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Comment by TheCleric | Hacker News Reader

This should be the reason why these sites should no longer exist. The IRS should have this as a built-in service. Or better yet, return-free filing like most other large economy countries.

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It would be easier if the tax code was simplified, oh wait the tax-prep companies are also lobbying against that. Maybe we should dismantle them, take their money away and use that to pay lawyers and tax specialists to simplify the tax code and create a nice and easy filing interface.

That is a huge part of it, but I've heard one of the other major barriers are people who are just plain anti-tax since they think anything more centralized would just give the government an excuse to sneak in new taxes.

I am somewhat sympathetic to the argument you are describing.

Imagine if income tax was not automatically deducted from your paycheck, but required you to save and physically send money to the IRS (like most 1099 contractors have to do). I think the overall feeling about tax for the bottom 60% of earners would be a little different, whereas now they see getting back some forced savings as a little reward.

The government is highly incentivized to automate and disguise that activity further.

There was no employer withholding originally. People wrote a check each year, which made the amounts very visible to each person. Employer withholding keeps it quiet and low-key so few resist the takings.

"Current Tax Payment Act of 1943" https://lawcat.berkeley.edu/record/191355

That would be a really regressive change in terms of who pays and how much they pay.

There are also very simple tax systems that are not regressive, like the UK or most of Europe's systems. Just eliminate most deductions and the ones you keep, decouple from taxes. Then 90% of employees can just have their tax deducted at source and not file anything. Like the UK and European systems. All of the big ones are just automated in most places (here in the UK, investment income is taxed at source, allowances for kids are done automatically based on birth record and the tax authority automatically tell employers rates including for those with multiple jobs)

Having lived and worked in Europe, I submitted yearly tax returns to various countries. The German payroll taxes were particularly troublesome to understand. And the countries had high sales taxes with VAT which causes more paperwork and encourages companies to vertically integrate.

Vat is specifically designed NOT to encourage vertical intergration. That's why it is structured the way it is and not paid by companies.

I can't comment on the exact details of the German tax system.

Here in the UK, I've done 4 tax returns in 22 years of working. All were because I was contracting via a limited company so there was no other way for HMRC to know what was earning.

What was the complexity around the German system? I understand they are federal (with state as well as local and federal taxes)...

Yes simlified taxes - repeal the personal income tax and replace with consumption-based sales tax. No more W2 withholding, no more individual fed/state filing, no more deduction games, no need for tax prep sites.

Maybe the sales tax would be zero rate for uncooked food at grocery stores.

So enact a hugely regressive tax that hits poor people the hardest as a percent of income, while lets rich people accumulate obscene wealth tax free? That’s what funding everything with sales tax does.

Poor people don't have mortgage interest deduction and other tax deduction acrobatics, so poor people are harmed today. And removal of paycheck W2 withholding would be a take home pay increase. The tax prep sites and government paper pushers would have to find something else to do for work. The corporate income tax could remain, if you like.

That has nothing to do with the deductions they get now?

If W2 withholding was removed, people who have more take home pay then go into debt when taxes were due.

To clarify, I suggest remove the personal income tax so there is no need for W2 withholding. Replace with a sales tax, with basic necessities having zero rate sales tax.

Poor people are harmed by the loopholes not the inherent principles, so instead of fixing the loopholes the proposal is to move a plan that inherently hurts poor people, no loop holes needed. Wow what a great plan.

This would disproportionally hit the poor. And the rich would be laughing even harder because their tax rate would effectively drop to zero.

The rich already laugh because their gains are not mostly W2 income. The rich already opted out.

No reason to make it even worse. Some rich guy I know wanted to show me his art collection, a whole bunch of non-descript stuff that sold for an immense amount of money. All I could think was to encourage him to buy more art: his money would be in better hands if it flowed back into the world through the artists. Then I learned that it is just a speculative thing, that there is a whole industry around this and that the artists see almost nothing of the money. But the galleries, the 'connoisseurs', the auction houses and the brokers all make bank. And they too are rich people... quite frustrating.

