To give these folks something they don't deserve (an assumption of good faith, non-cynicism, benefit of the doubt, etc): they think "letting" the IRS do folks' taxes will lead to more taxes and poor, defenseless taxpayers simply won't have the courage to challenge a "bill" from the IRS.
Simple fix: let folks contest whatever final "pay this number and you're done" amount they get invoiced for & sear that into federal law. But you probably won't ever hear Grover and all the other looney tunes ever mention that.
They don't want easy, hassle-free IRS filing. It's an opportunity for people to be pissed (who wants to pay money for the government)
There's also talk about your taxes fitting on a postcard and that, as usual from the scumbags nominally in charge of our country, is bullshit too because it just conceals a ton of paperwork (source: https://www.accountingtoday.com/opinion/the-postcard-tax-ret...)
IIRC: In Norway, the government computes your taxes for you and you can approve of their work by text messaging.
In the US, taxes are complexified to hide welfare for the rich[0] and put a burden on the non-rich people that they must fill out complicated tax forms correctly "or else." 0: This isn't idle rhetoric: That's what campaign financing buys: favorable treatment and tax law chicanery. Does anyone think it's right billionaires should pay less taxes than their secretaries?
The Icelandic government also pre-computes taxes. It takes me maybe five minutes to do taxes in Iceland and I don't even speak Icelandic.
Multiply that several times to do my US taxes and add some extra fees on top because I use tax prep software.
The really funny bit is I never owe anything in the US since I solely live and operate in Iceland so all that's covered by my Icelandic taxes, but as a US citizen I'm required to file regardless.
A billionaire paying a lower dollar amount in taxes than a secretary? Yes, I would also like to see data on that, because I doubt it happens. :P
The scenario does arise when we're talking about percentages, because billionaires make much of their wealth from capital gains and the like. But it's hard for me to imagine how the actual dollar amount paid could be lower.
In Sweden you have to reply if you agree as well, because otherwise they could never convict someone of tax fraud if the pre-computed data is missing some of your income, for example. (Well, maybe they could convict you, but it would be hard to defend that morally when they didn't even force you to acknowledge the numbers.)
Why would that be true? Law: "Thou shalt inform the government about finances that affect tax, or else be heavily fined or put in prison when we find out."
No need to have this information duty tied up to the tax return.
The IRS is working off of incomplete information about your income and eligibility for deductions. There is no way they can fill out a form under the current tax regime.
They can for the majority of Americans. Congress also has the ability to mandate more reporting, and more reporting from more agencies would pretty much have to be part of a 'simple tax return' bill.
The point never was "they do prefect tax returns for everyone." Everyone knows this isn't feasible.
The point is, they'll simply send you (web) forms prefilled with the information they already have, you go in and add information they don't have if something is missing. So even if they have incomplete information, you'll still benefit greatly. If youre feeling really upset about the whole concept, you can tbrow away everything they prefilled out and download a blank form and do it yourself from scratch and that would be perfectly fine too.
If you have a W-2 and no other income/expenses they can get pretty close. The idea of simple taxes almost always includes the ability to still do them in detail if you'd like. The idea is that the government would send you a bill (or a refund) and you can pay it (or accept it) and be done or reject it and do your own taxes like you currently do.
30% of people choose to itemize, mainly people who own real property. And out of those who don’t, many still can claim credits for child care expenses, health care expenses, and education expenses.
If the default bill sent by the IRS wouldn’t include all those things, then the result would be exactly what the Norquists of the world fear: a de facto tax increase.
Note also that the H&R Block/Intuit software are free for 70% households. The remaining households are the higher income ones that would most likely itemize anyway.
If you think you pay to much, file your own return. For majority of people it's just a waste of time, and I think IRS would nail the numbers pretty accurately for at least 60-80% of folks.
I think your assumption just isn’t true. About 20% of filers use the mortgage interest deduction, which the IRS has no idea about. Then there is a ton of other stuff. For example, the IRS doesn’t even automatically know how many dependents you have. If you get divorced and one parent gets custody, the IRS has no idea. There is no federal tracking of who lives with who. The IRS also has no idea whether it should apply married rates or single rates. Again, there is no tracking of marriages at the federal level.
If you only have W-2 income, are single, have no children, and aren’t eligible for any education credits, then the IRS can probably do a good job estimating your taxes. But that probably describes 20% of folks. If the IRS sent a bill to the other 80% without those deductions, it would be an overestimate. And sure, those folks could file their own returns, but many would not. That would result in a de facto tax increase, which is exactly what Norquist doesn’t want.
