Would You Let the I.R.S. Prepare Your Taxes?
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[1] http://capitolweekly.net/turbo-tax-maker-intuit-again-is-mir... (link from the article)
[2] http://www.propublica.org/article/turbotax-maker-linked-to-g...
Depending upon how complicated your taxes are, it can also be easy to do them by hand. I only recently started using turbotax because I was tired of doing it by hand. My taxes are fairly simple though.
Here's an illustration. Say you sell a security that shows $X,Y00,000 proceeds of which $X,000,000 is cost basis and $Y00,000 is capital gain. It's really important to make sure only the $Y00,000 gets included in any taxable number. The 'math' in question is that this amount should be taxable and this amount shouldn't be, and the checking is that it was correctly expressed to Turbotax.
Turbotax will not make mistakes regarding the business logic of the forms. It will correctly "add the value from line 19d on schedule XYZ" every time. But Turbotax can't know that you entered the data correctly in the first place. It has no underlying concept of "this $Y00,000 shouldn't be taxed" or that you should have used schedule UVW instead of XYZ. It's just a fancy flowchart shuffling some spreadsheet cells. This is why you want to double-check Turbotax's operations using the form views that it provides. The form views are Turbotax's step-through debugger. If you think Turbotax is getting something wrong, it's much more likely that you misunderstood a question and entered something that wasn't what it was asking for.
Perceived bugs in Turbotax are right about in the same space as "blame the compiler" bugs in programming. They can exist, and poor messaging can create false positives, but 99% of the time, it's the user providing some kind of bad input instead.
For my IL return it would not allow me to e-file b/c I didn't have the PIN which is assigned the first year you file. However the system's workflow entered an infinite loop and I had to just abandon and click "print return" order to continue.
> Turbotax will not make mistakes regarding the business logic of the forms.
I do not think this is true. It will let you enter arbitrary values in fields on the form that you should not have edited. It does not re-check and delete unnecessary entries from the forms either, though in some cases these problems trip up the debugger and it forces you to delete the return and start over.
If the forms had truly thorough input validation it would be a very confidence-inspiring product to use.
This year, I just said "fuck it" and went to H&R Block, because I'm just done with doing it myself. Someone else who does this all day can do it faster, yell at the computer less, and I'll get the same results.
All of this should be automated by now, but no...
I've used TurboTax this year and it's frighteningly stable.
Anecdata isn't terribly helpful.
I think for a professional tax preparer it would be great but the wizard left me scratching my head wondering if I'd filled it out correctly.
Worth checking out if you're looking for something else next year.
http://slickdeals.net/f/7774581-taxact-ultimate-bundle-delux...
If you don't match, then the IRS will either audit you or send you a proposed correction (along with penalties); i.e. once you fail to match, then the IRS is allowed to show you the correct calculations.
This is an incredibly convoluted system.
Of course you can get your overpaid taxes back by means of the tax return - but a lot of people don't have the money or time or knowledge to do that.
The overpaid money is to the government if requested back, an interest-free loan - if not requested back, a gift.
If the government would now tell the IRS to fill out the form for you - then there would be significantly less income - due to more accurate taxation.
This is not true at all. You decide how much money will be deducted from each paycheck by filling out form W-4 and similar state forms. You can make withholding adjustments after each paycheck.
IRS will penalize you if you "prepay" too little (for instance, if you owe them more than 10% of your total tax), but there nothing that prevents you from not giving them interest-free loan.
In case of doubts, you can book (again, online, with a digital certificate) an appointment with the local "hacienda" branch on one of the available slots and have a clerk filing it for you.
The last time I was there, the clerk had me deduct the rent, when I didn't know I was eligible.
I have childhood memories of my parents being immersed in files and files of esoteric looking forms filled with numbers for days on end, and dreaded filing my first taxes.
Progress!
Our government seems to think computers are operated entirely via witchcraft. I doubt we'll get something like that before 2050.
Obama could force Congress' hand via an executive order, to get the ball rolling on tax reform. They would dive in to begin fighting for their interests rather than be left behind. He won't do it because he's just as susceptible to lobbyists as any of the other major politicians in DC.
