and audit nightmares.
I'd be willing to be that a good many folks would shrug at their tax bill if it was laid out in simple terms with a sane user interface. Nobody can possibly shrug at the status quo form dance that they're subjected to year after year. It's practically guaranteed to cause discomfort and engender disdain.
Can we please stop taking their claims at face value? It is a blatant attempt to destroy the power of the US Federal Government, perhaps the last entity that stands in the way of absolute corporate domination. Norquist is a pawn in this play, just like all the other PAC's, super PAC's, institutions doing "economic research" etc.
The GOP has been consumed by these groups, who have been very clever to "explain" how tax cuts and reducing Government and social security benefits are great, even to those who need them the most. They are a cancer in American society and it still baffles me that these groups are now considered mainstream.
You often see income tax comparisons between the US and European countries, when in reality if you actually spend your money you are paying a 20+% tax.
With our tax system, you can see clear as day how much money you are losing out on for social security, medicare, and standard income tax.
Anything that is from them about individual taxes is just marketing to get you to vote Republican. They quite literally say that they want to "broaden the base of taxpayers", i.e, the individual pays more.
Of course we do! Opposition to taxes is LITERALLY the creation myth of the United States.
"No taxation without representation!" -- and we certainly weren't looking for representation.
If you only have W-2 or 1099 income, the government already has all of the data necessary to complete your taxes using standard deductions. If you have other income, itemize, or have other circumstances, you can continue doing your taxes as is.
It is curious that some proponents (in the US) of lowering taxes intentionally make taxes more complicated so as to make people more opposed to taxes in general.
I agree that most people who don't need to file Schedule C, who don't have investment gains or losses outside of tax sheltered accounts, and who don't pay for childcare while they work (Form 2441), and who don't have miscellaneous deductions (which include medical expenses and unreimbursed employee expenses if they exceed 2% of your income) could have the IRS correctly fill out their taxes for them. And thats a lot of people, and the IRS should do it. But the parent comment said "If you only have W-2 or 1099 income, the government already has all of the data," and my point is that unless they mean something weird by "1099 income," then thats wrong.
Most tax filers have a single W2 income and use the standard deduction, so the IRS would just send you a form that has that.
For the rest of us who actually don't use the standard deduction, at least it would help me know which forms the IRS has and what they think I owe them, so I don't forget anything, or can correct things. I've had incorrect 1099s filed against me and had no idea for years until the IRS notified me of a discrepancy.
So yeah, there is no downside to the IRS doing my return and then letting me amend it.
I live in Virginia and about a decade ago we had an online website to fill in the state taxes. It was so easy. H&R block bought off the legislature to have it shut down and now they charge one of the highest rates in the nation to file state taxes for Virginia. The stated reason for shutting it down was to save money, because $40k was apparently too expensive to save the residents of the state millions.
I just got a surprise from last year that a 401(k) rollover was (incorrectly) filed to the IRS as a distribution. No tax form was sent to me, but the IRS knew all about it and sends me a letter saying I owe them several thousand, interest is accruing and penalties are about to start. They had this data at tax time and I could have fixed it all before filing.
If they owe you money, you can file. If you owe them money because they screwed up, you don’t need to do anything. This assumes pay as you earn, standard employee status, not entrepreneurial revenue. Easy for the common case.
In NZ (and Australia) you have tax withheld, which means the employer holds your tax, they are not obligated to pay that tax for ( i believe 6 months ) so they tend to pay 1/4 yearly or 1/2 yearly, leaving the money in their own account.
In Singapore you get your full salary and you pay it yourself, either via lump sum, or monthly deductions from your bank account.
On the other hand, this also irks me in some way. It is good that it's so simple to file it, but at least when just texting an okay it probably hides just how much people pay in taxes. It's almost the same thing as the fact that most employers in Sweden just show the taxes they withheld from the salary, i.e not the significant payroll taxes the company had to pay (which could just as easily have been shown for/"payed" by the employee).
Regardless of ones opinion on how high taxes should be, and wether one believe they get good value for their money, I think everyone ought to know roughly how much they pay. I guess this is the reason why Grover Norquist of the Norquist pledge [1] tries to stop measures like this [2].