Doesn't this imply that simplifying/automating the return harms no one (folks can still file individually if they choose), while helping those who would otherwise have to take time or invest money in tax prep? How is this not an un-alloyed good?
It would hurt a lot of people if they end up paying more taxes than they owe because they don't realize they can pay less by filing their own return. It can be scary receiving a "bill" from the government, and many people might not try to contest the IRS's calculation.
For automated tax filing to be workable, it has to at least be accurate for nearly everyone. If it overstates taxes for most people, I think that's a big problem. In the U.S., I don't think you can achieve that level of accuracy without either changing the tax code, or having the federal government track a lot more information about people than it currently does. I owe the IRS money every year because my wife and I are subject to the marriage penalty. You can't calculate our correct taxes without knowing we are married to each other. And the IRS doesn't know that unless I put it on my returns.
Note that many countries track their citizens much more closely than does the U.S. For example, in Germany, you have to register with a Registration Office within one week whenever you move between cities.
Thanks for the dialogue! Just to try to simplify things, it sounds like you are worried about tax filing being regressive - causing under-privileged, low-income, and other disadvantaged people to pay more taxes than they owe. Isn't it true, though, that tax filings typically increase in complexity alongside income?
Things like marriage records and children aren't currently kept private such that the Child Tax Credit and Joint Filing rules couldn't be automatically applied. It's not immediately apparent to me that vulnerable populations would necessarily be at a disadvantage.
(Basically, I figure that if I'm high-income, it's my problem to sort out my taxes to my greatest advantage, but it should be easy for folks who don't have the luxury of time or money.)
We're not talking about "high-income" people. The biggest tax benefit for low-income people is the Earned Income Tax credit, which is calculated based on number of dependent children. Then there are all sorts of middle-class credits and deductions even for people who do not itemize: child credits, child care credits, child care deductions, teaching supply deductions, etc. And large numbers of middle class people use the mortgage interest deduction.
And even relatively high income people ($100,000+, which might just be a household of two teachers) might be hesitant to dispute a "bill" sent by the IRS.
As to applying these deductions automatically: the IRS simply lacks the information. There is simply no database (federal or state) tracking which children live with which adults (the credits are computed based on dependent children, not biological or legal children). There is no federal database of marriages, and while there are marriage certificates at the state level, it's unclear whether there are any easily accessible databases of married couples. There are no databases tracking which daycare you send your children to, what you spend in college tuition, etc.
Currently people seeking the EITC and Mortgage Interest Deduction have to file. This wouldn't change that. Nor is there a prohibition against the IRS sending a nice note encouraging folks to file if they want to take advantage of these benefits. It doesn't have to look like a bill.
We may just disagree on the size of the burden or the ability to ameliorate risks/downsides, but I'm having a hard time imagining that they cannot be addressed with _implementation_ choices on a pre-filed return.
I feel like this is important because it seems like we agree on the fundamentals: that the tax code should advantage the vulnerable, that filing should be as easy as possible, and that taxpayers should be able to discover and utilize all breaks available to them. The status quo does not seem _nearly_ good enough at these things to be worth preserving.
Not anymore. The primary effect of the Trump tax bill was in fact to massively increase the number of people who will claim the standard deduction, due in part to a large increase in the deduction itself as well as the introduction of the SALT deduction cap.
How would you even know if it is right? This is such an obvious fox guarding the henhouse situation. The government would have a clear incentive to not offer you the deductions you are eligible for, and taxes are complex, so it would be easy to hide the deductions. It would only be a matter of time before the perverse incentives of the government would take over the process.
The main result of this would be the government stealing from poor and middle class people who should've spent less than $100 on a 3rd party tax preparer that is incentivized to act in the interest of the taxee.
The whole idea of the government stealing from people makes no sense to me. You live in a democracy, the people choose their government and it does what it's elected to do. If the government starts actively stealing money from its people, the problem isn't the way in which you file your taxes. The problem is that the government brought by your democracy isn't working as intended.
For what it's worth, in the Netherlands it takes most people 5 to 10 minutes to flip through an app that has all your tax info filled in already. If you need to add anything that isn't already filled in, you get every chance to do so.
It doesn't stop you from getting an accountant to do it for you either, if you'd prefer.
