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US Senator Warren Introduces Bill to Simplify Tax Filing

213 points by abawany 11y ago

sdegutis 11y ago
Of course it won't pass. With enough money, you can pay lawyers to either make things legal, convince a court that what you're doing is legal, or hide your illegal activities. I'm not sure whether TurboTax and the like are doing #1 or #2, but they're the ones making sure simple tax filing never passes, which would put them out of business.
- artursapek 11y ago
  A sad example of capitalism holding back progress.
  - ancap 11y ago
    When I compare my life to those of people who lived 50, 100, or more years ago, the majority of the things I value most came from capitalism.
    - sdegutis 11y ago
      The majority of things I find convenient came from capitalism. The majority of things I value were already there and have been for quite a long time.
- awakeasleep 11y ago
  If the government could take on Standard Oil it probably has a chance at Intuit.
  - ancap 11y ago
    You say that as if government action against Standard Oil was some noble act. Standard Oil helped facilitate great improvements to the average Americans standard of living.
    - jonathankoren 11y ago
      And do you believe that monopolies offer choice, and drive down prices as well? via https://en.wikipedia.org/wiki/Standard_Oil#Monopoly_charges_and_anti-trust_legislation https://en.wikipedia.org/wiki/Standard_Oil#Monopoly_charges_... "In 1904, Standard controlled 91 percent of production and 85 percent of final sales." "The federal Commissioner of Corporations studied Standard's operations from the period of 1904 to 1906[31] and concluded that ``beyond question... the dominant position of the Standard Oil Co. in the refining industry was due to unfair practices—to abuse of the control of pipe-lines, to railroad discriminations, and to unfair methods of competition in the sale of the refined petroleum products''" From the DOJ complaint, "The evidence is, in fact, absolutely conclusive that the Standard Oil Co. charges altogether excessive prices where it meets no competition, and particularly where there is little likelihood of competitors entering the field, and that, on the other hand, where competition is active, it frequently cuts prices to a point which leaves even the Standard little or no profit, and which more often leaves no profit to the competitor, whose costs are ordinarily somewhat higher."
      - ancap 11y ago
        You probably didn't read the article because two sections below the one you linked (https://en.wikipedia.org/wiki/Standard_Oil#Legacy_and_criticism_of_breakup https://en.wikipedia.org/wiki/Standard_Oil#Legacy_and_critic...) states: > Some economic historians have observed that Standard Oil was in the process of losing its monopoly at the time of its breakup in 1911. Although Standard had 90 percent of American refining capacity in 1880, by 1911 that had shrunk to between 60 and 65 percent, due to the expansion in capacity by competitors. Which would clearly be impossible if Standard Oil was a monopoly. Your quote from a politician with ulterior motives does not prove a monopoly and even sounds economically dubious.
        jonathankoren 11y ago
        No I read it. It's irrelevant. If anything, it argues they should have been broken up earlier. Monopolies are market failures.
MattSteelblade 11y ago
Intuit's lobbyists will ensure this doesn't come to fruition.
- ahoy 11y ago
  Legislation can get past powerful lobbyists if there's enough public momentum. It happened with Tobacco. I'm not terribly hopeful that this particular bill will pass, but I'm glad to see Warren bringing the issue up.
  - afarrell 11y ago
    This is because most lobbyists can only offer campaign donations, and then only implicitly. That isn't what politicians really want; They want votes. If they have campaign money, they might be able to use advertising and organizing to turn that into votes, but it is no sure thing. A few lobbying groups, like AARP and the NRA actually can bring votes to a candidate and that is where the real power is. They have a list of people who care about their pet issue and can send them mail saying "candidate X proposed HR.1337 which does foo; Candidate X fights for your rights." Until recently, the only organization with a large list of people who were frustrated with turbotax was Intuit. However, Twitter, Facebook, and Reddit now both have records of large numbers of people griping about taxes. Why has Facebook not yet exposed an API that let you advertise to people who are frustrated with a given concept? It seems like a great way to find folks that have a certain pain point.
  - zeveb 11y ago
    > Legislation can get past powerful lobbyists if there's enough public momentum. It happened with Tobacco. Anti-tobacco legislation was passed due to powerful lobbyists.
- jchendy 11y ago
  How do lobbyists actually influence what happens to a bill?
  - abawany 11y ago
mrfusion 11y ago
Just curious would this be considered budget neutral or would it bring in more taxes? Or less?
- entee 11y ago
  Neutral probably, might affect costs at IRS, but I would imagine relatively little change in revenue. The hiccup could be if people were consistently overestimating their taxes, but it looks as though for the median citizen that's unlikely (most people don't itemize and take the standard deduction at that income level).
mozumder 11y ago
Of course, none of the Republicans support this.
- adventured 11y ago
  Several of the Republican Presidential candidates support drastically simplifying the tax code. Tax code simplification has extremely wide support among the Republican base. The lack of support very likely has more to do with who is presenting it and the approach used.