My grandmother was a walking collection of proverbs and one of the more pointy ones was 'the devil always shits on the larger heap'. I'm not sure if the meaning comes across in English but the gist is that once you're wealthy more wealth is pretty much guaranteed whereas the poor just get poorer.

Then automatically give a tax credit to the poor. (yeah, I know how well that would go over in the US)

Simplified taxes does not have to mean lower taxes. You're conflating 2 issues (or intentionally associating them).

Removing loopholes, reducing the kinds of things that can be claimed without solid proof (or likelihood of needing to be proved, or complicated to prove), reducing the amount of paperwork that can create loopholes, etc. is part of simplifying.

Removing personal deductions, a simple 1-step calculation, is not simplifying.

And reducing tax rates is not necessary to simplify taxes. A graduated income tax is very simple.

Think about it harder. Don't be intellectually lazy and just jump to cutting certain taxes because it would be "simpler". Unless that's your goal.

>> Simplified taxes does not have to mean lower taxes. You're conflating 2 issues.

When did I suggest lower taxes? I suggested sales tax increase which would offset removal of personal income tax.

You're implicitly implying that sales taxes would be lower than an income tax. Which they would not be (for most taxpayers), in order to raise the same amount of revenue.

Sales taxes are generally regressive.

If you're poor you're paying a high percentage of your income on this sales tax.

If you're not poor a much smaller percentage will be towards sales tax.

>> of your income

Rich people have investments and that is not income for tax purposes if it is correctly set up. For many rich, they have escaped from W2 taxes on income. "Income" according to the personal income tax code of IRS.

Poor working people, and middle class, have IRS income. The rich have investments and trusts and LLCs and loopholes.

LLCs cannot be used to avoid income taxes. The income from an LLC passes through directly to the tax returns of the owners, where taxes on it are due and payable. Same with trusts and trust beneficiaries.

Capital gains on investments are taxable as well, although some people can defer paying capital gains taxes simply by not selling until they need to. That does not avoid taxes, but rather defer them until later.

If anything "the rich" are subject to additional taxes, notably estate taxes. Irrevocable trusts can be used to reduce estate taxes, but do not reduce income taxes except by having a different person (the trust beneficiary) pay taxes on trust income.

Consumption taxes are hugely regressive, and really hit poor people hard. This would make doing taxes easier and probably cheaper for well paid programmers (like many of us), and hit poor people hard. We need non-regressive taxes. California has high taxes but surprisingly is less regressive than many places. I say surprisingly because it's hard to overcome the power of wealthy people pushing tax rates down for themselves via political donation (such as is seen in the us federal tax system).

Let’s do that with utility companies and ISPs while we’re at it. Make it better for everyone.

I don't want the tax code simplified, I want them to send me a tax bill and for that to be the end of the story for those of us not running a business.

We can do both of those things only if we mandate a lot more financial data sharing with the government.

All financial data should be shared with the government. Also, the government should have access to your ID and social security number and address.

Easier said than done. Given the depth and breadth of the tax code and the types of information that might be relevant, I don't see how it could be automated as-is without violating the 4th amendment.

Where does automation come into this?

Why anymore they already have a copy of everything my work, brokerages, and banks have.

W2s and 1099s are common, but they are a very small part of what someone could have on their 1040. If, as proposed above, we'd want to automate it without simplifying the tax code, there is way more information required. You'd need to know nearly every exchange of value that someone makes and why they did it. And they'd need to more closely track where people live, travel, work, etc.

FedNow seeks to facilitate adoption of these practices: https://explore.fednow.org/

FedNow is for payments. That is a small subset of the information needed to determine someone's tax given the current landscape of credits and deductions.

A generic link to the FedNow website doesn't even begin to substantiate your claim. To start with, where is there any evidence that FedNow intends to share any information about individual payments with the Treasury department?

That is currently the legal responsibility of the financial institutions (for payments over a certain amount), not the ACH network. The ACH system doesn't have information like SSNs or EINs to associate with individual payments.

Does FedNow have a plan to start gathering and requiring that information from depository financial institutions just to do a simple bank transfer?