I imagine, if there was interest, it could be done in a way that actually _raises_ the awareness of how much tax is payed/withheld from people's income.
[0]: https://www.skatteverket.se/omoss/press/pressmeddelanden/201... [1]: https://en.wikipedia.org/wiki/Grover_Norquist#Taxpayer_Prote... [2]: https://www.npr.org/templates/transcript/transcript.php?stor...
Why do you care? More importantly, why do you want to force people if they don't give a flying fuck?
> I guess this is the reason why Grover Norquist of the Norquist pledge [1] tries to stop measures like this [2].
Grover Norquist tries to stop measures like this because he absolutely hates the very concept of taxation and has made it his life's work to make taxes as painful as possible so others will as well. There is nothing benevolent to Grover Norquist, the man is an intellectual terrorist trying to make countries fail entirely.
There are much better ways to make taxes understandable to people than making it complicated to file them.
For example, UK tax office sends everyone a letter with their total tax contribution and a breakdown on how it is used for different government services: https://i.imgur.com/a1MIiPC.jpg
The radical anti-tax groups are so anti-tax that they see making it easier to pay taxes as support for taxes. So they want it to be difficult to pay taxes to make it easier for them to argue against taxes entirely.
The system is broken in so many places trying to approach it with any rationality gives you a headache.
seems reasonable to me. otherwise you could "raise" taxes by eliminating deductions.
The number of deductions and credits is orthogonal to whether the IRS can save you the effort of collecting the information about what they think you owe.
> It’s no secret that the IRS and big spenders in Washington, D.C. want to socialize all tax preparation in America. The (ironically-named) IRS Office of Taxpayer Advocate has been pushing for IRS preparation of tax returns for years. There’s only one reason proponents want to do this—tax revenues. If the IRS invites a conflict of interest by adding “tax preparer” to its role as “tax collector,” it’s a near-certainty that everyone’s taxes will rise. In fact, higher tax revenues are a major selling point of mandatory IRS-prepared tax returns.
...
> More importantly, it directs the IRS that it “shall not compete with the private sector in providing these services to taxpayers, nor acquire, develop, or deploy enabling systems to duplicate or replace private tax preparation services.”
> Never again would taxpayers have to worry about the IRS filling out a Form 1040 for them against their will.
These are unserious people that shouldn't be anywhere near the halls of power.
https://www.atr.org/taxpayer-advocates-issue-joint-free-file...
The second quote is ridiculous -- it would mean the IRS shouldn't have a public facing free information site at all, that you should have to find someone else to tell you anything whatsoever about paying your taxes at all.
The third seems like a deliberate strawman -- all proposals would involve you needing to approve the IRS quote.
Unserious, indeed.
Because this is an actual problem for some people?
"I don't want government to operate effectively because to do so would ruin my ideological minarchism"
and
"I don't want government to operate effectively because I can profit from it operating less effectively"
are very friendly bedfellows indeed.
I don't know if getting rid of taxes entirely is really a goal for many of these people, but what you describe doesn't sound that unreasonable. Making paying taxes easier does sound like support for taxes, right? For example, if we didn't have payroll deduction, surely there would be more popular support for tax cuts.
How does that fit into their logic?
What happens if all the taxes are abolished and there is no need for that business? Will they start lobbying for more tax or lobbying against the final cut? Or lobbying for an income report system with the tax component stripped out, basically building what would have helped in the first place?
Doesn’t mean that we wouldn’t have taxes, but we’d have a tight temporal and psychological link between what we pay and the selections we make at the ballot box.
That's the temporal connection that needs to be made.
The idea that there is a whole host of politicians who want to increase taxes is ludicrous. No one campaigns on the basis of increasing taxes. Further, in most of the West, taxes have dropped dramatically over the past few decades. Most politicians campaign on (1) reducing taxes or (2) providing some benefits. The dishonest politicians campaigning on #2 are teh ones who claim you can increase benefits without increasing taxes (which is occasionally true but rarely). It's only the honest politicians campaigning on #2 who add that the benefit will indeed have to be paid for by higher taxes.
