4 ms·

There are two points worth separating here: tax code complexity and for-profit filing. The two are obviously interrelated, but different: Intuit wants for-profi

by lvh 7y ago

There are two points worth separating here: tax code complexity and for-profit filing. The two are obviously interrelated, but different: Intuit wants for-profit filing so TurboTax makes money, and Intuit also wants tax code complexity to increase the barrier to entry. But the IRS gets to bear the brunt of any complexity in the tax code, and they've already suggested free filing. They also clearly already know what to expect in significant detail anyway, since they adjusted my return last year. This was part of my point with Belgium elsewhere in the tread: Belgium has tremendously intricate (and sensitive) governmental structure, but that hasn't prevented them from making tax filing a postcard for virtually everyone. The actual tax code is a lot more complex than the postcard (though still far less complex than the US' tax code), but the tax authority does the math, suggests a number, and if you have some reason to dispute it you go file a "proper" return. So: yes, maybe we can make the tax code simpler, but that should not preclude us from making _filing_ simpler regardless of how complex the tax code is.

harryh 7y ago
Yes, two different but interrelated things. I'm skeptical that much progress can really be made on the latter (for-profit filing) without significant work on the former (code complexity). Perhaps I am wrong though. Maybe I'll go read about the Belgian tax code. Sounds like some light reading for a Sunday afternoon. ;-)
- lvh 7y ago
  Can you think of an argument that would be convincing? The IRS already saying they can do it (when they obviously already do the work internally) as well as other countries with more complex governmental structure pulling it off seems like it would be convincing.
  - hundt 7y ago
    Can you point to where the IRS has said that they can prepare returns for taxpayers? As far as I know they can correct isolated pieces of information (e.g. wrong numbers from a W-2) but do not have the ability to prepare a return from scratch. Edit: I mean, they can obviously put all the pieces of information they know about you onto one return and do the calculations. But there will be many pieces they don't know, and I think you are unlikely to get an accurate return without them (or based on guessing). But if the IRS says otherwise I would like to know.
    - lvh 7y ago
      Sure: the ProPublica article linked elsewhere in the thread about how the IRS keeps saying "we should just do Free File soup to nuts", Intuit does a bunch of lobbying, and the IRS goes "oh okay I guess we won't do Free File for a while". You're of course correct that they do not have every document to prepare a return from scratch: but they do have the vast majority of them (in the cartesian product set of (Person x Document)), and certainly a similar to what other industrial nations who have reduced taxes to a postcard notice have--so the assertion also seems credible to me.
      - hundt 7y ago
        Sorry, I'm still not clear what you're referring to. There are multiple ProPublica articles linked in this thread and I'm not sure what statement you're paraphrasing with your "soup to nuts" quote. Are you referring to this article[0], which says the OMB suggested in 2002 that the IRS develop a free option, and the IRS opposed it then and consistently since? Regarding your second point: the IRS has a lot of documents but it is dwarfed by the total amount of information needed to prepare a return. Even just to determine who your dependents are is a complex flowchart[1] for which there are no official documents in existence that can provide the answers. These kinds of things come up all the time when doing ordinary people's taxes, not just in esoteric situations. (I know because I used to volunteer to do it.) [0] https://www.propublica.org/article/inside-turbotax-20-year-fight-to-stop-americans-from-filing-their-taxes-for-free https://www.propublica.org/article/inside-turbotax-20-year-f... [1] https://apps.irs.gov/app/vita/content/globalmedia/dependency_exemptions_4012.pdf https://apps.irs.gov/app/vita/content/globalmedia/dependency...
harryh 7y ago
Incidentally, the harryh plan for simplifying US taxes: 1. eliminate all deductions in favor of the standard deduction 2. once 1 is done you can actually eliminate the standard deduction as well and make it a part of the tax tables with a 0% rate up to various income levels. 3. eliminate the AMT and the NIIT 4. move all FICA taxes to the employee side (which is where the incidence actually is anyways) and thus eliminate the self-employment tax. 5. roll back all the crap about S corps that got introduced in the 2017 tax bill 6. standardize all 50 state tax forms (the rates can be different but the structure should be the same)
- lvh 7y ago
  My favorite one that I usually keep to myself because it makes me sound like a loon since it's so far out of the Overton window (but quite popular with economists): abolish corporate income tax. Corporate income tax is regressive, because AmaGooBookSoft is much better at not paying taxes than a mom and pop grocery store. But I think you've lost most of the constituents that think that's a good thing after saying you're gonna slash corporate taxes to literally zero. I'd love to see land tax too, but I appreciate that the Constitution doesn't make that easy. But damnit, if we somehow outlawed liquor, we can outlaw inefficient tax strategies.
  - harryh 7y ago
    You're absolutely correct on these IMHO. There is, at least, a multi decade trend of reducing corporate income taxes. Unfortunately all the complexity is still there even if the bills being paid are smaller. And yes, Georgist taxes on the value of unimproved land would have so many benefits. Can we get a carbon tax & dividend while we're at it? Dare to dream!
- usaar333 7y ago
  I generally agree on this working out well. As nits though: 1. This simplifies things like crazy, but could have all sorts of spill-over effects. (most notably reduction in charitable giving) 3. AMT, yes. NIIT is only another tax bracket though? 6. This would help dramatically, but I'm not sure how to execute it. CA nonconformity to all sorts of federal tax rules is a huge pain point (HSA being the worse one for the regular person), but it seems CA could care less about the complexity that hits its citizens.