  - jdmichal 11y ago
    This is not about simplifying the tax code. This is about filing returns.
    - adventured 11y ago
      The point I was making is that Republicans do support tax simplification, both at the filing and tax code levels. I'd go so far as to say that every Republican candidate has at one time or another publicly supported simplification across the board when it comes to both the code and filing. If you simplify the tax code - which is desperately needed - the filing simplification is a logical extension of that. For decades Republican candidates have been talking about the idea of being able to file your taxes on a single index card. Simplifying the filing without simplifying the tax code, is putting a bandaid on a gushing wound that is getting worse every year.
  - jacobolus 11y ago
    The Republican presidential candidates support “tax simplification” in a way which shifts the distribution of tax burden away from the wealthy and corporate interests, and toward the middle class, or in some cases shrinks the tax base, making up the budget shortfall by cutting social programs. That’s not really comparable to this proposal, which doesn‘t change who pays the taxes, and doesn’t rewrite the tax code, but just makes the paperwork more convenient for everyone.
nodesocket 11y ago
Current tax code is completely antiquated and way more complicated than it should be. While of course the more money you make the more you pay, generally the effective tax rate is signanfncitly lower for higher net worth individuals. This is due to loopholes, business expenses, and various writeoffs. For example, I just did my taxes and my effective rate was 18% (I am not wealthy, but above the average income level).
- erentz 11y ago
  Would love a how to on this if you feel like sharing more.
  - nodesocket 11y ago
    A few things. Careful planning of selling stocks that are in the red and in the green to minimize the amount of capital gains paid. I have a LLC for my startup and can write off quite a bit of business expenses to offset the business income.
    - zanny 11y ago
      This is the trick. You have your own LLC and writeoff everything as business expense. My dad is a contract construction worker, and writes off his vehicles, his gas, his phone, his tools, and all manner of insurance costs for work as business expenses and pays a really low effective tax rate as well.
      - nodesocket 11y ago
        A few big gotchas with LLC though. Every year you have to pay a flat $800 to the state of California. Sucks if your business is not making that much, $800 can be a significant cost. Self employment tax hurts bad. Basically this is Medicare and social security. Can be a huge amount owed seperate and in addition to income taxes.
        dublinben 11y ago
bpodgursky 11y ago
This would just paper over the fact that the US tax code is an abomination of deductions and credits. It would not simplify any of the magic math; it would just make most people think they are getting the right credits. Would it actually give people all the deductions and credits they could get through a detailed analysis? I highly doubt it. TurboTax doesn't ask 1000 questions for fun; most of them matter because of the insanity of our tax code. It would probably put turbo-tax out of business though, this is true. The default, free, option is going to win against a paid product. All this will accomplish is making sure that tax preparation is back where it was two decades ago -- where the Actually Wealthy hire a person to do their taxes and get the right deductions, and everyone else gets stuck with an opaque bill which they can't afford to assess for accuracy. This is a far more regressive system than what we have now. Don't accuse me of being a TurboTax shill. I have nothing to do with them, besides doing many hours of complex taxes which would have cost far more in-person than with TurboTax (and no, I'm not under any circumstances blindly entrusting the IRS with correctly calculating ISO AMT nonsense.)
- schwabacher 11y ago
  "All this will accomplish is making sure that tax preparation is back where it was two decades ago -- where the Actually Wealthy hire a person to do their taxes and get the right deductions, and everyone else gets stuck with an opaque bill which they can't afford to assess for accuracy. This is a far more regressive system than what we have now." This is where it is now - plus the non wealthy end up paying TurboTax $200. This bill would save them the $200.
  - MBCook 11y ago
    It would also provide a additional small incentive to the IRS to lobby harder to get the code simplified. Now they have to update another set of systems for each crazy change.
    - bcheung 11y ago
      They are only handling the simple cases for the free filing system. Basically only if you qualify for 1040EZ.
mathiasben 11y ago
Let's make it even simpler. no deductions for anything whatsoever.
- ancap 11y ago
  I'd like it simpler than that--0% for all incomes less than infinity.
  - nodesocket 11y ago
    I'm good with this.
Alupis 11y ago
What a great PR piece for Warren... but unfortunately this is just smoke and mirrors. This does +absolutely nothing+ to simplify the tax code, this is solely about "simplifying" tax preparation and filing. It makes it easier to file online for free, and makes it so the IRS can't get in bed with Intuit, HR Block, etc. We need real tax reform - not smoke and mirrors.
- davidw 11y ago
  > It makes it easier to file online for free That's not a bad thing in and of itself.
  - Alupis 11y ago