The politicians increasing taxes are the good guys because they're the only ones at least thinking about paying for benefits.
Practically it would never happen so it's difficult to argue for other than on ideological grounds. I think we as a society would find out that a huge amount of the population would simply be incapable of budgeting even quarterly tax payments. The enforcement costs would be immense.
Starving the beast is a major policy aim.
The powerful anti-tax group (which I support) is against this simplification problem. We believe making it simple would also make it simple to raise taxes and people will not realise how much money they are paying to the government. This reduces government's accountability in spending.
I think IRS must send us a bill each month and we must write a check to pay it. It is both simple and also people feel the pinch of paying taxes thus supporting measures to reduce taxes over time.
In other words you think people are too dumb to do the math, but yet are smart enough to make intelligent protests against taxes when they have to write a check?
Note: I don’t agree with the GP.
Let me rephrase my original sentence ". I do not want money taken away from people without they explicitly agreeing to it "
Just because you have to pay taxes anyways does not mean there should not be a formal consent in the form of a check.
1. There was any relation between how much we spent and what we pay in taxes. There isn't. In the U.S., so-called "fiscal conservatives" routinely give massive tax breaks to the wealthiest Americans while simultaneously voting to increase spending in the largest discretionary spending category we have: the military—which currently represents 53.7% of our discretionary budget.
2. People currently had any idea what they were spending on taxes. In my experience, most people think the amount taken out of their paycheck is all federal taxes. They seemingly make no distinction between social security, 401k contributions, medicare, pre-tax benefits like health insurance, transportation benefits, FSA's, etc., local, state, or federal taxes. It's all just seen as "the government took money from me". It's amazing how many people legitimately think they're taxed over 50% (especially those that are in the 15-25% tax brackets).
> People currently had any idea what they were spending on taxes.
This is precisely the opposition to IRS doing your taxes for you. Imagine you receive a bill every month that shows the clearly what all these payments are and you have to write separate checks.
Taxes include all the things. Not just Federal income tax. It gets frustrating comparing tax rates to say - European nations - when they typically will be quoting all-in tax rates other than sales tax (VAT) - where the US number will almost invariably list only the federal income tax rate which tells not even half the story in many cases.
social security, medicare, medicaid, local income taxes, state income taxes, federal income taxes, real estate taxes, sales taxes.
Adding those taxes together equals your total tax load. I think more people are closer to 50% than you'd suspect. Programs like social security and medicare are re-distributive in nature and indistinguishable from taxes - they simply were marketed differently for political reasons. But lets call them what they are.
> 401k contributions, pre-tax benefits like health insurance, transportation benefits, FSA's, etc.,.
Agreed that those are not taxes - in fact somewhat the opposite!
Edit: formatting
I do think the distinction is relevant: The expected result is that you will get every dime you put into social security and medicare back. And then some. They're required savings accounts. Taxes spent on interstates, debt repayment, and the military, however, are truly expenses.
There is basically one straight-forward case where the IRS preparing taxes makes sense: that of full time employees whose only income is from their job which issues W2s.
For everyone else — which includes:
- People working multiple part time jobs
- People with non-standard investment portfolios or real estate holdings
- Contractors, with or without an LLC
- Full time employees who are also contractors
- Dual residents
- Small retail businesses
- Small internet businesses
- Megacorps
— there is a different set of requirements. The idea that the IRS would be able to optimize everybody’s return so they pay the least amount of tax, is absurd. And that’s not even considering the moral hazard of misaligned incentives, i.e. the IRS has no incentive to make sure you deduct as much as legally possible from your return.
"And that’s not even considering the moral hazard of misaligned incentives, i.e. the IRS has no incentive to make sure you deduct as much as legally possible from your return."
This article isn't advocating that your taxes would be submitted without your review. It's advocating that they be PREPARED. As in prepared for further editing or review.
As such, 60-70% of the population would have nothing to do. People with multiple part time jobs would be fine. The rest would still have more to do. So, at worse, it hasn't become worse, and it is better for the majority of people.