> How would you even know if it is right?
Because it's still the same tax system you had before they made it easier by filling it out for you already. It doesn't get automatically filed, you still have to check it yourself and approve it.
It doesn't make any sense to compare the Netherlands to the US on any metric. The Netherlands doesn't have the population or gdp of just Texas or California by themselves.
The sheer magnitude of the difference between the US and the Netherlands is crazy, and it is like comparing a house to a town.
Communism works on a small scale, the bigger the scale, the less you can just trust everyone is doing the right thing. The bureaucracy of the IRS has every incentive to maximize tax revenue, and that is what they will eventually do.
I see this sort of sentiment repeated over and over in different contexts both here and on Quora; but the poster never explains why scale is relevant.
Most people in both the US and the Netherlands work for one employer, own or rent one house, have a few credit cards, and a car. In most cases they have no complicated investments or debts. So how does the simple fact that one population is larger than the other have any effect?
In a larger community you simply need proportionally more computer power to process proportionally more data, but the data types and business rules are the same for all the individuals.
It isn't about the person. It is about the scale of government.
Running a small business is not the same as a large business.
Ok, have you ever played civilization? In civilization corruption goes up as you build more cities and the farther those cities are from the capital. That is to reflect the reality of managing larger and larger groups of people.
Solutions that can work on the state level don't necessarily work on the federal level. The Netherlands are basically the size of a state with an extremely homogeneous population, and a far less cut throat culture than the US.
In small groups of 10-20 people communism works very well. It doesn't work in bigger groups though. The bigger the group the more perverse incentives are acted upon.
Even beyond that though the US is a cut throat competitive culture. Eventually the person in charge of treasury will want to show that the democrats/republicans before them did a bad job of collecting tax revenue. They will realize by not offering deductions a lot of people will just pay and this will end up with them looking like they did a really good job. Or maybe it will be someone lower on the totem pole that wants to move up and can show that they did a better job at collecting tax revenue.
Also, solutions that work in the US probably won't work in China or India because the population is so much larger that US solutions won't scale properly.
Indian tax system largely resembles British and Brazilian systems. Chinese tax system is simpler, but they compensate by tighter population control (which is unfavorable in the US).
True, the size difference would mean the time/effort saved would be tremendous. I detest the hours and hours of my life I've given to the IRS simply because they are stuck in a time warp. My UK tax return took me under 2 hours last night (and only because they keep getting the student loan wrong - but it's simple to correct). But yes, it does require investing in a suitable computer system. I seem to be giving them the benefit of the doubt and attributing it to an infrastructure issue but that's probably not the real problem, is it.
This might be true if you view the government as adversarial. If you view the government as a service provider for citizens I don’t think it holds water.
Your statement could easily be flipped. Turbo Tax is incentivized to keep the tax code as complex as possible, the government is incentivized to do the opposite.
Most filers in the US have a single income from a single employer that is reported on a W2, and then take the standard deduction. And a lot after that have maybe a bit of income via 1099 forms and a mortgage deduction. All of those the government already has.
If they filled out a return with all that info, it would take just a couple of minutes to review it if it were already pre-filled out.
And worst case, you have other income and deductions, such that you've saved a bunch of time entering information the government already knows.
If anything, it would be the upper middle class who would lose out because they would just be lazy and click "ok" instead of doing their own taxes.
I agree with Norquist. You make things too easy, and people will just let it happen.
As someone who owns a business and has to make quarterly tax payments, paying taxes is painful. I know how much it costs me every time I write a check and I am very reticent to vote for any politician that thinks we should raise those taxes.
On the flip side, I have many friends whose taxes are just pulled out every paycheck. And at the end of the year, they get a tax refund. They act like the government is giving them money! Many don't even seem to realize that all they are getting is a repayment for an interest free loan they have been giving to one of the largest and wealthiest organization/government in the world.
I understand and agree that taxes are important, but if we make it too easy, we make people complacent and the next thing you know, we will wake up with a 75% tax rate.
This is the same reason I disagree with adding the tax in on product prices. People in other countries that do this don't realize how much of the price is going towards taxes - and to keep a government in check, information is key.
Many western countries have very simple or near-automatic tax systems and I would argue that the tax you pay is actually much more visible to residents of such countries.