    > > It makes it easier to file online for free > That's not a bad thing in and of itself. You're absolutely right. However, this is being touted as tax [code] reform... which it's definitely not. Your tax preparation expenses are already tax deductible, so making it "cheaper" doesn't really help anyone. We need a simpler and more fair tax code - but we're not getting any of that with this bill. This is a distraction, and good PR for someone potentially poised for a VP ticket...
  - dmix 11y ago
    The question is not whether the end goal is good, or whether their intentions are in the right place, it's whether it's the best use of government resources to focus on this vs other things. Could they be spending their limited time/resources on more valuable things? This would be an expensive endeavour for the government to develop. They aren't great at building usable software or web services as the health insurance site demonstrated. I'd rather they invested time doing what their good at, which is managing policy. Investing time in this instead of simplifying the existing policy is of questionable economic cost. Private industry is more than capable of building software to make filing taxes easier. But there are limitations on their ability to do so if the tax code is so complex. Additionally, simpler software is cheaper than one managing endlessly complex requirements. That's win-win as far as I'm concerned.
- jonathankoren 11y ago
matt_wulfeck 11y ago
I received a letter from the IRS asking for some money because my 1099 didn't match what my brokerage submitted... If you have the data already then why am I also calculating it by hand and sending it? Why don't you just tell me what I owe you!?
- joezydeco 11y ago
  That's Intuit again, lobbying to keep the US from developing a system like this. There are countries in Europe that already do it. http://www.theatlantic.com/business/archive/2016/03/the-10-second-tax-return/475899/ http://www.theatlantic.com/business/archive/2016/03/the-10-s...
- RodericDay 11y ago
  This is exactly what this is all about. There is no need for two entities to do the exact same work in parallel.
- deleted 11y ago
  [deleted]
malchow 11y ago
Simplify? The only ones working to simplify the inane and uncompetitive U.S. tax code, which largely hurts working families and enables the politically well connected, are those rare and few politicians working toward complete structural overhaul.
tmaly 11y ago
I would like to see us go back to a variation on the apportionment among the states. The variation I would envision would be an apportionment among congressional districts. This would allow tiny states like RI to still contribute, but maybe not on the same level as larger states as CA. Then under this, it would be up to each individual state to decide how it is going to collect taxes for each of these districts. Then repeal the 16th amendment and replace it with a new apportionment amendment. We would still be stuck with the current state tax code for each of the respective states that we have now, but we would get rid of the massive Federal tax code.
bcheung 11y ago
I was just reading the text. Looks like it is limited to just the simple cases (no deductions) where there isn't a lot to figure out already to begin with. Why not just automatically file unless the tax payer elects to file something different? They already have all the wage data submitted to them from employers.
lutorm 11y ago
Sounds like my Swedish taxes. All I have to do, if I agree with the information already on there, is sign it (electronically, of course.)
blue11 11y ago
I must be missing something, but how exactly would this simplify tax filing? Presumably this bill would break the grip that TurboTax has on the market by, say, enabling cheaper and/or free solutions. But using the alternatives would not be in any way simpler than using TurboTax. And TurboTax is not that expensive (<$100 for federal+state).
- dmix 11y ago
  You have to consider this from the perspective of the modern US politician instead of an engineer. Of course they'd prefer another Health.gov style spending bill to build another sprawling web service, with the added perk of keeping the friendly government contractors well fed, instead of something that requires the real hard work by the politicians. And simplifying such a complex policy as the tax code would be real hard work. Instant gratification that can be draws congratulation is always preferred to risking your political reputation attempting to solve the hard underlying problems - especially when they are riddled with special interests as the tax code has become.
  - cbhl 11y ago
    > Instant gratification that can be draws congratulation is preferred to risking your political reputation attempting to solve the hard underlying problems Certainly this happens to some engineers, too.
    - dmix 11y ago
      But we have longer term consequences for our actions both from users and employers. Using duct-taping to patch up serious problems is rarely punished in politics.
shmerl 11y ago
May be they should fix AMT mess as well?
forrestthewoods 11y ago
Because our Federal government is super good at creating easy to use, functional websites. TurboTax was able to hook into my investment accounts and automatically pull all of my data. It worked great. All the IRS needs to do is provide an API to let a range of software do the same. Also, use of "average" here is criminally misleading. The "average" person doesn't spend $200. And the "average" tax return isn't $2000. TurboTax free edition is perfectly sufficient for a plurality of users.
- lhc- 11y ago
  Do you have a reference for that? Maybe some evidence of why you consider these numbers misleading? I worked in the tax business recently and I'd say both those numbers are actually below average for out customers (who were mostly poor or middle class).
harryh 11y ago