In the UK, as stated for other countries, I would just use Pay As You Earn, where all taxes were extracted at the time of pay check, and would owe 0GBP at the end of the year. My Californian wife was astounded by this. "How do you know they've not got it wrong and screwed you?!" "Because I trust they got it right." "Why would you do that?!"
My read of the British is that they might not like the government or politicians, but they generally believe that government agencies get things to the letter of the law more often than not. You can disagree with the tax law, but you assume that the tax man is taking the right amount as governed by that law.
You can't pass tax reform in the US because enough of the citizenship wouldn't accept it.
- When do you need to accept your return or settle your outstanding balances by?
- How are business taxes handled?
- How complicated are your tax codes?
- Your current-year preliminary info becomes available online in November, and is updated continuously as the tax authority gets new information. You can log in at any time and correct things, declare unreported income, declare eligibility for commute subsidy, etc. The "regular" period for making such additions/corrections is through the end of February of the following year.
- In the first week of March of the following calendar year, you get a PDF sent to you with the "final" tax computation based on what is in the system as of that date. The tax computation is fairly simple for most people; for me, this is a 3-page PDF, of which the actual computation takes up 1.5 pages.
- If the form you get in March is correct and you're owed a refund, you don't need to do anything; the refund will be direct-deposited one month later (i.e. first week of April). If there are errors or omissions and/or you owe money, you have until May 1 to correct and/or settle it.
This year I got it in early March, and it's due by mid-May.
> - How are business taxes handled?
Pretty much all businesses employ an accountant that takes care for the basic stuff (paying and declaring salaries), and most also have a CFO - usually someone with a legal decree - who knows how to optimize the tax stuff. Every large corporation of course have a whole department of internal accountants and lawyers.
> - How complicated are your tax codes?
Not too simple at least! Multiple types of tax for different types of income (salary, capital, property) and the tax level depend on factors like municipality of residence, membership in a church, total income earned, sums and types of loans outstanding etc. If you collect social benefits, they further complicate as some are taxable and some not. There are also some "tax-like" fees payable by your employer, some of which are deductible in personal taxation and some not. And this is just what I know of personal taxation, the corporate taxation is a whole world of its own.
I don't think the issue here is that our taxation would be so much simpler - and anyway the IRS probably has disproportionate R&D budget compared to a small European country.
Look at sales tax just for California - http://www.boe.ca.gov/sutax/pam71.htm - and that table of quicklinks should frighten you. That is just scratching the surface. For example sales tax for in person transactions is charged based on the address of the store. Unless you buy a car, in which case it is your home address.
Two other factors apply. One is an American mentality that doing minor things against the law isn't that wrong, and being caught is where it becomes real. An example is speeding - it almost seems a contest of wits to not get caught, rather than fixing the limits or realising why they exist. Is it wrong to lie on your tax return about something, where the odds of getting caught are very low, and everyone else is doing it anyway? An example of that is how people call Amazon sales tax free because they are out of state. The supreme court says yes they are sales tax free (to not hinder interstate commerce), but then states charge a "use tax" which happens to be exactly the same as the sales tax. Very few people admitted to their out of state purchases since they were so unlikely to get caught.
The final factor is a distrust of government. They are seen as plodding, corrupt, useless, expensive, political, uncaring and largely pointless. They are very rarely seen as an instrument of voter will. This is what provides the perennial source of jokes - the DMV (department of motor vehicles), the IRS, city hall and all that. Who would trust government to get things right?
So tax returns turn into a contest. What do people think they get away with? Which of the many rules will they obey to the letter? What are their neighbours and others getting away with? Was that really a business lunch? How am I paying more tax than I need to?
Despite their values, neither of the main two political parties do anything to fix this. They are however happy to keep adding to the piles of laws, which makes it more expensive to comply, and increasingly unfair.
I often end up paying fines on my returns. This is not because I am a bad person, and I actually try very hard to get it all correct. It is just cheaper than doing some things the right way, and fairly normal! Some of those fines are also because I don't have a time machine, and I couldn't actually do things correctly without one.
