4 ms·

If the federal government really wanted to save money on tax collection, improve the accuracy of tax collection, and drive the tax preparation industry out of b

by bradfa 3y ago

If the federal government really wanted to save money on tax collection, improve the accuracy of tax collection, and drive the tax preparation industry out of business which would save every person and company significant money, then the federal government would just simplify the tax code. Any high school graduate should be smart enough to file their own taxes. That this is not true today is simply insane. For tax incentives such as buying a qualifying electric vehicle, just provide the incentive directly to the car dealership at the time of purchase. Businesses which want to pass along such savings to their customers will need to do some paperwork and it'll be much harder to restrict benefits only to specific income brackets, but it would be much simpler and cheaper for taxpayers.

ajmurmann 3y ago
The income bracket stuff is so crazy. It's just another way to redistribute wealth, but that's not palatable to the US public so it takes weird forms like this. It would be much more practical to abandon these piecemeal, market-distorting interventions and instead just do some smallish UBI. The money saved on overhead alone would probably be enormous.
- prottog 3y ago
  > just do some smallish UBI Smallish UBI is an oxymoron; I'm assuming by "smallish" you mean something that's insufficient to cover basic living expenses (the B in UBI). I agree that we should do away with market-distorting interventions in places that aren't strategically critical to the nation as a whole (like food production), but politicians are woefully inadequate to the task of resisting the urge to meddle.
  - LegionMammal978 3y ago
    > Smallish UBI is an oxymoron; I'm assuming by "smallish" you mean something that's insufficient to cover basic living expenses (the B in UBI). Like it or not, the term UBI has been overloaded in common usage to refer to both forms. (Wikipedia notes that sometimes a "full basic income" vs. a "partial basic income" is used to disambiguate the two forms.) "Basic" in this sense just means that there is a set "basis" from which income can only increase; it does not necessarily have anything to do with "basic" living expenses, although many proposals do tie that particular connection.
    - prottog 3y ago
      Thank you; I was unaware of this common parlance. I understood that UBI implicitly meant something that one could live off of. In that case, I prefer something like a Friedmanesque negative income tax, versus the absurd scenario of, say, a pauper and a millionaire both receiving the same basic income; or indeed over the existing absurdities of the means-tested welfare system, with all of its perverse incentives.
- a_humean 3y ago
  Take a moment to look outside of your borders. In the UK we have a mostly progressive income tax system with various tax brackets, tax free allowances up to 12k GBP, claw backs of said allowance over incomes of a certain amount, national insurance taxation, student loan repayments, etc... The majority of UK citizens file no paperwork with HMRC (equivalent to the IRS) and never have a reason to contact HMRC. The majority of UK citizens only interaction with HMRC is when they get a summary letter in the post at most once a year telling them that everything is fine or they over/underpaid through the automated systems. In the latter casen they either are given the money owed or told that they will have to repay what is due through what is effectively an interest free loan over the course of the next 1-2 years (can be negotiated). The reason why this is possible is because employers report salaries to HMRC and its a deduction in their monthly payslips. You might say its not possible to do that in the US, but ask yourself how does the IRS actually know that you have misreported/underpaid? Its because they already know exactly how much you owe because the same information has already been reported to them by the banks and your employers. There is literately no point in tax filing for the majority of US citizen that work as an employee employer except to enable the parasitic tax filing industry to exist.
  - ajmurmann 3y ago
    It feels like you are arguing against a point I didn't make. I was responding to this section from the parent "it'll be much harder to restrict benefits only to specific income brackets, but it would be much simpler and cheaper for taxpayers." Also to "Take a moment to look outside of your borders.", I'm a German citizen where my dad is a retired tax officer and Iia business degree which involved accounting and taxation. I'm familiar with some taxation outside the US. If I weren't, there'd already have been dozens of other posts here describing the better tax filing solution in every country.
    - deleted 3y ago
      [deleted]
    - a_humean 3y ago
      I apologise, I think I actually meant to reply the the parent above you. I was intending to criticise the implied premise that the problem with filing is that tax code is too complex, when its very possible in other complex tax justidictions to automate all of this away for most citizens (esp when the standard deductible is sufficient for almost everyone). There is evidence that its already possible to automate most of this away in the US because the data collection and calculation is already happening for most simple cases. I know this because I'm a dual citizen and I am constantly shocked at how terrible the IRS is and how relatively pleasant HMRC is. I just took it as non-sequitur to promote some other policy bug bear.