As a data point for anyone curious about what a fairly complex, but really not insane, tax return looks like, my taxes were fairly complicated this year: - 3 jobs (2 for me cause I changed mid-year, 1 for my wife) - Some investment earnings (both cap gains & dividends) - I was part of the Google class action settlement - Some random 1099s - Itemized deductions mainly just cause I live in a high tax state (NY) My federal tax return is 87 pages (not counting a list of all capital transactions). IMHO, complexity that could possibly be eliminated can be found in these items (in no particular order): - The deductibility of state taxes (still kinda weird to me how this works) - Foreign tax credits (Probably actually necessary, but tricky) - The AMT - Forms 8959/8960 (Can't this be built into the rates?) - Self Employment Tax (an artifact of the deceptive way SS & Medicare taxes work) - The worksheet for calculating capital gains tax seems a bit crazy Overall, at least from my perspective, no individual item is all that crazy. It's just the weight of a bunch of little things that all add up to something that feels overly complicated.
- zeveb 11y ago
  > The deductibility of state taxes (still kinda weird to me how this works) Well, the idea is that the federal government is only taxing your income, and money that your state has taken away doesn't is your income. It's not a bad idea, but the problem is that it means that no-or-low-income-tax states end up subsidising high-income-tax states. Moreover, there's no easy way to itemise other forms of state taxes, e.g. sales or property taxes. It really should be done away with.
  - harryh 11y ago
    Ya, I get the reasoning. And I agree with your analysis about the negative consequences. But the part I actually think is weird/complex is the way it ties tax returns together from adjacent years. For my 2015 federal return I don't deduct my state taxes on my 2015 income, I deduct state taxes I paid in 2015. Those can be two different things. I just find that a bit weird.
rurban 11y ago
I filed my income taxes in Austria, the US and now in Germany. All of them are pretty easy to file. The cited 13 hours is insane, and I never needed a 3rd party to help me. But the US fax filing system is by far the simpliest. I only needed 2 hrs to file them every year. In Austria and Germany it needs 5-10 hours, and they have insane buerocratic hurdles. The US have a very simple PDf to fill out, and an excellent explanation. In Germany I have now monthly stupid HTML forms to fill out with manually entering >50 zeros. So I cannot really understand what's so complicated.
nickik 11y ago
Everything would be so much better if there was just a simple flat-tax. Same tax for all buissness and people. Same tax for incomes of all kinds. And before the Progressives start rioting, its easly possible to make it somewhat progressive. Then we can foreever argue if it should be more or less progressive. The amount of time saved by people and more importantly buissnesses is quite extraordinary. Additionally it would make finding tax cheaters far easier. The IRS could be much smaller. That also has positive effects on privacy. The book "The Flat Tax" was released in 1981 and was implmented in some of the countries that became free after the collapse of the USSR. I highly recommend this 1h podcast with the auther of the book: http://www.econtalk.org/archives/2007/04/rabushka_on_the.html http://www.econtalk.org/archives/2007/04/rabushka_on_the.htm...
kaffeinecoma 11y ago
I dread tax time every year. I'm self-employed, so I don't exactly expect it to be easy, but I generally end up spending 3-4 full days working on my return. Not including the meticulous record keeping I amortize over the year with a simple spreadsheet. Every time I think I've finally got it figured out, there's always some weird new situation that throws a wrench in things. Common things like buying/selling a house, moving to a new state or locality, death of a parent, etc. I honestly don't know how most people ever manage to do it correctly, much less optimally. This year it was 2 different banks that got IRA reporting wrong. Last year, Turbotax "interview mode" would not let me enter some crucial figure correctly. Previous year it was clients not sending 1099s (and agonizing over whether to just report manually or wait for the form). Two years before that it was a RITA (local tax authority) screwup. I tried hiring a local CPA to take away some of the pain, but he ended up making a $5K mistake, and it took hours of my time to correct. I've had a good accountant in the past, so I know they can make a huge difference, but they are very hard to find.
crb002 11y ago
Trump plan is best. Set a tax floor of $50-$100k. Exclude millions of americans from even having to file.
MaggieL 11y ago
Nobody ever simplified anything by giving the government a monopoly on it.
- pzone 11y ago
  It's a natural monopoly because the government automatically receives copies of your tax information. You couldn't just set up a competitive market for tax preparation software with the government selling access to everyone's W2s.
emdd 11y ago
My tax filings are 30-40 pages long, so I'm game for any improvements.
MikeNomad 11y ago
Simplify filing? How about going back to not taxing wages, and for those that would still have to file, simply input the info directly on the IRS website?
pjc50 11y ago
Does the US not have PAYE? Or is it made inconvenient by the state/federal split? The corresponding UK system, "self assessment", is reasonably slick online, although you have to put in all the information yourself. It's used by about a sixth of the population: https://www.gov.uk/government/news/hmrc-sees-biggest-digital-self-assessment-ever https://www.gov.uk/government/news/hmrc-sees-biggest-digital...