(Note that factors above are generalisations, and don't apply to every last person.)
This I find to be the absolute dumbest reason of all. The IRS already knows everything about your income that you would be telling them anyway.
Not even close. For example they don't know how much you paid in state taxes, and which portions of that are also considered okay for fed taxes. Eg in California a portion of your annual vehicle registration fee can be taken against state taxes. Do the feds also allow that?
They don't know what you consider business expenses. They don't know how much of your house you used for business purposes. They don't know where you resided during the year and the tax treatment of the various places you did live. They don't know about your moving expenses.
They don't know about income you received in cash. They don't know about your Amazon purchases. They don't know about your medical expenses. They don't know about your losses.
They don't know about your foreign income or assets.
They don't know about dependents, or how they have changed. Or your marriage, or divorce. Or how you want your married taxes to be treated (there are at least two different ways).
That is just scratching the surface of the tax relevant things - there are a huge amount more. As an individual you couldn't get your tax return 100% correct, and the government certainly can't.
Edit: various institutions and employers are required to file information with the IRS. However this is big picture information - for example how much interest you were paid on your bank account, or what the employer paid you. They do not get individual transaction information, cash withdrawals or similar details.
We can't have this because it would put tens of thousands of accountants out of work, not to mention the damage it would do to tax filing companies. The middlemen must be protected apparently.
If I somehow became president, I'd tell congress to cut the tax code by 10% a year. If they fail to do so, then every 9th paragraph would be automatically deleted. Or perhaps have the entire tax code read out and voted on, page by page each year to mandatory attendance.
'And rather than download people’s financial data from government sources — which Mr. Williams said might not be very secure — Intuit prefers to connect its systems to banks, employers and other private companies to obtain taxpayers’ information, he said.'
David Williams knows perfectly well that every US taxpayer's tax transcript (showing W-2s, 1099s, etc.) are available online at http://www.irs.gov/Individuals/Get-Transcript . Intuit is using security as a cover for their regulatory capture <http://en.wikipedia.org/wiki/Regulatory_capture> of the US tax paying system.
Doing taxes in the US feels like going through a garbage can of bad social program ideas, bureaucratic waste, etc. Then to make matters worse we get expensive wars...
Banks file forms. Charities file forms. Employers file forms. They know how many kids you have, they know how old they are, they know if you own or rent, and how much your mortgage is and the interest being paid. They have info on your outstanding student loans. Except for the edgiest of edge cases, there really should be no surprises. Even a moderately powerful desktop should be able to precalculate the taxes for everyone in the country in less than a day.
Why is filing taxes even a thing anymore? Hell, at this point, I wouldn't be surprised if Facebook could do our taxes for us due to all of the info they have. Our tax system is stuck perpetually in 1960, and it's just sad to watch.
The government bitches about the digital age stealing their income, but they're not even trying to adapt. Nobody anywhere should have to "file" anything. The very act of buying and selling means it's already on file somewhere, and that means a live view is possible.
Unless you're using computers from 1960...
Any tech worker probably saves money by itemizing in California too. State taxes and salaries are high enough for that.
I could see that homeowners in CA would benefit by itemizing, however a simplified system could make something like mortgage interest much easier to factor in.
My not well studied understanding is that people price homes based mostly on the monthly payment they will make, so the mortgage interest deduction tends to make them willing to pay more for a given home. Rising prices do not make housing more affordable.
As with any subsidy, you'd expect both an increase in the market clearing price of the subsidized good and an increase in the number of units sold at the market clearing price (that is, it increases both price and affordability), unless you have either perfect elasticity or perfect inelasticity, neither of which seems likely with homes.
> The stated purpose of making mortgage interest deductible is to make home ownership more affordable. We should take a careful look at whether it accomplishes that goal.
To the extent it does, it does only for people near the boundary of being able to afford to own a home, and does so (ceteris paribus) at the expense of everyone who isn't paying interest on a mortgage, including people too poor to do so even with the deduction -- who it therefore makes less likely to be able ever to afford a home.
