It’s amazing that 54% of adults in the United States have a literacy below 6th grade level, but it is expected for the same population to have the financial literacy to file their taxes accurately. Going further, the IRS already knows the details of most people’s taxes before they file, yet everyone is expected to complete what amounts to a complex task for many people. I cannot fathom why it is still done this way.
I guess it was originally done this way because in the past people actually had some semblance of privacy and the government didn't actually know a great deal about people's income.
Eventually, privacy was eroded away year after year to the point where the government now knows an extreme amount about each citizen.
I guess I'd refrain the question - instead of asking why do we need to do taxes when the government knows everything about us that they could do it for us, should we really have that little privacy? Maybe instead of changing the way we file taxes, we change the way the government is intimately entangled with our lives?
Of course, those ideas, liberty and privacy, small government, etc., isn't really fashionable with the latest generations and most people would gladly give up their freedom and privacy to save having to fill out some paperwork.
> instead of asking why do we need to do taxes when the government knows everything about us that they could do it for us
They cannot do everyone's taxes since what they know about many individuals is incomplete.
> should we really have that little privacy?
Put that way, the answer is no. On the other hand, virtually everyone demands services from their government and very few people want those services to be transactional (e.g. most people demand roads, few people want to pay based upon their usage of those roads). That means the government needs some form of revenue. For various reasons, it has been decided that a person's income should be a portion of those revenues. In order to ensure that people are paying their dues, the government needs to collect some information. Are there other ways the government could get revenues? Sure, but all of them are going to be problematic in some form or other.
> Of course, those ideas, liberty and privacy, small government, etc., isn't really fashionable with the latest generations and most people would gladly give up their freedom and privacy to save having to fill out some paperwork.
One has to be careful about generalizations. Even though a desire for liberty and privacy may be universally appealing, we would find that people's views on what those terms mean varies from generation to generation and from individual to individual. Note that I said the meaning changes, not a person's desire for it. As for the desire for small government, well, some people want small government and other people don't. It is a far less universal ideal.
> since what they know about many individuals is incomplete
No, for most individuals it is complete. Most people don’t own stocks directly (only an estimated 21% do)[1], and the ones who don’t are not probable to deal with complexly taxable transactions as the norm.
Your comment is phrased as a disagreement, but it's not. The GP post said the IRS can't do everyone's taxes, and you replied that they can do most. I think we're all on the same page that people would benefit from having available information autofilled while still having the opportunity to review and make corrections as needed.
> They cannot do everyone's taxes since what they know about many individuals is incomplete.
For the vast majority of people they have all the info needed. Hardly anyone can take any deductions other than the standard deduction anymore, so that's covered. For income, most people have W-2 jobs so that's covered and all financial institutions send 1099s to the IRS with all your interest, dividend and stock transactions so that's covered too.
> For various reasons, it has been decided that a person's income should be a portion of those revenues. In order to ensure that people are paying their dues, the government needs to collect some information. Are there other ways the government could get revenues? Sure, but all of them are going to be problematic in some form or other.
Sure, but before that most taxes were in the form of excise taxes and import duties, at least in the US. Alcohol taxes were a big portion of that. When the prohibition amendment was enacted in 1919, that money went away -- in theory because people were no longer purchasing alcohol, in reality because they were purchasing untaxed bootleg alcohol. The effect was the same: a big hole in Uncle Sam's revenue stream.
Enter the shiny new income tax, passed just a few years before (1916). This had been sold to the public using Bernie Sanders-style "millionaires and billionaires" rhetoric, but, as is the inevitable way with such things, it was soon being applied to thousandaires and hundredaires. :-)
Liberty and privacy are fashionable. The problem is that our Congress passes hundreds of pages of domestic spying legislation in the middle of the night. It’s not exactly the School House Rock democratic process we learned about in 4th grade.
But that’s really beside the point. If you are like millions of other Americans filing W2s, the fact that you work for your employer isn’t a secret. Your salary isn’t a secret. Most people will take the standard deduction. There’s no reason why that can’t be the default. It’s not a privacy violation for the IRS to use that info to make peoples lives easier.