prottog 3y ago
> Any high school graduate should be smart enough to file their own taxes. That this is not true today is simply insane. The tax code is stupid, yes, but on the other hand one-fifth of high school graduates are functionally illiterate, and it would be hard for them to file their own taxes.
jjice 3y ago
I agree in concept for sure, but just simplifying our complex tax code is probably near impossible at this point unfortunately. Even for certain things like you mention with electric vehicle incentives, I don't believe you'd be able to pass saving on at purchase time because I believe for those (or maybe I'm think of solar or another green tax break), you need to own it for a period of time and savings come only with a certain amount of ownership. That stuff gets complicated immediately. If it was simpler then these incentives would also be simpler, which would be great. It is a shame that so many regular W2 Americans will still have to run into some nonsense about an rollover IRA pro-rata rule or something that can cost you thousands of dollars if done wrong. I guess what I'm trying to say is that it would be great, but not simplifying our existing tax code would be incredibly complex.
- bradfa 3y ago
  For electric cars, I don't believe there's an ownership period required. But for example of the right way to do it, in New York if you buy an electric car then at the time of purchase the state will pay $500 to $2000 to reduce the price of the car for you based on the all-electric range, with no requirement about income levels and nothing to file on your personal income taxes. https://www.nyserda.ny.gov/All-Programs/Drive-Clean-Rebate-For-Electric-Cars-Program/How-it-Works https://www.nyserda.ny.gov/All-Programs/Drive-Clean-Rebate-F...
mediascreen 3y ago
I filed my Swedish taxes yesterday. It included private income and investments, my own sole proprietorship as well as dividends from a larger company where I own 10%. It took around 30 minutes including all calculations. We may have high taxes, but at least they make it easy to pay them...
- noisy_boy 3y ago
  Even low-tax countries like Singapore make it ridiculously easy to pay them.
psxdude 3y ago
The majority of high school graduates can probably easily file their taxes, since their income is likely entirely W-2.
- bradfa 3y ago
  If they're single, have only W-2 income, and have no children, then maybe... Just the child tax credit for 2022 requires filing an additional schedule 8812 (which is somehow referred to in some places as schedule 8) and in order to complete schedule 8812 you have to choose the correct worksheet and fill that in, but not file it. All of that results in a single credit value which is 1 line on the form 1040. This is not simple: https://www.irs.gov/instructions/i1040s8 https://www.irs.gov/instructions/i1040s8
  - noisy_boy 3y ago
    That is horrible indeed but I guess it is unavoidably so - you can't effectively have n-level nested if-else and lookups on a paper without making it complicated. Translated into code, it should become much simpler with progressive inputs/filtering.
    - bradfa 3y ago
      It's not unavoidable. This is my point. You could just say something like "multiply the number of dependents entered previously on form 1040 by $2000, enter value on line X" and you'd still have a child tax credit and the vast majority of people who claim it would see no difference other than taking significantly less time to figure out the amount of their child tax credit. By the time you get to the child tax credit line on form 1040 you've already written all your dependents and their social security numbers right at the beginning of form 1040.
userabchn 3y ago
Reducing the burden for those filing their taxes is nice, but an effect of simplifying the tax code that I am more interested in is that it restricts the power of the government (and so the reduces the attractiveness of lobbying politicians). The complexity provides opportunities for lobbyists to design rules that distort markets in their favour.
- noisy_boy 3y ago
  Even if you simplify, complexity can be gradually built-up again; lobbyists are like waves, they will keep coming and wear out the roughest of rocks. They represent the voice of the wealthy and the highest court of the land has agreed to let it be as loud as they wish.
natnat 3y ago
This a really classically difficult political problem of concentrated benefits with diffuse costs. The complication of the tax code comes from a zillion little exceptions added over the years, and every little exception has a beneficiary who doesn't want the existing system to change. Imagine you're a congressperson trying to simplify the tax code. If you want to remove a single little exception, you're going to piss someone off a whole lot for not much benefit. If you want to do a big refactor and lower everyone's rate while cutting a ton of exemptions, you need to fend off zillions of loud, empowered interest groups. As recently as 2017, congress tried to simplify the tax code with the TCJA. Paul Ryan and co tried very hard to make the tax code simpler while also cutting rates, and the process failed under the enormous pressure from interest groups. They ended up leaving pretty much every exception in place, and only cutting a few high-value tax benefits (like the SALT deduction) that benefited people from the other political party. When there's no clear path to actually solving the problem, a hack that makes things better in the interim can be a really helpful solution.