You'd do at least as much to make home ownership -- but also lots of other things -- more affordable by getting rid of the deduction and cutting base rates on below-median incomes such that the net result was revenue neutral before considering indirect economic effects.
I would be happy to see the deduction go away along with all other deductions :)
That much I absolutely agree with. A flat tax would require a single tax form the size of a business card.
> The percentage of people who save money by itemizing deductions is extremely small, as is the percentage who claim (or are eligible for) any of the more generous deductions.
Not true at all. Anyone who owns a home itemizes to deduct interest. Anyone who pays enough state taxes itemizes because you can deduct state tax payments on your federal taxes.
I do agree that taxes should be drastically simplified, but in the process they would also need to be lowered so that the average person pays the same or less in taxes as they would have with today's high taxes and deductions.
So yes, a large percentage of people are just getting the standard deduction.
So, yes, plenty of people in the "we can afford expensive houses" category are in position to deduct. Majority of the nation? Not so much.
Flat isn't the simplification -- elimination of the billion deductions is the simplification.
> Flat isn't the simplification -- elimination of the billion deductions is the simplification.
If you have deductions, it isn't a flat tax. "Flat" typically implies both rate and lack of deductions.
If you took current government revenue from income taxes as a percentage of total personal income and just used that as the flat tax rate, that would indeed be quite unreasonable, mostly because that revenue number is far too high. On the other hand, a flat rate in the 4-5% range might not be unreasonable.
Or, alternatively, a simple formula that would still count as "flat tax":
tax = flat_rate * max(income - floor, 0)
I don't know where you're getting that. The only number I can find on it is an unsourced assertion that more than 60% take the standard deduction [1], which still implies that on the order of 1/3 of taxpayers itemize. Hardly "extremely small".
[1] http://abcnews.go.com/Business/tax-tip-choose-standard-deduc...
The IRS needs to go away. It is an organization responsible for the execution and enforcement of the enslaving of the American people.
Our tax system has devolved from "let's collectively pay for our expenses" to a system using financial punishment for behavior modification. Freedom my ass.
The other problem is that, through attrition, people have become comfortable with taxing just about anything, even farts:
http://dailycaller.com/2014/04/11/republicans-warn-of-a-fede...
Not only do we have to kill off or massively reduce the size and influence of the IRS, we need serious controls on how government spends our money. Government is huge beyond belief and grotesquely inefficient. Of course, the crown jewel of this and what probably brought it home for a lot of people is the ridiculous cost and mess that the Obamacare website became.
How should we pay for running the country? A flat tax is one idea. A consumption tax is another.
I personally think that no government should take more than 20% of your money. In our case this would include state and federal added up. Government needs to be the most frugal, efficient and effective enterprise in a country, not the most wasteful, inefficient and ineffective organization, which is what we have.
The IRS should be two guys who work a couple days twice a year. When the Congress & President pass a budget, these two take the bottom line revenue needed, divide by number of congressmen, aggregate by state, and send each Governor a bill (overnight courier); next day they confirm the bills were received. On April 16, they open the IRS mailbox, cash the checks for each state; next day they confirm the funds transferred, and inform the President which states did/didn't pay on time (subject to Executive enforcement). Done.
It seems to me an altogether more sensible approach to have them make available the records they have for me, and I can check them, or ask someone to check them, or whatever. I'm tired of the fact that in 2015, I am still waiting until sometime in February to get that one piece of paper about my house mortgage before I can go off and pay someone to do a bunch of mindless redundant (see above) paperwork for me.
I'd much rather my financial planner just pull up my information, and file adjustments on my behalf, etc, and go about my business.
Please don't insinuate that someone hasn't read an article. "Did you even read the article? It mentions that" can be shortened to "The article mentions that."
Note also - the article doesn't mention any of my opinions or preferences in it. So no, not everything I sated was in the article by the fifth paragraph.
edit - the parent originally started with something like: "I suggest you read the article before commenting". I'm leaving the above as is, because I don't think substantially changing a comment after people reply to it is good behavior.
http://www.irs.gov/Individuals/Get-Transcript
If the IRS has any documentation on you, it's available on the web. This includes notices, etc. sent out.