> the fact that you work for your employer isn’t a secret
I would prefer if it was. It's even worse than that, the government has entitled itself to be a party to every transaction over $600, so even the self employed have to shoulder this unseemly burden.
> Your salary isn’t a secret
It is. It's a shared secret. Again, I would prefer if I didn't have to do this. My salary is not at all the same as my "taxable income." It puts me in a position to have to justify my filings after the fact to an entity that only has access to half my relevant information.
There never was a point in the period of time when people filed taxes in the US that the government wasn’t entitled to know your salary. It used to take more time and effort to get the info, but better technology doesn’t change the game, it highlights that it wasn’t a « shared secret ». Your employer has a ton of paperwork to file related to your pay.
Only if you're defining "filed taxes in the US" as "filed income taxes in the US," which would make your statement redundant. The first income tax in the US wasn't until the Civil War, and only existed for the length of it. The "first peacetime income tax" didn't come until 1894, only applied to income over $4000 (2023: $126,000), and thus only to the top 10% of the population.
Even the constitutionality of an income tax was in question until 1913 and the 16th Amendment.
People today assume the past was a lot more surveilled than it was. The government (at any level) often didn't even have a record of people's births until they needed to interact with the government for some reason, even in the early 20th century. That was largely changed by Social Security, and people at the time and since complained that its foothold would begin a slippery slope of government intrusion into every aspect of their lives.
Did you not just explain how the game changed from technology in your own post?
Before all of this unconstitutional collection of Americans information the government had to have a target and go out and collect and tabulate the information.
Now it’s a select where citizen does thing x over y threshold. How is this not changing the game?
The government having this information predated electronic systems. In 1935! when Social Security came into existence companies needed to pay a portion of their employees income directly to the federal government. IRS didn’t get computers until the 1960’s.
If they got rid of all the deductions and loopholes most people wouldn't need to file as the only thing they'd have to put on their taxes is their W2 income.
I believe the IRS is even informed of things like 401k disbursement and stock sales. Meaning most people wouldn't have to submit for those either.
The gains of simplify the tax code are gargantuan, but unfortunately, the wealthy and powerful organizations benefit from the current system, and would be hurt financially by simplifying it. So, it will never be simplified.
Part of the problem is that the main way the government knows how to give people money is through tax deductions. It doesn’t have to be that way. Covid checks demonstrated that grants are possible. That in and of itself would simple things, since there would just be a list of things you can apply for.
>we change the way the government is intimately entangled with our lives?
I've lived in Sweden where taxes are not just automatically filed but every citizen can trivially look up anyone's tax returns and nobody ever saw it as the government being intimately entangled with anyone's life.
Privacy violation would be to look into how and on what you spend your money, not that everyone pays their share of taxes. That tells you nothing about what people spend their money on. Merely that they aren't avoiding paying their part. I don't see the problem with the government automatically doing my taxes or anyone being able to see that.
of course your address, phone number, income, etc should all be private
just because the phone companies shared this didn't mean it's a good idea; and they always provided a way to be unlisted
"Of course" makes it sound like it is obviously / objectively true, but it is a sentiment that is not necessarily true, either in the past, or even in the present everywhere on the planet.
> your address, phone number, income, etc should all be private just because the phone companies shared this didn't mean it's a good idea
This information was public in the past before the phone companies existed. May I introduce you to the concept of city directories:
> A city directory is a listing of residents, streets, businesses, organizations or institutions, giving their location in a city. It may be arranged alphabetically or geographically or in other ways.
> City Directories were created for salesmen, merchants, and other interested in contacting residents of an area. They are arranged alphabetically giving lists of names and addresses. These often list the adult residents of a city or area.
They can date back to (at least) the 1800s and continued into the twentieth century:
> City directories were published yearly. The Archives has them from 1834 to 2001 (except for a few years in the 1830s, 1840s, and 1850s, and in 1987, when they were not published).
The idea that they are is a construct for the benefit of employers, not workers.
Even your sense that you should hide it is in service of this and the effort to get people tearing each other down is also just a good way to depress salaries.
Except in Sweden, what this means in practice, is that you only see the income/cap gains taxes paid of ordinary middle class people.