213 points by abawany 11y ago

Of course it won't pass. With enough money, you can pay lawyers to either make things legal, convince a court that what you're doing is legal, or hide your illegal activities. I'm not sure whether TurboTax and the like are doing #1 or #2, but they're the ones making sure simple tax filing never passes, which would put them out of business.

artursapek 11y ago
A sad example of capitalism holding back progress.
- ancap 11y ago
  When I compare my life to those of people who lived 50, 100, or more years ago, the majority of the things I value most came from capitalism.
  - sdegutis 11y ago
    The majority of things I find convenient came from capitalism. The majority of things I value were already there and have been for quite a long time.
awakeasleep 11y ago
If the government could take on Standard Oil it probably has a chance at Intuit.
- ancap 11y ago
  You say that as if government action against Standard Oil was some noble act. Standard Oil helped facilitate great improvements to the average Americans standard of living.
  - jonathankoren 11y ago
    And do you believe that monopolies offer choice, and drive down prices as well? via https://en.wikipedia.org/wiki/Standard_Oil#Monopoly_charges_and_anti-trust_legislation https://en.wikipedia.org/wiki/Standard_Oil#Monopoly_charges_... "In 1904, Standard controlled 91 percent of production and 85 percent of final sales." "The federal Commissioner of Corporations studied Standard's operations from the period of 1904 to 1906[31] and concluded that ``beyond question... the dominant position of the Standard Oil Co. in the refining industry was due to unfair practices—to abuse of the control of pipe-lines, to railroad discriminations, and to unfair methods of competition in the sale of the refined petroleum products''" From the DOJ complaint, "The evidence is, in fact, absolutely conclusive that the Standard Oil Co. charges altogether excessive prices where it meets no competition, and particularly where there is little likelihood of competitors entering the field, and that, on the other hand, where competition is active, it frequently cuts prices to a point which leaves even the Standard little or no profit, and which more often leaves no profit to the competitor, whose costs are ordinarily somewhat higher."
    - ancap 11y ago
      You probably didn't read the article because two sections below the one you linked (https://en.wikipedia.org/wiki/Standard_Oil#Legacy_and_criticism_of_breakup https://en.wikipedia.org/wiki/Standard_Oil#Legacy_and_critic...) states: > Some economic historians have observed that Standard Oil was in the process of losing its monopoly at the time of its breakup in 1911. Although Standard had 90 percent of American refining capacity in 1880, by 1911 that had shrunk to between 60 and 65 percent, due to the expansion in capacity by competitors. Which would clearly be impossible if Standard Oil was a monopoly. Your quote from a politician with ulterior motives does not prove a monopoly and even sounds economically dubious.
      - jonathankoren 11y ago
        No I read it. It's irrelevant. If anything, it argues they should have been broken up earlier. Monopolies are market failures.

MattSteelblade 11y ago

Intuit's lobbyists will ensure this doesn't come to fruition.

ahoy 11y ago
Legislation can get past powerful lobbyists if there's enough public momentum. It happened with Tobacco. I'm not terribly hopeful that this particular bill will pass, but I'm glad to see Warren bringing the issue up.
- afarrell 11y ago
  This is because most lobbyists can only offer campaign donations, and then only implicitly. That isn't what politicians really want; They want votes. If they have campaign money, they might be able to use advertising and organizing to turn that into votes, but it is no sure thing. A few lobbying groups, like AARP and the NRA actually can bring votes to a candidate and that is where the real power is. They have a list of people who care about their pet issue and can send them mail saying "candidate X proposed HR.1337 which does foo; Candidate X fights for your rights." Until recently, the only organization with a large list of people who were frustrated with turbotax was Intuit. However, Twitter, Facebook, and Reddit now both have records of large numbers of people griping about taxes. Why has Facebook not yet exposed an API that let you advertise to people who are frustrated with a given concept? It seems like a great way to find folks that have a certain pain point.
- zeveb 11y ago
  > Legislation can get past powerful lobbyists if there's enough public momentum. It happened with Tobacco. Anti-tobacco legislation was passed due to powerful lobbyists.
jchendy 11y ago
How do lobbyists actually influence what happens to a bill?
- abawany 11y ago

mrfusion 11y ago

Just curious would this be considered budget neutral or would it bring in more taxes? Or less?

entee 11y ago
Neutral probably, might affect costs at IRS, but I would imagine relatively little change in revenue. The hiccup could be if people were consistently overestimating their taxes, but it looks as though for the median citizen that's unlikely (most people don't itemize and take the standard deduction at that income level).

mozumder 11y ago

Of course, none of the Republicans support this.