by lvh 7y ago

harryh 7y ago

Yes, two different but interrelated things. I'm skeptical that much progress can really be made on the latter (for-profit filing) without significant work on the former (code complexity). Perhaps I am wrong though. Maybe I'll go read about the Belgian tax code. Sounds like some light reading for a Sunday afternoon. ;-)

lvh 7y ago
Can you think of an argument that would be convincing? The IRS already saying they can do it (when they obviously already do the work internally) as well as other countries with more complex governmental structure pulling it off seems like it would be convincing.
- hundt 7y ago
  Can you point to where the IRS has said that they can prepare returns for taxpayers? As far as I know they can correct isolated pieces of information (e.g. wrong numbers from a W-2) but do not have the ability to prepare a return from scratch. Edit: I mean, they can obviously put all the pieces of information they know about you onto one return and do the calculations. But there will be many pieces they don't know, and I think you are unlikely to get an accurate return without them (or based on guessing). But if the IRS says otherwise I would like to know.
  - lvh 7y ago
    Sure: the ProPublica article linked elsewhere in the thread about how the IRS keeps saying "we should just do Free File soup to nuts", Intuit does a bunch of lobbying, and the IRS goes "oh okay I guess we won't do Free File for a while". You're of course correct that they do not have every document to prepare a return from scratch: but they do have the vast majority of them (in the cartesian product set of (Person x Document)), and certainly a similar to what other industrial nations who have reduced taxes to a postcard notice have--so the assertion also seems credible to me.
    - hundt 7y ago
      Sorry, I'm still not clear what you're referring to. There are multiple ProPublica articles linked in this thread and I'm not sure what statement you're paraphrasing with your "soup to nuts" quote. Are you referring to this article[0], which says the OMB suggested in 2002 that the IRS develop a free option, and the IRS opposed it then and consistently since? Regarding your second point: the IRS has a lot of documents but it is dwarfed by the total amount of information needed to prepare a return. Even just to determine who your dependents are is a complex flowchart[1] for which there are no official documents in existence that can provide the answers. These kinds of things come up all the time when doing ordinary people's taxes, not just in esoteric situations. (I know because I used to volunteer to do it.) [0] https://www.propublica.org/article/inside-turbotax-20-year-fight-to-stop-americans-from-filing-their-taxes-for-free https://www.propublica.org/article/inside-turbotax-20-year-f... [1] https://apps.irs.gov/app/vita/content/globalmedia/dependency_exemptions_4012.pdf https://apps.irs.gov/app/vita/content/globalmedia/dependency...

harryh 7y ago

Incidentally, the harryh plan for simplifying US taxes: 1. eliminate all deductions in favor of the standard deduction 2. once 1 is done you can actually eliminate the standard deduction as well and make it a part of the tax tables with a 0% rate up to various income levels. 3. eliminate the AMT and the NIIT 4. move all FICA taxes to the employee side (which is where the incidence actually is anyways) and thus eliminate the self-employment tax. 5. roll back all the crap about S corps that got introduced in the 2017 tax bill 6. standardize all 50 state tax forms (the rates can be different but the structure should be the same)

lvh 7y ago
My favorite one that I usually keep to myself because it makes me sound like a loon since it's so far out of the Overton window (but quite popular with economists): abolish corporate income tax. Corporate income tax is regressive, because AmaGooBookSoft is much better at not paying taxes than a mom and pop grocery store. But I think you've lost most of the constituents that think that's a good thing after saying you're gonna slash corporate taxes to literally zero. I'd love to see land tax too, but I appreciate that the Constitution doesn't make that easy. But damnit, if we somehow outlawed liquor, we can outlaw inefficient tax strategies.
- harryh 7y ago
  You're absolutely correct on these IMHO. There is, at least, a multi decade trend of reducing corporate income taxes. Unfortunately all the complexity is still there even if the bills being paid are smaller. And yes, Georgist taxes on the value of unimproved land would have so many benefits. Can we get a carbon tax & dividend while we're at it? Dare to dream!
usaar333 7y ago
I generally agree on this working out well. As nits though: 1. This simplifies things like crazy, but could have all sorts of spill-over effects. (most notably reduction in charitable giving) 3. AMT, yes. NIIT is only another tax bracket though? 6. This would help dramatically, but I'm not sure how to execute it. CA nonconformity to all sorts of federal tax rules is a huge pain point (HSA being the worse one for the regular person), but it seems CA could care less about the complexity that hits its citizens.