Rich people in the Nordics hold their wealth in foreign companies as retained earnings, and thus that wealth accrues gains/dividends tax free and remains invisible until they sell off a small portion for the purpose of buying something.
It's "transparency" only for the plebs. Americans cannot do this, as they are subject to global tax and extra punitive taxation on foreign withheld earnings.
Also, Swedes don't have the same level of real estate transparency that there is in America (property tax assessments put a public value on everyone's holdings in the US). Wealthy folks holding real estate between different countries in Europe makes the whole situation more shadowy than you might think.
Party affiliation, which is mandatory in some U.S. states for voters (e.g. Oregon) is available to anyone who wants to access the registration dataset from the Secretary of State.
I assume you can also be independent though maybe there are implication for voting in primaries. At least in MA being on voting lists puts your address in the available registration dataset.
It takes very little to deanonymize things like healthcare records with this information as was demonstrated going back to the 1990s.
Sweden has never had secret ballot. The “Valmyndigheten” election authority themselves have criticized the lack of secrecy and general chaos with Sweden’s ballots. But what do they know? They only administer the elections.
Swedes have a highly developed superiority complex and ability to perform mental gymnastics about the flaws of their country and ways of doing things. No sane person from any other country in the world would consider a system where voters must, in public and under the active scrutiny of other voters and local election officials (who are themselves politicians and party members) pick ballots for the party you intend to vote for and then bring it into the “secret” booth. Any child or idiot can see that’s not secret other than in the most distorted and disingenuous sense of the word.
The government agency was tasked with finding ways of improving their work. One of the things they recommended was for the selection of ballots to be hidden, which has been implemented since then.
It will probably have a negative effect on the ability for smaller parties to get started.
This is the most common counter, but it doesn’t change the fact that the ballot is not secret. Again, you’re picking ballots in public and under the active scrutiny of other voters and election officials, and there is a strong and palpable disincentive to pick ballots from the “wrong” parties, and a strong and palpable incentive for showing your neighbors and friends you pick only the correct ballots before going into the booth. Smaller parties have to come up with nationwide ballots themselves, which is often impossible. People can and do also vandalize, hide, throw away and illegally modify the ballots such that voters who show up can not vote according to their wishes. I have personally experienced TWICE having to ask the election officials out loud to restock the ballots for the party I intended to vote for, and so have countless others. I could go on. These are all known problems that the election authority themselves have pointed out should be rectified, but they never will be, because the system is working as intended. (discouraging votes for the wrong parties)
Yeah, and blank ones if you want to write down the party of your choice. You could bring your own ballot if you so choose, or vote pretty much anywhere else than were you live during a ~ three week long period.
yeah... or you could just implement secret ballot like all sane countries have
> blank ones if you want to write down the party of your choice
this can and does risk resulting in the vote not being counted (due to alleged illegibility, a tiny spelling error or whatever)
> You could bring your own ballot if you so choose
same thing, your own ballot could be considered illegitimate + even in the best case that you obtain a real lawful ballot, only a tiny fraction of people are willing and able to go through the trouble of doing so + again, by requesting a ballot, secrecy is out the window
> or vote pretty much anywhere else than were you live during a ~ three week long period
the suggestions just keep getting more and more ridiculous - no one should have to do any of this! everyone should be able to just rock up and vote with secrecy preserved, without having to prepare or use all these hacks
As per my prior comment directed at you, you have been reminded that the improvement you asked for had been implemented into law.
As per the same comment, the situation for new parties have thereby become worse. You are sure to have experienced the same problems we experienced when getting the Pirate party into parliament when you got the Sweden Democrats through the system.
Which country has "secret ballot" then ? Cause what you described as imperfect is the system that is present in all countries I've ever been in, and I've been in the majority of western europe...
Almost all actual democracies have secret ballot? There’s any number of ways to ensure secrecy is preserved at all times by default. (unlike in Sweden, where virtually no votes are secret because it requires hacking the process)
That you've "lived in sweden" implies you have the luxury of hopping to whatever country suits you most. Nobody wants to hear a cosmopolitan's take on how we have too much privacy and how the government should be more involved in our lives. If the government mistreats you, you can just go to a nicer country.