adventured 11y ago
Several of the Republican Presidential candidates support drastically simplifying the tax code. Tax code simplification has extremely wide support among the Republican base. The lack of support very likely has more to do with who is presenting it and the approach used.
- jdmichal 11y ago
  This is not about simplifying the tax code. This is about filing returns.
  - adventured 11y ago
    The point I was making is that Republicans do support tax simplification, both at the filing and tax code levels. I'd go so far as to say that every Republican candidate has at one time or another publicly supported simplification across the board when it comes to both the code and filing. If you simplify the tax code - which is desperately needed - the filing simplification is a logical extension of that. For decades Republican candidates have been talking about the idea of being able to file your taxes on a single index card. Simplifying the filing without simplifying the tax code, is putting a bandaid on a gushing wound that is getting worse every year.
- jacobolus 11y ago
  The Republican presidential candidates support “tax simplification” in a way which shifts the distribution of tax burden away from the wealthy and corporate interests, and toward the middle class, or in some cases shrinks the tax base, making up the budget shortfall by cutting social programs. That’s not really comparable to this proposal, which doesn‘t change who pays the taxes, and doesn’t rewrite the tax code, but just makes the paperwork more convenient for everyone.

nodesocket 11y ago

Current tax code is completely antiquated and way more complicated than it should be. While of course the more money you make the more you pay, generally the effective tax rate is signanfncitly lower for higher net worth individuals. This is due to loopholes, business expenses, and various writeoffs. For example, I just did my taxes and my effective rate was 18% (I am not wealthy, but above the average income level).

erentz 11y ago
Would love a how to on this if you feel like sharing more.
- nodesocket 11y ago
  A few things. Careful planning of selling stocks that are in the red and in the green to minimize the amount of capital gains paid. I have a LLC for my startup and can write off quite a bit of business expenses to offset the business income.
  - zanny 11y ago
    This is the trick. You have your own LLC and writeoff everything as business expense. My dad is a contract construction worker, and writes off his vehicles, his gas, his phone, his tools, and all manner of insurance costs for work as business expenses and pays a really low effective tax rate as well.
    - nodesocket 11y ago
      A few big gotchas with LLC though. Every year you have to pay a flat $800 to the state of California. Sucks if your business is not making that much, $800 can be a significant cost. Self employment tax hurts bad. Basically this is Medicare and social security. Can be a huge amount owed seperate and in addition to income taxes.
      - dublinben 11y ago

bpodgursky 11y ago

This would just paper over the fact that the US tax code is an abomination of deductions and credits. It would not simplify any of the magic math; it would just make most people think they are getting the right credits. Would it actually give people all the deductions and credits they could get through a detailed analysis? I highly doubt it. TurboTax doesn't ask 1000 questions for fun; most of them matter because of the insanity of our tax code. It would probably put turbo-tax out of business though, this is true. The default, free, option is going to win against a paid product. All this will accomplish is making sure that tax preparation is back where it was two decades ago -- where the Actually Wealthy hire a person to do their taxes and get the right deductions, and everyone else gets stuck with an opaque bill which they can't afford to assess for accuracy. This is a far more regressive system than what we have now. Don't accuse me of being a TurboTax shill. I have nothing to do with them, besides doing many hours of complex taxes which would have cost far more in-person than with TurboTax (and no, I'm not under any circumstances blindly entrusting the IRS with correctly calculating ISO AMT nonsense.)

schwabacher 11y ago
"All this will accomplish is making sure that tax preparation is back where it was two decades ago -- where the Actually Wealthy hire a person to do their taxes and get the right deductions, and everyone else gets stuck with an opaque bill which they can't afford to assess for accuracy. This is a far more regressive system than what we have now." This is where it is now - plus the non wealthy end up paying TurboTax $200. This bill would save them the $200.
- MBCook 11y ago
  It would also provide a additional small incentive to the IRS to lobby harder to get the code simplified. Now they have to update another set of systems for each crazy change.
  - bcheung 11y ago
    They are only handling the simple cases for the free filing system. Basically only if you qualify for 1040EZ.

mathiasben 11y ago

Let's make it even simpler. no deductions for anything whatsoever.

ancap 11y ago
I'd like it simpler than that--0% for all incomes less than infinity.
- nodesocket 11y ago
  I'm good with this.