(Still I suppose that may be an improvement over the status quo)
The status quo is that residents must either (a) do nothing and receive a fine, or (b) file their taxes, explicitly opting in to any refund programs they qualify for. Whereas the implication of this change would necessitate the impoverished resident to either (a) do nothing and likely miss an underreported refund, or (b) file their taxes, basically, explicitly opting into any refund programs that were missed.
It basically hides the penalty of not filing in savings missed.
It certainly changes the calculus of the question of morality. Which case is better for the impoverished resident? It’s not a simple question.
If the IRS later notices, presumably any recipient who is impoverished and for whom there's no evidence of fraud wouldn't be charged penalties on any balance due, and might be eligible for some offer in compromise or installment plan. This is no different than now, except even less of a justification for penalty when self-reporting isn't the norm.
I imagine they would probably lose the free option. It's true that they would still have the paid option, but I don't think most people would bother if they didn't have to.
[1] https://www.irs.gov/individuals/free-tax-return-preparation-...
That said I'm sure US congress could find some interesting way to involve for profit companies in the process that makes everyone even more miserable than the current system.
This system would be way better since you get to see the error up front and deal with it immediately instead of waiting 8 weeks for the process to start and your refund to languish for another month or two before it is all sorted out.
I think it's almost important to keep in mind that the IRS already does your taxes. If what they do significantly disagrees with what you do, you have problems. I would much prefer the IRS just sends me their work rather than me having to do it, then send it to them for checking.
No one ever was trying to say that IRS doing your taxes for you would never make things easier.
https://www.irs.gov/statistics/soi-tax-stats-individual-inco...
However, I still claim that even such boring filers would benefit from the IRS sending out "yea/nay" forms. It removes a lot of the stress and mystery from the process.
Stock trades are also reported to the IRS, although the basis often isn't.
As soon as return free filing becomes an option, intermediaries will pop up to automate IRS reporting for many other taxable transactions (think Square for plumbers and business credit cards for automatic business expense deductions). Even those who have simple returns are wasting half an hour a year.
There are ways to make things exceedingly complex:
1. Have activity cross-brokerage (e.g. cross-account wash sales) as no entity cleanly tracks this.
2. Have straddles (e.g. put options on equity) which are under complex rules and AFAIK brokerages don't handle correctly (often failing to even identify them).
3. Constructively sale stock using options/shorting as rules are ambiguous and brokers don't implement the entirety of it.
You might predict otherwise, or you might think the cost is outweighed by the benefit to the people who really do have boring taxes.
But I think the argument makes sense.
There are about 125 million households in the US. 80% of those households obtain money via: W-2, Retirement (Social Security, 1099-r), bank interest via 1099, dividends or other investment income via 1099, contractor income via 1099 and similar. 13% of taxpayers can file a 1040EZ (aka simple enough to use a phone IVR)
100 million households can be freed of a needless administrative burden. Why not?
But secondly there's a lot more to taxes than just income.
For example: - Filing status (married, head of household, etc.) - Education credits - Child credits - Personal exemptions (income adjustment reduced to zero, but you still need to calculate them to determine qualification for various things)
These things affect most taxpayers and require information that is not reported to the IRS. The IRS could make "worst-case" assumptions (single, no kids, etc) thus requiring everyone to revise their returns, or they could guess and invite tax fraud and inadvertent errors.
So that's a reason why not.
The other upshot is that the expense and non-compliance from a tax perspective would probably drive more W-2 employees in situations where 1099 status is being abused. (ie. probably 40%)
How can the IRS collect information on your filing status and family/dependent situation that would be simpler than just asking you to file a tax return? It's not just a matter of who lives where, you know.
They could always implement something like TurboTax. That's a reasonable option, but a far cry from "pre-filled forms."
> So, because 20 million households can't have a form auto-filled, we should forget about the other 100 million?
Well the issue is that the IRS has no way of knowing which of the households are the "easy" ones, because that is determined by facts not reported to them (except on a 1040). They can guess, but I think they would be wrong pretty frequently.
I think you have the underlying premise that the IRS guessing wrong has no cost, because you can just correct it. But my suspicion is that a lot of people would just file with the incorrect information, either willingly or unwillingly, and many of those people would have put the correct information if they had paid someone or bought software to do it for them. So I disagree with your premise.