I mean, for myself personally, they already have everything from my bank, brokerage and employer and my job is to send them a copy of a bunch of forms they already have and have them do calculations they already did.

And while many of the people on this forum direct deposit their salary from their single white-collar job into a bank and take the standard deduction, tens of millions of Americans don't.

That's not to say it wouldn't be impossible to automate our taxes, but we'd probably want to tweak quite a few things in the tax code if we wanted to make automatic filing work without either being onerous or inaccurate.

The system I've heard people recommend is that the government gives you a tax form with everything filled out and you can either pay that or redo it yourself with corrections.

What data sharing?

A very significant number of people take the standard deduction and only include data in their return that has already been provided to the government by their employer and perhaps their brokerage and retirement management firms.

Yes, the IRS could prepare a return with the data they already have.

But that wouldn't be a system that would be ...

> the end of the story for those of us not running a business.

as claimed above

Won't happen Congress derives much of its power from punishng and rewarding via the tax code.

I keep reading these articles. They say that tax sites "shared" or "gave" user data via active pixels, but is that really true?

Don't these companies receive money to host the pixels?

Didn't these companies actually sell user data?

"Giving" and "sharing" are not the same as "selling", yet not one article I've read indicated whether the tax prep compaies received payment for the user data.

Does anyone know?

My Occam's razor take would be that Google Analytics (and whatever Facebook have) are running on the sites and this is how financial information is being gathered.

A generous explanation is that the tax sites were inadvertently offering up this data as a result of the whole analytics buy-in. But you would expect a site dealing with tax info would not be that stupid/naive to allow 3rd party code on their sites without knowing exactly what the repercussions of that are.

I could just be blowing smoke out of my ass though.

Well, your intuition was good. Apparently blowing ass smoke was exactly the strategy one company pursued when questioned about the pixels:

...a spokesperson for Ramsey Solutions, said in an email that the company “implemented the Meta Pixel to deliver a more personalized customer experience.”

“We did NOT know and were never notified that personal tax information was being collected by Facebook from the Pixel,”

Of course, "a more personalized customer experience". Well duh, everybody needs that!

"the whole analytics buy-in" is really the issue isn't it?

The internet giants are making billions in a surveillance economy, that in the US is a blatant violation of the constitution's 4th amendment. But, nobody really cares about that do they? Well, except the 2nd amendment, because if we aren't armed to the teeth the libtards are coming to take away our burgers!

We do live in interesting times...

> return-free filing like most other large economy countries.

Taxes in the US are not objective. The IRS doesn't have enough information about you to determine how much you need to pay.

This is effectively false for the vast majority of tax payers. Tax preparation services can still exist for the relatively small number of people that require it.

> This is effectively false for the vast majority of tax payers

If you are imagining W2 workers with no business activity, children, inheritance, donations, property, or investments, I think this is actually a tiny portion.

So collect the data? In Germany it is standard to classify workers based on marital and child status[0]

[0] https://neotax.eu/en/blog/tax-classes-steuerklassen-in-germa...

Children and property are easily handled by the IRS; people with more sophisticated needs (inheritance, meaningful donations, investments) could still hire a professional to adjust what the IRS calculates. That's effectively what's happening now anyways, its just the IRS doesn't let you take their calculation at face value, you have to file your own and see if it matches.

Instead they could just send you "This is what we calculated" and you can do nothing (probably 90% of people) or file as we do today for the special cases you mentioned.

> Children and property are easily handled by the IRS

Please explain. Which percentage of the year did the child live at each household? Is the property your primary residence? Did you rent a room? What amount did you spend on property upkeep or interest?

Across my working lifetime, even with many of those things at some point in time, most years the IRS has (or can obtain) everything they need.

Heck, nearly 90% of households take the standard deduction.

The IRS should send a pre-filled form with an amount owed (in either direction). If you agree, you sign it, and make any payment/refund. If you disagree, you add your deductions and whatever else needed, similar to today.

It's false for something like 45-60% of tax payers. That's not a "vast majority", and that's just based on people who have previously used deductions. The IRS can't do this with small business owners for similar reasons.

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