Around 500 million people living in the EU have that privilege. It’s pretty common for people to exercise it and in no way makes you part of the jet set.
Your reply feels unkind. They just said they lived in Sweden for a time. I don’t think it implies luxury or that they’re a wealthy jet-setting cosmopolitan. It could be for one of many reasons.
I also don’t know what’s wrong with hearing the opinion of a jet-setting cosmopolitan anyhow.
> I guess it was originally done this way because in the past people actually had some semblance of privacy and the government didn't actually know a great deal about people's income.
You still had to file taxes, though, so they would know about your income, if only a year behind. I read somewhere that tax withholding only started during WWII (and it was supposed to be temporary). It's really the withholding that would give the IRS the information needed to file your taxes in advance, so it's only a fairly recent possibility.
None of which apply to the vast majority of filers.
Nobody is saying filing taxes should never be necessary. Only that it shouldn’t be necessary for most people.
The flow should be… Employer and financial institutions send info to IRS (they mostly do already). Then, in January, IRS sends a “Is this correct?” notice to residents. If correct, no action is needed. If not correct, then make adjustments.
How would the residents verify the amount on the notice is correct? It sounds like the residents would have to do their taxes to verify the amount on the notice....
free-file is entirely voluntary. You can still submit the forms yourself if you want.
free-file is estimated to cover 47% of Americans. we fund public schools even though a significantly smaller proportion of Americans are children. you would have a hard time finding any government service that applies to 100% of people
> liberty and privacy, small government, etc., isn't really fashionable
Your negative freedom and ownership of property is recognized and enforced by the tax-funded awesome power of the state. If you like small government there is no lack of countries that you can emigrate too where the internationally-recognized government is too weak to enforce its protection over much of its society. These are usually places that are too unstable to be palatable to someone from a developed nation.
> should we really have that little privacy?
As someone else mentioned, the government already has to know that to know that you are paying the right amount of tax given your means. Alternatively, consider simplifying tax laws so that it needs to know less. Also, look at regulation that limits what the government can do based on the information that it has on you; for that matter, businesses too, for privacy's sake.
The two aren't really related. A implies B does not mean B implies A, ie negating B won't negate A, ie not having automatic tax filing won't remove the loss of privacy
Might as well say "Maybe instead of changing the way we file taxes, we solve world hunger"
(I say this while voting for small government & making efforts to preserve my privacy)
It’s amazing how much of an idiot I felt like when we hired a babysitter for two days a week for about a year and then it came time to do things properly regarding taxes and her wages.
I understand why it’s important to do it properly (for the employee’s benefit) but when I tried to look into what we had to do, as technically her employer, and it was nearly impossible for me to figure out what we had to do and then how to even do it (federal and state). I understand why many people just want to pay cash under the table. It really made me feel like a complete moron.
If we ever do it again we’ll have to just hire a payroll service and factor that cost into what wages we can offer, or structure it so that total payments remain under the threshold required for filing.
Highly recommend a payroll service for this, like Poppins. It costs like $50/mo for a single employee, which is rounding error on nanny wages, and they do all the withholding and state tax filing for you. Then give you instructions on how to fill out federal tax Schedule H on your personal taxes (1040).
I did it manually the first time around and it was a pain in the ass.
Yes, I wish I had known about this before. In our case we weren’t hiring a full-time nanny, but a regular part-time babysitter (16 hrs/week) just often enough that we met the criteria for needing to file and all that, so payroll services would be a more significant part of the total we ended up paying for wages.
No. I said “more significant”, relative to full time employment. It would have been around 5% extra per month, so it’s not nothing.
With the hindsight I have now it would have been much cheaper for us than it turned out to be, but that’s still extra money I’m paying simply because complying with the law is as complex as it is, and I’m not running a business, just hiring a part-time caretaker.
Non-US citizen here: you have to declare what you paid the nanny to the IRS? Where I'm from, only the receiving end of the money needs to declare how much they earned. The only reason we file expenses is for tax deductions. The US tax system has always seemed so hostilely complex to me.