Something “like TurboTax” that also precompleted information that was tied to forms that are already filed directly by third parties with the IRS would be essentially equivalent to pre-filled forms for a very large number of filers.
> How can the IRS collect information on your filing status and family/dependent situation that would be simpler than just asking you to file a tax return?
Filing status and dependent information is a small fraction of the information content of a tax return, so having you file just that would itself be simpler than asking you to file a tax return; additionally, it is information that changes infrequently, so once you've filed it once, they could prepopulate it and require updated filings of that information only if changes occurred.
True, although that was just one example. Another example is the credit for education expenses. Here are the requirements for the American Opportunity Credit, the best one:
* Be pursuing a degree or other recognized education credential
* Be enrolled at least half time for at least one academic period beginning in the tax year
* Not have finished the first four years of higher education at the beginning of the tax year
* Not have claimed the AOTC or the former Hope credit for more than four tax years
* Not have a felony drug conviction at the end of the tax year
The IRS + the schools could theoretically figure out only three of those five requirements. I guess four if all states reported felony convictions to the IRS.
If you don't meet those requirements, there is another one available with different rules for which expenses qualify.
This is not an uncommon tax situation! I helped a lot of lower/middle-class taxpayers prepare their returns through a free IRS service a few years ago, and this came up all the time.
> once you've filed it once, they could prepopulate it and require updated filings of that information only if changes occurred
But changes occur all the time. So the information would not be accurate for long, and you have no way of knowing when it has become wrong. In the case of the education credits, a common occurrence is that the student ceases to be a dependent of the parent (an issue which depends on how much support the parent gives the child, something the IRS has no way of knowing), meaning who is entitled to the credits changes.
Even for simpler things, like which of your children qualify for the child tax credit, changes are not extremely rare.
It's not that hard to guess when changes might have happened based on additional information. But this basically requires the IRS to reimplement TurboTax, or at least a crappy version of it that kicks people out of scope whenever things are not trivial. Without those types of inquiries I think the confidence that a given return is correct would be extremely low, absent a serious simplification of the tax code.
Edit in response to your edit:
> Something “like TurboTax” that also precompleted information that was tied to forms that are already filed directly by third parties with the IRS would be essentially equivalent to pre-filled forms for a very large number of filers.
Yeah, that would be awesome! I definitely agree that a "TurboTax lite" that was synced with the government info and allowed you to click through a bunch of screens confirming various things would be a pretty good experience. Although I actually think the real TurboTax is pretty close to this for simple situations, because they can import your information from major payroll providers, brokerages, etc.
I live in Denmark, and all of the above use cases are automatically calculated by our tax auth..
My most complex tax-filing was:
- Full-time job
- Extra "non-job" salary (board membership)
- Investment income from two different providers
- Expenses for multiple bank loans and mortage, and external credit card companies
- Three different companies (LLCs) that I own
All of that info send to the IRS (by law) from all provider.
My time for tax-filing 10 minutes to look it through (and do nothing as it was correct).
This year I had 1 change to the taxes. The interest from a small collective loan for our home-owners association was not automatically filed, and I had to enter that by hand... Took 5 minutes..
Small note, my three companies also had my time spent doing tax stuff, but that is by law required of the LLCs and the companies have a (shared) accoutant doing that..
Other note. Even royalties (for books, music etc) are correctly calculated by the danish IRS due to the requirements of posting from the companies doing payouts..
tl;dr: The requirements of the payer and all financial institutes to file to the IRS is extremely effective...
Multiple part-time jobs makes setting withholding allowances properly tricky, but doesn't substantially complicated year-end taxes, so, no, this isn't a valid point.
> People with non-standard investment portfolios or real estate holdings
People who derive income in a particular way from these Ina given year that isn't trivially applied given documents that are already required to be filed with the IRS would, yes, need to do some kind of filing addendum/adjustment. These are probably a very small share of returns each year.
> Contractors, with or without an LLC
Yes, anyone who has business income on their personal taxes rather than in a non-passthrough entity is going to have to do some kind of business addendum to an IRS-prepared personal return.