I used it this year to verify my tax filings.
I think there's some logic in this objection, but then again, I don't see these same complaints levied against the other "post-billed" taxes people deal with, like property, vehicle, and so forth.
Really, there's no likeable side in this. The tax prep software people (never buy Intuit!) have a vested interest in keeping the tax code complicated, and decent portions of the government has a vested interest in same.
The solution to both problems is a massive simplification of the income tax code - too many people opposed to it for that to ever happen, though.
Doesn't the government do this anyway? Try claiming that you owe $0 and see how that goes over. The individual taxpayer has already had the money withheld and then submits paperwork after the fact just in case any of the business entities involved failed to submit their required documentation.
Either way, I'm stuck filing the #($&ing paperwork.
AFAIK, they aren't liable for under withholding if they withhold correctly according to the W-4 signed by the employee, even if the W-4 claims things (e.g., "exempt" when the employee does not meet the qualifications) that are not accurate.
Submit a signed W-4 [0] to your employer with the word "Exempt" on Line 7.
Of course, by doing so you also certify that you are actually meet the legal requirements stated on the form for $0 withholding, under penalty of perjury, so you obviously should only do it if, you know, you actually qualify for it. But that's how you do it.
Is it a 'conflict of interest' for restaurant to both collect money for my bill and tell me how much my bill is? No. The rules are clear so anyone can audit their own bill if they feel they're being cheated.
If the government just said "You owe $673.25" and wouldn't tell you why or how they got to that number, then I would see a conflict.
A restaurant charge is simple - here's what you ordered, here's what each thing costs, here's the total. If you really suspect shenanigans, you get a copy of the menu to validate against.
Property tax is usually pretty simple, as is vehicle registration. Both can be described in a couple of paragraphs.
The problem right now is that even if the forms were precalculated, the IRS doesn't necessarily know about the deductions you're entitled to, and claiming those is a far more intricate process than simply filling out your PII (1040) or your wage info (W2).
Here's a relevant example. I just started going to school again at the end of last year (November). A run through with TaxAct/HR Block showed me as owing about $600 before any deductions or credits - you have to tell them about those. The fact that I started going to school gave me the "lifetime education credit", and turned a $600 payment (that I could not afford at the time, and was somewhat stressed about) into a roughly $2K payday.
Without the software, or paying an accountant, I wouldn't have known about that, and paid $600 that I didn't need to pay.
The lifetime education credit is calculated based on the 1098-T that your school had to file with the IRS.
I had to help two friends navigate TurboTax after they couldn't figure out where to enter a 1098-E (student loan interest), so my anecdotal evidence is that TurboTax easily misses certain items when hey ask "Did you go to school this year", but not "Did you have education expenses" (or something similar). Without someone who had already used the software to enter similar items, they may not have been able to get that credit.
My main complaint with TurboTax (other than the fact that I have to use software to file taxes and buy a new version every year) is that I am charged to e-file at the state level.
This is what I mean. Comparing income tax filing (with a W2 and a 1040 by mail, with nothing else, that's at least 3-4 pages of work, with no guarantee that you're paying what you ought to be) with a restaurant bill (an itemized receipt of things you bought) is fundamentally dishonest.
Every comparison made is against single charge, a single payment, based on a usually simple formula, rather than an entire freaking body of law.
I don't. The IRS is going to calculate how much people owe in any case. The question is whether they provide all the information they've collected first, and calculate the results based on that, and provide it to the taxpayer who can either accept it or note any changes/additional information and return it, or they make the taxpayer do it first from scratch (or pay someone else to do it, or pay for a tool to do it), and then the IRS goes and does it in anyway for every taxpayer taking into account the information they have from the taxpayer and what they have received separately.
In either case, the IRS is absolutely going to calculate how much people owe. That's not even the choice that is at issue. So the objection to one side of that choice that the IRS calculating how much people owe is a "conflict of interest" is a non-sequitur; it simply has no bearing on the choice.