It’s worse than that. For example we were also supposed to withhold 50% of the social security tax that the employee is responsible for, or if we pay the full amount for them (which we did because we didn’t know we were supposed to withold that), then we have to declare that as additional income for the employee, and more I’m sure I’m forgetting because I started to lose it at that point.
You don't have to do any of that. Its their job to report income and pay taxes. Withholdings are a "convenience" not a requirement. Furthermore you weren't their employer, they provided a service to you.
The IRS seems to think a babysitter is a household employee [1], which makes mkrisc a household employer and subject to various requirements. Withholding for federal income tax is voluntary, but employment tax isn't assuming the total pay is over the thresholds.
Not knowing what was required for sure? Figuring out how to fill out the 1099-MISC? Knowing how to file it with the IRS/state?
I remember it being a bit tricky at first but once I knew the right form it only took a few minutes. The hard part for me is keeping track of rule changes.
If they’re trying to follow the rules, then they can’t just fill out a 1099-MISC.
A babysitter one of the examples specifically called out as a household employee in the IRS guidance[1], so if you’re doing it right you should be running payroll. That’s pretty tricky to DIY properly.
I can see doing this for a nanny, but surely no one is jumping through all these hoops for ad-hoc, hourly babysitting? Any of the random highschoolers or college kids I've used would look at me like I was crazy if I tried to set them up on payroll lol.
It depends on if your yearly payments to them exceed some threshold. There may be more to it than that, of course. Don’t listen to me, I’m the idiot who couldn’t figure it out.
For all intents and purposes, a babysitter is looked at just like a nanny in that if they must adhere to the schedule you set and come to your home to take care of your kids based on the rules you set, the IRS will most likely view this as an employment relationship. And taxes can sneak up on you quickly. If the babysitter earns just $15 per hour and works even 10 hours per week, you’ll cross the $2,700 tax withholding threshold in a little over four months.
I have a housekeeper who only comes in once a month and (I learn) is fairly inexpensive though it doesn’t seem that way. Weekly it would be way over the threshold. I assume
my lawn guy whose basic work is under that threshold —and has a business—doesn’t count either although he does other jobs as well for me and others. But that’s true of contractors generally. So I assume one just does what most people do in common situations.
What made it difficult was: finding out we needed to do anything at all, finding out what that “anything” even was, finding instructions for doing it, parsing the instructions and figuring out if we were reading the correct instructions, figuring out if the various exceptions and other special clauses applied, researching those, then figuring out how to actually do any of this, and so on, and then again a second time for state taxes.
Nevermind going down the rabbit whole of trying to figure out if we need an EIN and then repeating the same discovery and learning process for just that small part of the whole entire thing.
Honestly it would have been a full time job for me to successfully navigate it all. I don’t see how it’s possible to do without already being a CPA or accountant of some sort. It’s an entire domain of knowledge and I had almost none of that knowledge. There’s too much else going on in my life to begin to delve into all that.
> “all this for…” — you’re employing someone for 40% a full time duration. of course you need to do the right thing, ensure they get the right wage, if you need to pay benefis, etc.
this is such a privileged position and you think you should’ve just been able to pay cash and potentially screw someone over?
I went through all the trouble because I thought it was the right thing to do and I wanted to do right by the babysitter. It’s why I ended up paying an accountant a larger lump of money than I would have liked to in order to get it all sorted out.
Im complaining how difficult it is to do the right thing.
Sorry about that other poster, I appreciate your answer to my question. Thinking it's a lot for an individual household to have to identify and do this much paperwork for childcare is an entirely reasonable response. As is doing taxes in the US in general... it can be both obnoxiously overboard and also be well intended.
I did not read anything in your post that suggested you resented the babysitter or having to pay money to do it properly.
I read the exact opposite, that more people would if the process were not so burdensom of people who obviously have a child and so presumably not a ton of time for paperwork.
After all, you did it properly... what's to get angry about other than the topic of the original article, that tax paperwork is overboard?
> you think you should’ve just been able to pay cash and potentially screw someone over
You're only benefitting the babysitter by paying them cash, big win for them. And benefitting yourself to avoid all that payroll hassle that nobody understands. Win-win.
The complexity will vary by state. But basically you have to create a small business with a unique tax id, then pay into your employee's social security benefits.