> Dual residents
Sure, these (or anyone with foreign tax to report) are going to need something on top of the base IRS return.
> Small retail businesses; Small internet businesses; Megacorps
This whole idea applies only to personal taxes; so many of these are out of scope ab initio. As far as small businesses that would be reported as personal income, that's already addressed.
With IRS-prepared returns, everyone would have substantially less to do, and the vast majority of individual returns would be just review and approve.
And as it turns out, this is the vast majority of cases. Just because there are a few other cases where it doesn't work out does not justify not doing this.
https://www.irs.gov/statistics/soi-tax-stats-individual-stat...
They don't have this category exactly, but it is clear that that there are many more than "a few other cases" that are not full-time W-2 employees. For example, 25M returns in 2015 (17%) have no wage income at all and around 13% have self-employment income.
As others have stated in comments, there's nothing special about US taxes that mandate it should be this complex, other than special interests of people wanting to make things complex for their own benefit.
Would be amazing to have the cake and eat it too - lower taxes and a simple filing system!
Sure if you live in Oaklahoma you might pay less than that but CA/NY state taxes plus property taxes, plus fewer investment tax free options, I think US taxes are now similar or higher. Ie 28% federal + 10% state + 10% property taxes equals nearly 50%. Sure sales tax is lower.
Plus - you still have to pay for your medical care, and universities and no social safety net.
You pay in tax bracket A up to $X, then the next tier is taxed at tax bracket B, and so on, and so on.
You need to add 12% to your marginal tax rate before £46500 per year for national insurance payments (and 2% after that), and 20% between £100k and £121k per year for the loss of the standard deduction. The real marginal tax rate for someone making £100k is 62%.
Also include 12% employer's NI (which by law isn't included in your salary, but must be paid by your employer), and a nice 20% sales tax levied on everyone except people with a significant amount of savings.
The $165K to $315K bracket for a family in the US is 24%. A healthy chunk lower than France. Plus mortgage interest deduction, etc.
In the US, you face a 24% or 25% tax on your gross income after deductions, not including additional credits that may also apply. Payroll tax deductions are also much smaller in the US.
Not aware of any state which has a 10% property tax and an income tax. I am aware of some states having high property taxes but no income taxes...
Finally...we do have a safety net. It's a safety net, not a dole like the European model.
California's can be as high as 13 something percent, I believe (though, I think with the kind of numbers the other guy was talking about, it'd probably be like 6-7%). But, you're right that the property tax is a serious exaggeration. Like, expensive places like Austin are around 2%, from what I remember.
The US safety net is anything but. It barely exists and is extremely difficult to both qualify for and live off of.
The 30% income tax you refer to would not be enough to cover that. I think the income tax in France doesn't even cover the interests of the national debt, that how little it is in the grand scheme of things. Hence why we have a hell of a lot of other taxes (VAT at 20%, CSG, etc.) to keep going...
At least we have the benefit of 14 aircraft carriers.
You can't just add the percentages up like that since federal and state taxes are marginal rates. You'd have to add the effective tax rates.
> Lower taxes? In France the bracket for a family for €104,120 to €279,132 is only 30%.
This range is $118,000 to $318,000 USD. At the federal level for a family $165,000-$315,000 is at the 24% marginal rate of taxable income (not gross).
In the convoluted system we have, you'd knock off $24,000 as a standard deduction, then any amounts contributed to retirement accounts (401k's and IRA's), HSA contributions if applicable. If you add all those vehicles up, that's up to another $54,000 taken off of your gross income. No idea how taxes in France works, aiming to point out there are tax advantaged spaces which would significantly reduce the tax burgeon.
Quick looking at things, NY state income tax would be about $20,500 on $323,000 in earnings (no deductions, credits, averages to about 6.3%).
I'm curious where you got your 10% property tax guesstimate though? I'm not familiar with New York to try to estimate through things, but [5] makes it seem not nearly that bad. Is it a highly localized thing?
"Property taxes in New York vary greatly between New York City and the rest of the state. In New York City, property tax rates are actually quite low. The average effective property tax rate in the Big Apple is just 0.80%. The statewide average rate is 1.65%."