In the UK, for example, most employees do not have to file a tax return. The HMRC files it for them and sends them a letter every tax year with their calculation. It even comes with a nice chart to see how much tax you've paid and where it went to (https://secure.i.telegraph.co.uk/multimedia/archive/02871/ta...).
The tax brackets are also very straightfoward and everyone knows which bracket they are in.
The same is true with tax on product prices. Everyone knows the tax rate on items because it's a simple number and there's a lot of public discussion whenever politicians decide on reducing/increasing it. If you ask anyone in the UK (or any other country other than the US with VAT) what the current VAT rate is, they will be able to tell you. Good luck getting an answer to such a question from someone in the US; you just pay what the cashier tells you to as VAT depends on so many factors.
Technically, there is no VAT in the US. There is sales tax, and it can vary from city to city. I guess that is why it is not included in the price by default.
Yep; sales tax, VAT, GST, they are all pretty much the same thing. And the fact that in the US they vary by location was what I was alluding to.
> I guess that is why it is not included in the price by default
I hear that argument a lot but it does not really make sense to me. The place of purchase knowns what their tax rate is in their current location because the cash register has that information (and I assume this sales tax does not change very frequently?). So why not print out or display the prices with that tax included?
No, they are not the same thing. You pay VAT on the value added at each part of the process. So a retailer pays VAT to their wholesaler, unlike American state sales tax systems.
That's fine for a local store, but what about a regional chain? Or even a national chain? What price to they advertise? Or do they need to do different advertising per tax district? (which could be city, county and/or state)
Do as the rest of the world does and include the tax in the price. Margins will obviously change between stores in different tax districts but arguably that phenomenon is already priced in today's profits: A store on the California to Oregon border has to price in the fact that their customer base could buy the same product with zero sales tax across the border.
McDonald's is offering a 99₵ burger as part of a nation wide promotion. Where I live (Florida) it's $1.06 with tax. In Oregon, it would be 99₵ (no sales tax). In North Carolina, it's $1.03 except Ashville, North Carolina has a 7% tax rate so it would be $1.07 there. What price does McDonald's advertise for their promotion?
In Europe they have a 1 euro menu regardless of what country the burger was sold in (countries have different VAT rates). Some advertising is even shared between smaller countries that speak the same languages.
This is a minor annoyance only to foreigners here on vacation. You quickly adjust to not having the tax included and it is something people in the US don't even consider unless they've traveled abroad. The system with the taxes included in the advertised price only really works when you have a national tax with no other taxes involved. No state or city will ever go for that and it really isn't bothering anyone since everyone is used to the system already.
If you want to rail against hidden charges complain about the restaurant welfare system that allows employers to legally under pay and fire employees for not making the majority of their money from tips
Dragging this back towards a HN topic, years back this caused a fight for PC computers stores. They argued that their main customers were businesses and so advertising prices "before tax" was expected by the trade customers. Others argued really most customers were hobbyists and so would pay the VAT price.
Obviously it's beneficial to be able to advertise the lower price, these days assembling your own PC from components must be much less common than it was back then so I imagine even if the decision went in their favour back then that's changed since.
In a world with tax-included prices, obviously they would advertise the local price in local media. In national media, who cares what they do? They could put "$0.99 (prices may vary)" or whatever they choose.
The headache of an advertiser should be the least of your concerns when dictating consumer law. (And yes, it is law in many countries. Consumer protection laws say that consumer pricing must include VAT.)
>Many western countries have very simple or near-automatic tax systems and I would argue that the tax you pay is actually much more visible to residents of such countries.
I think if you want to counter the poster, you need to give an example of a western country that has simple/automatic tax systems and have a lower tax rate than the US.
His/her complaint is primarily that if a system is too simple, it's much easier to raise taxes. You're giving exactly the example he/she is looking for - a country where it's easy and the tax is higher.
I believe that the income tax paid in California is higher than in the UK for the median household.
Now correct me if I am wrong, I have only filed tax in the US for a single tax year so I might be missing something. But for the median household income in California of around $66,529, you would be paying an effective tax rate of around 24%. (using this website: https://smartasset.com/taxes/california-tax-calculator#wWyPf...). And yes, I realize this is excluding deductions.
In the UK, the median household income is £27,300 and you would have an effective tax rate of around 19.6% (https://www.uktaxcalculators.co.uk/), also excluding deductions.