Yep, there's a thriving industry around nanny payroll services, if you don't want to become an accountant. Wish the common use-cases were streamlined for DIYers.
The anti tax republicans believe that if Americans had an easier time filling their taxes then they would have less objections to the same or higher level of taxation.
I’ve paid no tax and I’ve paid lots of tax. I did not care in either case how much I was paying in taxes (it is what it is). What I did care about is how much of a pain in the as it is. Mail me a goddamn postcard telling me how much I owe and be done with it.
And then to find out one political party would prefer that I suffer so I’ll vote the way they want? Yeah, fuck those guys, I’m voting for the other ones.
Well perhaps you don’t care, but majority of people care and feel the impact of higher taxes. I’d rather not have the government waste more of my money
> I’d rather not have the government waste more of my money
Then campaign and vote for people who will handle the money how you prefer. You don’t get to argue with the bill after the money is already spent. Tax collection time is the wrong time to be having this fight.
The vast majority of working adults have to file a W-4, receive paystubs that shw exactly how much they're withholding for state and federal taxes, and get a W-2 every year with the totals. The 1099 is just busywork that doesn't give the taxpayer any extra information. I fail to see how prefilled forms would fail to alert taxpayers to the amount of taxes they pay.
Well, as a non-citizen US resident, having to do my own taxes definitely makes me think "They can't even build a tax filing system? What the fuck are they doing with all that money?"
I guess the difference is that my mind immediately goes to "Who are those people who think government not doing its job properly is a Good Thing(TM), and why do Americans keep electing them?"
It's as if a wannabe entrepreneur claiming "Capitalism does not work! Make me your CEO and I'll prove it to you!" - and then the board keeps falling for those guys.
> They can't even build a tax filing system? What the fuck are they doing with all that money?
More like “They can’t even solve poverty? What are they doing with 2/3rd of my income?” France here. Cities have to build 40% of poverty housing, by law, because, well, we’ve determined that 40% people are poor.
The benefit of not declaring income is not only taxes, but lower-rent housing as well.
Why wouldn't that be the case? People put up with raises in all kinds of expenses without really noticing or complaining. Why would it be any different with taxes?
it is just a bit hypocritical that the anti-tax people, who cloak in words about small government, are opposed to a less intrusive form of government services that would also generally cost taxpayers less (since Turbotax et. al. are always steering users of their products into higher tiers they probably don't need)
"we want to make your life worse so that you align with our political goals" is generally a terrible thing to admit to out loud
You're spinning their POV. Their POV is, harder taxes = less taxes, easier taxes = more taxes. I'm not saying that will work for them but I can see it as defendable idea.
I think many of them would also like to see a ban on auto tax deduction. Their POV is if everyone has to send a check to the government they'll vote for less taxes where as with auto-deduction, most people just look at their after tax income and ignore the rest (and see their "refund" as a bonus which it isn't)
I think I'm mostly on the "simpler is better" where simpler should be "get the tax code to fit on 2 pages of 10pt single spaced letter sized paper. Something simple like "+0.25% for every 1k over 10k up to 50%" the end. I'd be curious to know which country has the simplest taxes
> It’s amazing that 54% of adults in the United States have a literacy below 6th grade level,
AFAICT this is a mis-interpretation. IIUC the actual study says "54% of adults in the United States have a literacy IN ENGLISH below 6th grade level". They might be highly literate in some other language but that wasn't tested.
How about dicing them this way: "Sixth-graders already read about as well as the median adult." Sounds pretty good to me.
The shock value of the original statement derives from the idea that sixth-graders are basically illiterates who can barely function in society, but what if that's not the case and six years in school are actually enough to learn reading and writing? It's a pretty long time already. What further improvements are to be expected from another six years?
The shock value should come from the fact that the US scores very low among developed countries. The UK, Canada, and most of Europe score much higher on literacy tests.
The US has exceptional universities and colleges, but its K12 education system leaves much to be desired.
On which literacy test? The PISA 2022 reading scores for the US (504), Canada (507), UK (494) and OECD average (476) are not that far apart, and unlike what you said, the UK and most of Europe score slightly lower than the US. https://www.oecd-ilibrary.org/sites/53f23881-en/index.html?i...