I post this not to defend Intuit, but to clarify why the tax code is complicated. It's not because Intuit goes to Congress and says "please make this thing complicated." It's because millions of people and companies each go to Congress for their pet issue.
Norquist objects to pre-filled tax forms because he wants people to think hard about their taxes at least once a year. The theory is that if paying taxes is easy and automatic, it will be harder to argue for simplification. No one will care if things are complicated if they can just push one button and forget about it.
It's part of a larger ongoing debate: if government services work so well that citizens don't have to think about them, will that have the side effect of reducing citizen engagement?
It's not so different from the tech concerns about Apple's iOS ecosystem. Will the super easy, super controlled experience of the iPhone result in fewer kids thinking about programming?
First, the IRS has already screwed my taxes up with faulty assumptions - three times over the last decade. Each time it's been a huge pain to correct. I simply don't trust them to get it right.
Second, I don't particularly trust them to notify me when there's something in the tax code that works in my favor. They're not going to file your 83b elections for you. They certainly aren't going to tell you about, say, the special rules for the Qualified Small Business Stock that you've held for five years. However, they'll happily take your overpayments if you don't know about these rules yourself.
Third, I want everyone to be more aware of the taxes they're paying. You're not going to get informed citizens and intelligent voters if the system's set up to hide the financial consequences of their voting decisions. It'd be better for America and American politics if we moved in the opposite direction, and got rid of automatic tax withholding.
“Imagine if your vehicle registration fee was done the same way,” Mr. Bankman asked in a recent interview. “Imagine if the state said, ‘Go to your car, find your VIN number and then look at this table that has different tax rates to find out how much you owe.’ If they did, people would probably need to hire an expert for that too.”
It sounds like a huge pain, and I wouldn't want to do it. Neither would anyone else.
On the other hand, huge pains like this are how policy gets changed. If it became more obvious to everyone that this was yet another hidden tax, perhaps there'd be more pressure to eliminate it or make it more rational.
Because Revenue/Tax collection services in many countries operate on the principle of "guilty until proven innocent", they simply view every individual/company as being guilty by default and it is the job of that entity to prove they are not (hence lack of motivation in pre-filling forms as is suggested in article)
The same line of thinking is also why the tax code is so complicated and seems to always get more complicated, it becomes almost impossible to become tax compliant for average person/company since there are so many caveats and loopholes and exceptions and so on, tho it also leads to employment for armies of accountants, advisors etc and of course the people working for Revenue/Tax entities themselves. Why would the give us simpler tax codes and procedures when it can put them out of job? Reminds me of CIV quote "The bureaucracy is expanding to meet the needs of the expanding bureaucracy."
Admittedly, as a sole proprietor my taxes are simpler than many business owners' taxes would be, but their considerably more complicated than the average Joe's. My accountant charged me $135 to handle everything for me. He's been doing business with my family for years, but I'm more than happy to pay him and he seems to do a pretty good job of finding me deductions.
Is this uncommon? Are reputable tax accountants that hard to find, or are they really that expensive? I can't think of a reason I'd buy TurboTax or anything else when I can have someone with 30+ years experience taking care of it for me...
I think it's very easy to find good tax accountants, it just becomes a pricing matter. I think you're getting a great deal and I'd absolutely stick with your accountant.
Except for Canada? The same sort of situation exists here. The Canada Revenue Agency enthusiastically supports the private tax preparation companies. It's pretty much the same deal except perhaps a little worse. The private companies will extend you charity here as well, but if you have any amount of income you don't even get online forms to fill out.
Presently in Canada the only way for a citizen to file their own taxes is by filling out paper forms. Ironically the easiest way to get the forms is to download them off the internet from the CRA website. Then you fill them out and mail them.
The really ridiculous thing is that since the CRA already has all the information it doesn't really matter how you fill out the forms. Just get your deductions and withholding on there and you are good. You can put whatever other gibberish on there you want.
I actually file on paper on the principal that I don't want to support a corrupt system. This year I am considering just drawing pictures on the parts that are ignored and putting down a hundred billion jillion dollars as my refund... I strongly suspect that the people made to do the data entry could use a bit of entertainment.