Alupis 11y ago

What a great PR piece for Warren... but unfortunately this is just smoke and mirrors. This does +absolutely nothing+ to simplify the tax code, this is solely about "simplifying" tax preparation and filing. It makes it easier to file online for free, and makes it so the IRS can't get in bed with Intuit, HR Block, etc. We need real tax reform - not smoke and mirrors.

davidw 11y ago
> It makes it easier to file online for free That's not a bad thing in and of itself.
- Alupis 11y ago
  > > It makes it easier to file online for free > That's not a bad thing in and of itself. You're absolutely right. However, this is being touted as tax [code] reform... which it's definitely not. Your tax preparation expenses are already tax deductible, so making it "cheaper" doesn't really help anyone. We need a simpler and more fair tax code - but we're not getting any of that with this bill. This is a distraction, and good PR for someone potentially poised for a VP ticket...
- dmix 11y ago
  The question is not whether the end goal is good, or whether their intentions are in the right place, it's whether it's the best use of government resources to focus on this vs other things. Could they be spending their limited time/resources on more valuable things? This would be an expensive endeavour for the government to develop. They aren't great at building usable software or web services as the health insurance site demonstrated. I'd rather they invested time doing what their good at, which is managing policy. Investing time in this instead of simplifying the existing policy is of questionable economic cost. Private industry is more than capable of building software to make filing taxes easier. But there are limitations on their ability to do so if the tax code is so complex. Additionally, simpler software is cheaper than one managing endlessly complex requirements. That's win-win as far as I'm concerned.
jonathankoren 11y ago

matt_wulfeck 11y ago

I received a letter from the IRS asking for some money because my 1099 didn't match what my brokerage submitted... If you have the data already then why am I also calculating it by hand and sending it? Why don't you just tell me what I owe you!?

joezydeco 11y ago
That's Intuit again, lobbying to keep the US from developing a system like this. There are countries in Europe that already do it. http://www.theatlantic.com/business/archive/2016/03/the-10-second-tax-return/475899/ http://www.theatlantic.com/business/archive/2016/03/the-10-s...
RodericDay 11y ago
This is exactly what this is all about. There is no need for two entities to do the exact same work in parallel.
deleted 11y ago
[deleted]

malchow 11y ago

Simplify? The only ones working to simplify the inane and uncompetitive U.S. tax code, which largely hurts working families and enables the politically well connected, are those rare and few politicians working toward complete structural overhaul.

tmaly 11y ago

I would like to see us go back to a variation on the apportionment among the states. The variation I would envision would be an apportionment among congressional districts. This would allow tiny states like RI to still contribute, but maybe not on the same level as larger states as CA. Then under this, it would be up to each individual state to decide how it is going to collect taxes for each of these districts. Then repeal the 16th amendment and replace it with a new apportionment amendment. We would still be stuck with the current state tax code for each of the respective states that we have now, but we would get rid of the massive Federal tax code.

bcheung 11y ago

I was just reading the text. Looks like it is limited to just the simple cases (no deductions) where there isn't a lot to figure out already to begin with. Why not just automatically file unless the tax payer elects to file something different? They already have all the wage data submitted to them from employers.

lutorm 11y ago

Sounds like my Swedish taxes. All I have to do, if I agree with the information already on there, is sign it (electronically, of course.)

blue11 11y ago

I must be missing something, but how exactly would this simplify tax filing? Presumably this bill would break the grip that TurboTax has on the market by, say, enabling cheaper and/or free solutions. But using the alternatives would not be in any way simpler than using TurboTax. And TurboTax is not that expensive (<$100 for federal+state).

dmix 11y ago
You have to consider this from the perspective of the modern US politician instead of an engineer. Of course they'd prefer another Health.gov style spending bill to build another sprawling web service, with the added perk of keeping the friendly government contractors well fed, instead of something that requires the real hard work by the politicians. And simplifying such a complex policy as the tax code would be real hard work. Instant gratification that can be draws congratulation is always preferred to risking your political reputation attempting to solve the hard underlying problems - especially when they are riddled with special interests as the tax code has become.
- cbhl 11y ago
  > Instant gratification that can be draws congratulation is preferred to risking your political reputation attempting to solve the hard underlying problems Certainly this happens to some engineers, too.
  - dmix 11y ago
    But we have longer term consequences for our actions both from users and employers. Using duct-taping to patch up serious problems is rarely punished in politics.

shmerl 11y ago

May be they should fix AMT mess as well?

forrestthewoods 11y ago

Because our Federal government is super good at creating easy to use, functional websites. TurboTax was able to hook into my investment accounts and automatically pull all of my data. It worked great. All the IRS needs to do is provide an API to let a range of software do the same. Also, use of "average" here is criminally misleading. The "average" person doesn't spend $200. And the "average" tax return isn't $2000. TurboTax free edition is perfectly sufficient for a plurality of users.

lhc- 11y ago
Do you have a reference for that? Maybe some evidence of why you consider these numbers misleading? I worked in the tax business recently and I'd say both those numbers are actually below average for out customers (who were mostly poor or middle class).