--
Interestingly, Iowa, which people on the coasts would probably lump together with Oklahoma as low cost of living flyover states, has very high state taxes. 8.98% on earnings above $70,785. [4] New York's highest bracket hits at $2,100,000 and is 8.82%. [2]
[1] Federal Income Tax: https://www.nerdwallet.com/blog/taxes/federal-income-tax-bra... [2] NY Income Tax: https://www.tax-brackets.org/newyorktaxtable [3] NY Property Tax: https://smartasset.com/taxes/new-york-property-tax-calculato... [4] Iowa Income Tax: https://www.tax-brackets.org/iowataxtable [5] New York Property Tax: https://smartasset.com/taxes/new-york-property-tax-calculato...
True, though so far, at least, I think that's still balanced by being able to deduct federal income tax when figuring what you owe the state. I recall that there's a move to get rid of that deduction.
The sales tax in CA is half the rate in France.
Property taxes cannot be directly compared to income, they are based on the location and value of the home. There are large changes to the property tax system in 2018-2020 in France. We can compare overall property tax revenue for the country and divide it per person. In 2015 in France the average property tax revenue per person was $1422 USD. In 2010 in CA it was $1472. CA is higher but not substantially so.
You start your filing prefilled. Works like a charm.
They send you tax report already filled and all deductions done based on information they know. You check it for errors and correct if there is need and send it back. If you don't send it back, they just assume the default was OK.
It shouldn't require any form of "trust". A person should be able to tell within minutes that it's correct.
Otherwise the filing method isnt't the problem but the complexity of the tax code (for the large majority).
That article also answers a question many here have ("why don't they pre-fill the form like <insert EU country here>"). It's because Grover Norquist, the well known promoter of the "Taxpayer Protection Pledge" took the counterintuitive view that just making the process easier equated to a new tax, since taxpayers might end up paying taxes already on the books that they might have previously unintentionally evaded.
The same applies to any such improvements in the IRS filing process.
1. https://www.npr.org/2017/03/29/521954033/stanford-professor-...
Makes one wonder...
[1] https://www.opensecrets.org/orgs/summary.php?id=D000026667
[2] https://www.opensecrets.org/orgs/lobby.php?id=D000022016
And the majority of those is because I'm a part owner of my dads company, so I have to verify that the given numbers are correct in two forms instead of only one.
Also note that companies usually prepay part of salaries as tax, so generally people only have to pay a few K, or receive a few K. Depending on how much is paid.
Taxes seem complicated in USA.
It should be they prep it, and I can verify and dispute it if I think they did it wrong.
At a minimum if there was a secure way that we could look that up and then feed that into tax prep software I think that would save us 80% of the time.
I fear that people would consider whatever form the government sent them, with whatever number it had on it, the final say, resulting in the government not being accountable for the taxes they collect.
Given that, no. No way would I let the IRS prepare my taxes.
Jan, I get a 1040 form, prefilled out.
If I don't agree that it states my financial position correctly, I can correct it & send it back by Mar 1st.
If I do agree, I place it in my file cabinet.
But as patio11 noted, at least once, the IRS enforces taxes to the amount Americans will tolerate. What he did not say, but I have heard elsewhere, is that tax evasion is enormous, and pervasive in the cash economy.
which is part of why I favor abolishing cash. :-)
So whether the IRS pre-fills the 1040 or I do it myself, I'm going to use tax prep software.
I guess they loose the e-filing fees, but most version of the software come with 1 free federal and 1 free state..
In other scenarios, I would prefer to cough up money to talk to a specialist.
Patronizing and offensive to Americans
My spouse has a business now though, so no.
I'm not getting why there's a sudden interest in this. The article is over 3 years old, and it's not even close to tax season.
That is how it works in Spain and Sweden. But, in the end, the tax office will randomly select people and check their tax applications. If you did something wrong they will send a correction so you pay the difference plus an interest rate. But even then you can send allegations to justify your original tax application. Only if they reject the allegations you need to pay the difference.
