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.
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.