harryh 11y ago

As a data point for anyone curious about what a fairly complex, but really not insane, tax return looks like, my taxes were fairly complicated this year: - 3 jobs (2 for me cause I changed mid-year, 1 for my wife) - Some investment earnings (both cap gains & dividends) - I was part of the Google class action settlement - Some random 1099s - Itemized deductions mainly just cause I live in a high tax state (NY) My federal tax return is 87 pages (not counting a list of all capital transactions). IMHO, complexity that could possibly be eliminated can be found in these items (in no particular order): - The deductibility of state taxes (still kinda weird to me how this works) - Foreign tax credits (Probably actually necessary, but tricky) - The AMT - Forms 8959/8960 (Can't this be built into the rates?) - Self Employment Tax (an artifact of the deceptive way SS & Medicare taxes work) - The worksheet for calculating capital gains tax seems a bit crazy Overall, at least from my perspective, no individual item is all that crazy. It's just the weight of a bunch of little things that all add up to something that feels overly complicated.

zeveb 11y ago
> The deductibility of state taxes (still kinda weird to me how this works) Well, the idea is that the federal government is only taxing your income, and money that your state has taken away doesn't is your income. It's not a bad idea, but the problem is that it means that no-or-low-income-tax states end up subsidising high-income-tax states. Moreover, there's no easy way to itemise other forms of state taxes, e.g. sales or property taxes. It really should be done away with.
- harryh 11y ago
  Ya, I get the reasoning. And I agree with your analysis about the negative consequences. But the part I actually think is weird/complex is the way it ties tax returns together from adjacent years. For my 2015 federal return I don't deduct my state taxes on my 2015 income, I deduct state taxes I paid in 2015. Those can be two different things. I just find that a bit weird.

rurban 11y ago

I filed my income taxes in Austria, the US and now in Germany. All of them are pretty easy to file. The cited 13 hours is insane, and I never needed a 3rd party to help me. But the US fax filing system is by far the simpliest. I only needed 2 hrs to file them every year. In Austria and Germany it needs 5-10 hours, and they have insane buerocratic hurdles. The US have a very simple PDf to fill out, and an excellent explanation. In Germany I have now monthly stupid HTML forms to fill out with manually entering >50 zeros. So I cannot really understand what's so complicated.

nickik 11y ago

Everything would be so much better if there was just a simple flat-tax. Same tax for all buissness and people. Same tax for incomes of all kinds. And before the Progressives start rioting, its easly possible to make it somewhat progressive. Then we can foreever argue if it should be more or less progressive. The amount of time saved by people and more importantly buissnesses is quite extraordinary. Additionally it would make finding tax cheaters far easier. The IRS could be much smaller. That also has positive effects on privacy. The book "The Flat Tax" was released in 1981 and was implmented in some of the countries that became free after the collapse of the USSR. I highly recommend this 1h podcast with the auther of the book: http://www.econtalk.org/archives/2007/04/rabushka_on_the.html http://www.econtalk.org/archives/2007/04/rabushka_on_the.htm...

kaffeinecoma 11y ago

I dread tax time every year. I'm self-employed, so I don't exactly expect it to be easy, but I generally end up spending 3-4 full days working on my return. Not including the meticulous record keeping I amortize over the year with a simple spreadsheet. Every time I think I've finally got it figured out, there's always some weird new situation that throws a wrench in things. Common things like buying/selling a house, moving to a new state or locality, death of a parent, etc. I honestly don't know how most people ever manage to do it correctly, much less optimally. This year it was 2 different banks that got IRA reporting wrong. Last year, Turbotax "interview mode" would not let me enter some crucial figure correctly. Previous year it was clients not sending 1099s (and agonizing over whether to just report manually or wait for the form). Two years before that it was a RITA (local tax authority) screwup. I tried hiring a local CPA to take away some of the pain, but he ended up making a $5K mistake, and it took hours of my time to correct. I've had a good accountant in the past, so I know they can make a huge difference, but they are very hard to find.

crb002 11y ago

Trump plan is best. Set a tax floor of $50-$100k. Exclude millions of americans from even having to file.

MaggieL 11y ago

Nobody ever simplified anything by giving the government a monopoly on it.

pzone 11y ago
It's a natural monopoly because the government automatically receives copies of your tax information. You couldn't just set up a competitive market for tax preparation software with the government selling access to everyone's W2s.

emdd 11y ago

My tax filings are 30-40 pages long, so I'm game for any improvements.

MikeNomad 11y ago

Simplify filing? How about going back to not taxing wages, and for those that would still have to file, simply input the info directly on the IRS website?

pjc50 11y ago

Does the US not have PAYE? Or is it made inconvenient by the state/federal split? The corresponding UK system, "self assessment", is reasonably slick online, although you have to put in all the information yourself. It's used by about a sixth of the population: https://www.gov.uk/government/news/hmrc-sees-biggest-digital-self-assessment-ever https://www.gov.uk/government/news/hmrc-sees-biggest-digital...