by bradfa 3y ago

ajmurmann 3y ago

The income bracket stuff is so crazy. It's just another way to redistribute wealth, but that's not palatable to the US public so it takes weird forms like this. It would be much more practical to abandon these piecemeal, market-distorting interventions and instead just do some smallish UBI. The money saved on overhead alone would probably be enormous.

prottog 3y ago
> just do some smallish UBI Smallish UBI is an oxymoron; I'm assuming by "smallish" you mean something that's insufficient to cover basic living expenses (the B in UBI). I agree that we should do away with market-distorting interventions in places that aren't strategically critical to the nation as a whole (like food production), but politicians are woefully inadequate to the task of resisting the urge to meddle.
- LegionMammal978 3y ago
  > Smallish UBI is an oxymoron; I'm assuming by "smallish" you mean something that's insufficient to cover basic living expenses (the B in UBI). Like it or not, the term UBI has been overloaded in common usage to refer to both forms. (Wikipedia notes that sometimes a "full basic income" vs. a "partial basic income" is used to disambiguate the two forms.) "Basic" in this sense just means that there is a set "basis" from which income can only increase; it does not necessarily have anything to do with "basic" living expenses, although many proposals do tie that particular connection.
  - prottog 3y ago
    Thank you; I was unaware of this common parlance. I understood that UBI implicitly meant something that one could live off of. In that case, I prefer something like a Friedmanesque negative income tax, versus the absurd scenario of, say, a pauper and a millionaire both receiving the same basic income; or indeed over the existing absurdities of the means-tested welfare system, with all of its perverse incentives.
a_humean 3y ago
Take a moment to look outside of your borders. In the UK we have a mostly progressive income tax system with various tax brackets, tax free allowances up to 12k GBP, claw backs of said allowance over incomes of a certain amount, national insurance taxation, student loan repayments, etc... The majority of UK citizens file no paperwork with HMRC (equivalent to the IRS) and never have a reason to contact HMRC. The majority of UK citizens only interaction with HMRC is when they get a summary letter in the post at most once a year telling them that everything is fine or they over/underpaid through the automated systems. In the latter casen they either are given the money owed or told that they will have to repay what is due through what is effectively an interest free loan over the course of the next 1-2 years (can be negotiated). The reason why this is possible is because employers report salaries to HMRC and its a deduction in their monthly payslips. You might say its not possible to do that in the US, but ask yourself how does the IRS actually know that you have misreported/underpaid? Its because they already know exactly how much you owe because the same information has already been reported to them by the banks and your employers. There is literately no point in tax filing for the majority of US citizen that work as an employee employer except to enable the parasitic tax filing industry to exist.
- ajmurmann 3y ago
  It feels like you are arguing against a point I didn't make. I was responding to this section from the parent "it'll be much harder to restrict benefits only to specific income brackets, but it would be much simpler and cheaper for taxpayers." Also to "Take a moment to look outside of your borders.", I'm a German citizen where my dad is a retired tax officer and Iia business degree which involved accounting and taxation. I'm familiar with some taxation outside the US. If I weren't, there'd already have been dozens of other posts here describing the better tax filing solution in every country.
  - deleted 3y ago
    [deleted]
  - a_humean 3y ago
    I apologise, I think I actually meant to reply the the parent above you. I was intending to criticise the implied premise that the problem with filing is that tax code is too complex, when its very possible in other complex tax justidictions to automate all of this away for most citizens (esp when the standard deductible is sufficient for almost everyone). There is evidence that its already possible to automate most of this away in the US because the data collection and calculation is already happening for most simple cases. I know this because I'm a dual citizen and I am constantly shocked at how terrible the IRS is and how relatively pleasant HMRC is. I just took it as non-sequitur to promote some other policy bug bear.

prottog 3y ago

> Any high school graduate should be smart enough to file their own taxes. That this is not true today is simply insane. The tax code is stupid, yes, but on the other hand one-fifth of high school graduates are functionally illiterate, and it would be hard for them to file their own taxes.