Entities are required to provide your W2, or 1099, or whatever have you through the mail. They have to provide several copies as well.They still provide a 'send to the IRS with your return' copy, which is not required, but also redundant again by the amount of people electronic filing.
The flow of -> entity printing the documents -> mailing them -> individual then either entering in themselves or having somebody else prepare their taxes -> the information is, for the most part, entered into the computer via plane ole' data entry...by a person -> the return is e-filed to the IRS...who already has an electronic copy of said document...from the Entity that sent it to you...
Let's face it, before we even debate about letting the IRS just do it for us...let's at least get them to streamline the process. The IRS single handily keeps the Post Office in business, not to mention the cost and time/labor expense of the tax payers. (at least we get to deduct tax prep cost...if you can actually itemize..)
Let's get the basic forms first. The IRS should have an easier method of somebody getting the information about them that was sent in from entities electronically. Set up an API, I'm sure the NSA will let them use their server farms... This alone would probably eliminate the need for 80% of the population to ever have to file. All Capital gains will be in, unless the basis was not submitted to the IRS of course.
Now, I don't see a blanket, "The IRS will file your taxes for you" for everyone. Most people who have K1's or Sch C's, etc, will most likely need to make estimated payments. Many of the decisions on what to classify things and best place to 'deduct' them can become an art. But that is not going to apply to most people.
I've probably repeated some stuff in the article, I only skimmed it.
Previous discussion here: https://news.ycombinator.com/item?id=9380232
Mods, is it possibly to merge these two discussion?
No.
Stop with these stupid stop-gap measures. Income taxes are inherently flawed on so many levels, it's absurd. They're difficult to calculate, easy to cheat on, don't tax swaths of people who don't have a traditional income, cause grief every year and untold resources to calculate, verify, audit, etc.
Just stop.
A national sales tax, property tax, or frankly, any other option, would be better by far.
Also, if the government has all the information necessary to do your income taxes properly, then it'll literally take you 5 minutes to fill out the form. You receive the same forms they do, just plug in the numbers. The PDF version will calculate everything for you.
The problem is that the vast majority of people have DEDUCTIONS and the government has no idea what those are, so this wouldn't work for them.
The self employed and wealthy probably would still need to do their taxes. Self employed is only 7% of workforce. Even their taxes would be easier because they would know all of the info that the IRS collected and wouldn't have to collect the paper forms.
> national sales tax
Haha, good luck with that. Sales taxes are substantially easier to cheat than income taxes for most people.
Nationalizing sales taxes just provides more incentive to cheat.
OR has no sales tax, everyone goes crazy about it, yet they have one of the highest income taxes in the nation.
Even for the poorest, it's very difficult for that to be a good bargain.
Even if you spend every dime you make, your expenditure will almost never be completely sales-taxable (in our current system).
The national, tax-everything sales tax doesn't tax idle money. People with money have lots of it and can spend it non-domestically.
There's no such thing as idle money. As soon as you deposit it in a bank, it gets loaned out to someone else who spends it.
> People with money have lots of it and can spend it non-domestically.
Even now, you're obligated to report any purchases made outside the jurisdiction and pay sales taxes on that yourself. I'm not suggesting we abolish the IRS. They should still be around and do audits and enforce the law, especially in such cases.
Not true; actual state income tax isn't its nominal rate on all income (state income tax usually starts with AGI and then has state deductions and credits). So 6-8% on some subset of expenditures may be more, equal, or less than 6-8%on subset of income.
Heck, its not even true without considering that; it would be -- without considering that income tax excludes some income in the same way that sales tax excludes some expenditures -- if expenditures had to be less than income, but its possible to run a deficit as long as your income is sufficient to pay the increasing debt service cost, which (particularly with an increasing income over time) can be an arbitrarily long period of time.
This is false. Food and clothing is exempt from sales tax. At least it is in my state and that's how it should be.
If they're genuinely poor, that's what they're spending their money on, so they wouldn't get taxed at all.