I'm not going to trust some 3rd party to do my taxes unless they're responsible for the accuracy of my taxes. The federal government (government in general for that matter) does not have a particularly good track record of not holding other people accountable when it screws up.
I have almost always worked as an employee, not a contractor or business, so I did not owe money--they probably owed me.
I decided that rather than get the couple hundred bucks I would receive as my return, I will forgo the stupid process altogether.
I have yet to hear from anyone about it, and I have become a little bit happier by not having to deal with that crap.
In 2014, I gave up income altogether, so I am no longer required to file. Before then, I guess you could call it civil disobedience.
He won't get in trouble or anything.
They will calculate a substitute return and mail it to him. If it shows a refund he can chose to accept, reject, or ignore it.
Accept: They'll send him money. But not as much as if he had done the return himself.
Reject: You do that by filing a correct return.
Ignore: Then he's giving a free gift to the government. Which is his choice I guess.
PS. He may regret his decision later if he wants to get a loan, or apply for government services.
If it helps, some other comments in this thread indicate that there's no need to file a tax return on yearly income under ~$10,000 so this person and others in their situation would likely qualify.
I don't think the IRS should give amnesty for past willful nonpayment in light of present circumstances though. We have a different mechanism for that; it's called bankruptcy.
Maybe amnesty isn't the solution, but if you're living out of your car and have IRS issues looming over your head, escaping that life could be pretty tough, and that sucks.
Reminds me of this video I was watching on tiny homes. This guy converted a school bus into a home for him, his wife, and three children. And he was totally over-selling everything in it. Going on an on about how you can hang stuff here and there to save space. How the counters can be used for this and that and how multipurpose they are (like most flat surfaces). How everything is able to be cleaned. Etc.
And I'm like "Cool, it is a small space and you've managed to fit everyone inside to whatever degree of success you are comfortable with, but your 'dryer' is literally hanging clothes and turning on the heater."
I'm sure you can live like that. I'm sure you can manage living effectively homeless and with the barest of cash to buy whatever you need day to day. But that also requires a level of commitment and hustle I just don't want to deal with. I want to go home, watch Netflix, noodle on my guitar, build some Legos, whatever. Without having to think "Well, where should I sleep tonight that won't get me stabbed or dead from exposure"
Being able to live "cash free" because you are able to stay with people who will let you crash rent free is more exploitative than savvy in my opinion.
I stopped paying for food, taking advantage of all the food that is wasted daily.
I stopped paying for clothes, wearing free second-hand instead.
That's most of it. For other things, like computers and phones, I follow a similar strategy.
Now I am free to spend almost all the time I have in whatever ways I choose.
What does this mean?
I stopped paying for food, taking advantage of all the food that is wasted daily.
I stopped paying for clothes, wearing free second-hand instead.
That's most of it. For other things, like computers and phones, I follow a similar strategy.
Now I am free to spend almost all the time I have in whatever ways I choose.
Willful failure to file is a felony [1].
>> Willful failure to file a tax return is a misdemeanor pursuant to IRC 7203. In cases where an overt act of evasion occurred, willful failure to file may be elevated to a felony under IRC 7201. <<
Carrying up to one year of jail time under federal law. States usually have penalties, too.
> In cases where an overt act of evasion occurred, willful failure to file may be elevated to a felony
OP is bragging about willfully failing to file on the Internet. Something tells me proving this wouldn't take a sleuth.
It would be actively doing things to hide, falsify documents, etc.
This seems to be mostly for businesses and folks doing a lot of cash transactions.
Sounds like OP isn’t making much money to begin with — is it really worth the IRS time or to prosecute him?
I imagine they’d tell him to pay and fine him.
Doubtful it’s a felony based on his description.
/ˈsivil ˈˌdisəˈbēdēəns/
noun
the refusal to comply with certain laws or to pay taxes and fines, as a peaceful form of political protest.
Edit: looks like I was wrong. That number matches what turbo tax is saying[1]
1. https://turbotax.intuit.com/tax-tips/irs-tax-return/does-eve...
You would rather willfully evade taxes (not file) to protest the system? The hundreds of dollars in your favor doesn't cut it for you?