jjice 3y ago

I agree in concept for sure, but just simplifying our complex tax code is probably near impossible at this point unfortunately. Even for certain things like you mention with electric vehicle incentives, I don't believe you'd be able to pass saving on at purchase time because I believe for those (or maybe I'm think of solar or another green tax break), you need to own it for a period of time and savings come only with a certain amount of ownership. That stuff gets complicated immediately. If it was simpler then these incentives would also be simpler, which would be great. It is a shame that so many regular W2 Americans will still have to run into some nonsense about an rollover IRA pro-rata rule or something that can cost you thousands of dollars if done wrong. I guess what I'm trying to say is that it would be great, but not simplifying our existing tax code would be incredibly complex.

bradfa 3y ago
For electric cars, I don't believe there's an ownership period required. But for example of the right way to do it, in New York if you buy an electric car then at the time of purchase the state will pay $500 to $2000 to reduce the price of the car for you based on the all-electric range, with no requirement about income levels and nothing to file on your personal income taxes. https://www.nyserda.ny.gov/All-Programs/Drive-Clean-Rebate-For-Electric-Cars-Program/How-it-Works https://www.nyserda.ny.gov/All-Programs/Drive-Clean-Rebate-F...

mediascreen 3y ago

I filed my Swedish taxes yesterday. It included private income and investments, my own sole proprietorship as well as dividends from a larger company where I own 10%. It took around 30 minutes including all calculations. We may have high taxes, but at least they make it easy to pay them...

noisy_boy 3y ago
Even low-tax countries like Singapore make it ridiculously easy to pay them.

psxdude 3y ago

The majority of high school graduates can probably easily file their taxes, since their income is likely entirely W-2.

bradfa 3y ago
If they're single, have only W-2 income, and have no children, then maybe... Just the child tax credit for 2022 requires filing an additional schedule 8812 (which is somehow referred to in some places as schedule 8) and in order to complete schedule 8812 you have to choose the correct worksheet and fill that in, but not file it. All of that results in a single credit value which is 1 line on the form 1040. This is not simple: https://www.irs.gov/instructions/i1040s8 https://www.irs.gov/instructions/i1040s8
- noisy_boy 3y ago
  That is horrible indeed but I guess it is unavoidably so - you can't effectively have n-level nested if-else and lookups on a paper without making it complicated. Translated into code, it should become much simpler with progressive inputs/filtering.
  - bradfa 3y ago
    It's not unavoidable. This is my point. You could just say something like "multiply the number of dependents entered previously on form 1040 by $2000, enter value on line X" and you'd still have a child tax credit and the vast majority of people who claim it would see no difference other than taking significantly less time to figure out the amount of their child tax credit. By the time you get to the child tax credit line on form 1040 you've already written all your dependents and their social security numbers right at the beginning of form 1040.

userabchn 3y ago

Reducing the burden for those filing their taxes is nice, but an effect of simplifying the tax code that I am more interested in is that it restricts the power of the government (and so the reduces the attractiveness of lobbying politicians). The complexity provides opportunities for lobbyists to design rules that distort markets in their favour.

noisy_boy 3y ago
Even if you simplify, complexity can be gradually built-up again; lobbyists are like waves, they will keep coming and wear out the roughest of rocks. They represent the voice of the wealthy and the highest court of the land has agreed to let it be as loud as they wish.

natnat 3y ago

This a really classically difficult political problem of concentrated benefits with diffuse costs. The complication of the tax code comes from a zillion little exceptions added over the years, and every little exception has a beneficiary who doesn't want the existing system to change. Imagine you're a congressperson trying to simplify the tax code. If you want to remove a single little exception, you're going to piss someone off a whole lot for not much benefit. If you want to do a big refactor and lower everyone's rate while cutting a ton of exemptions, you need to fend off zillions of loud, empowered interest groups. As recently as 2017, congress tried to simplify the tax code with the TCJA. Paul Ryan and co tried very hard to make the tax code simpler while also cutting rates, and the process failed under the enormous pressure from interest groups. They ended up leaving pretty much every exception in place, and only cutting a few high-value tax benefits (like the SALT deduction) that benefited people from the other political party. When there's no clear path to actually solving the problem, a hack that makes things better in the interim can be a really helpful solution.