Of course higher salaries attract higher taxes in the UK, but if the above is correct, then the average person should be paying less tax in the UK than in California.
not sure what point you are trying to make here. you single out one of the highest income states in the US and say the median household would pay less tax than the median family in the whole UK. sure, but families that made the equivalent of $66,529 in pounds (£51,699 at current exchange rate) would pay about 27% in taxes according to your calculator with the default settings. not sure what conclusion I'm supposed to draw from this.
I'm not going to argue for a hypothetical. I actually ran the numbers once. My state's income tax rate is high, but lower than CA's. For my income (above median), one year I actually calculated my tax for CA (as in actually got the forms and filled them out).[0] Despite the lower tax rate, the my state's income tax was higher. The reason? CA has a lot more deductions for people of my income or lower. CA can get you in all kinds of other taxes, but not income tax.
Also, just checked. Other than the deductions, for single people, you hit the second highest bracket at a little over $8K in my state. To get to that same bracket in CA, you have to earn over $50K. CA tax rates are low for lower income people.
[0] It's a long story why I did this - it was not fun at all.
Of course, it's very difficult to directly compare such things for a single individual, never mind the median individual (you'd have to account for the fact that the UK taxes include medical insurance as well as a pension on one side and lower sales tax in California on the other side, and so on...).
My point was that taxes in countries where the tax return is automatically performed by the government aren't necessarily higher than in parts of the US. In other words, OP's comment above was nothing more than FUD.
According to the Wikipedia page on VAT in the UK[1], while there are two rates and presumably everyone there knows them, there is a long arbitrary list of which item falls into the 20%, 5%, or 0% category. For example, it says "Biscuits (chocolate covered only)" are 20%, but "Smoking cessation products" are 5%.
Sales tax where I am has similar characteristics - I think most people are perfectly well aware (as I am) that it is generally 8%, but I couldn't tell you exactly which items are exempt, or what the modification is for prepared food or whatever.
So I think you are exaggerating (as people like to do) the difference between the US and the UK.
Completely disagree that it's an exaggeration. If I walk into a supermarket in the UK, it doesn't matter if I know that certain goods are exempt or 5%, because the amount im going to pay is already considered on the sticker.
There's no excuse for the sticker price not matching in the US.
I am not 100% sure I get what you meant so I apologise if I misunderstood. But are you under the impression that the tax is not listed on the receipt in other countries? (it is)
My receipts show the taxes im paying. I don't think I've ever seen the tax listed separately on the sticker in the US, so ive actually got less information. Without knowing the tax rate of the area I'm in for the goods in advance, I don't know how much I'm paying
> Many don't even seem to realize that all they are getting is a repayment for an interest free loan they have been giving to one of the largest and wealthiest organization/government in the world.
Ah, hmm, yes, they just don't realize. Those poor benighted fools.
Or maybe? Maybe they don't care. Take me, for example. I don't care. I've thought about it. I could spend more time screwing with my taxes to optimize my returns, or even go to no withholding whatsoever. Or I could enjoy my finite time on this planet, 'cause the amount of money we're talking about is marginal for me and I do pretty well for myself.
(And to make one thing very clear: the downright fearmongering about a "75% tax rate" are just that and are not worthy of further address. Even were there a salient point in the bottom of this well, this isn't it.)
> I understand and agree that taxes are important, but if we make it too easy, we make people complacent and the next thing you know, we will wake up with a 75% tax rate.
The scenarios you suggest happening if taxes are easy to file don’t have to be the consequence. It’s a possible consequence but overall I don’t think it would happen the way you suggest. I think it highly unlikely that it would lead to what you fear.
It's Grover Norquist: https://www.huffingtonpost.com/grover-norquist/grover-norqui...
To give these folks something they don't deserve (an assumption of good faith, non-cynicism, benefit of the doubt, etc): they think "letting" the IRS do folks' taxes will lead to more taxes and poor, defenseless taxpayers simply won't have the courage to challenge a "bill" from the IRS.
Simple fix: let folks contest whatever final "pay this number and you're done" amount they get invoiced for & sear that into federal law. But you probably won't ever hear Grover and all the other looney tunes ever mention that.
They don't want easy, hassle-free IRS filing. It's an opportunity for people to be pissed (who wants to pay money for the government)
There's also talk about your taxes fitting on a postcard and that, as usual from the scumbags nominally in charge of our country, is bullshit too because it just conceals a ton of paperwork (source: https://www.accountingtoday.com/opinion/the-postcard-tax-ret...)