That's an even tinier slice of a very tiny pie. You're talking about maybe 0.5 to 1% of Americans who were born near the US/Mexico border who speak Spanish better than English.
According to the U.S. Census Data, only 18 million, or 5% of Americans even live along the U.S./Mexico border. Of that 18 million, 9 million or 2.5% identify as Hispanic. Of that 2.5%, about 70% identify Spanish as their native language.
I can't find how many among the 2.5% who identify as Hispanic were born in the U.S., but even if we assume they all are, this is basically a rounding error in the grand scheme of things.
This may be a misinterpretation in the study but even if every single multilingual person in the US was counted as not being proficient the number would not meaningfully change in context of the conversation (i.e. still above 1/3 in the extreme case).
The real issue is that taxes are unreasonably and unnecessarily complicated to allow politicians to pander to specific voting blocks (both rich and poor) at the expense of the middle class.
There is no reason every legitimate employer can't send tax information to the IRS and the self employed can't simply self-report our taxable incomes. No more deductions, for anything, just simple graduated tax brackets. Easy for the IRS to calculate quickly and either send a bill or a refund by April. They would need a fraction of the staff they currently employ and we could apply the savings to the national debt.
The tax code is also designed to incentivize behavior that we wish to promote as a society. for example, directly reducing the tax versus tax benefits of a 401(k) and other such mechanisms. ultimately, the government is there to serve the interests of the people and society.
I understand the noble intent behind much of the tax code, but it has grown into a gnarly beast full of loopholes for the rich, and the wrong kind of societal incentives for the poor.
Is there a specific country's tax system that you look up to as the ideal?
I see often people claim that the US tax code sucks (nobody is going to defend it with the rising inequality), but there isn't any proposal about how exactly to enact the changes while still keeping the benefits of the tax code that apply to the disadvantaged.
Also, I'd like to point out that the tax code has every type of federal tax, administrative elements, and isn't just about income tax, and I'd argue that most of the federal tax code has nothing to do with "loopholes for the rich".
I would propose that we enact a graduated income tax system starting at 0% for the economically disadvantaged. It is not the job of the tax code to do anything else for them. We already have a plethora of state, federal, and non-profit agencies and organizations that provide targeted aid to them and are far more effective than the IRS could ever hope to be. The money saved by simplifying the tax code and thus the IRS could be better used by them instead.
Yes, the purpose of the IRS is revenue collection via federal income tax for funding the government with. Said funding can then be given to the agencies and organizations I mentioned in my previous comment.
Simplified tax code means less tax money is spent on administration overhead of the IRS itself and more money that can go to programs like WIC, SNAP, TANF, and other targeted programs that are more effective aid to the economically disadvantaged.
Okay that is fair, you'd reduce administrative and enforcement costs if the tax code was simplified, but creating and managing new programs would also lead to extra overheard. I suppose to ground these arguments we'd need to discuss numbers, but its hard to generate data on this w/o specifics.
The fact of the matter is the tax code is stupidly complex for no good reason. It's used to promote policy and benefits the wealthy (Warren Buffett has noted this numerous times). That's it. If the focus was on collecting taxes it would be stupidly simple.
At this point I think of it as a jobs program. Every year we calculate our taxes by reading the manuals and instructions, fill out our tax return and submit it. I like to think that my literacy is above 6th grade level but every year it gets corrected by the IRS, and sometimes more than once.
It’s also practically impossible to fire bad teachers, and standards continue to go down in many states in order to mask the poor performance of their schools.
If the IRS takes responsibility for filing everyone’s tax forms, then it could potentially shift liability to them if they were to make a mistake. Whereas if people are filing their own forms, the blame can be put on the taxpayer for any errors.
I've filed my taxes myself for several years. A couple of times the IRS sent me letters after the fact saying I messed something up. Then it's another several hours combing through all their paperwork trying to correct whatever they said I did wrong. One time they directed me to "explain why you won't make this mistake again in the future." Which is a particularly asinine thing to ask. "Well, Mr. Tax Man Sir, I probably won't make that particular mistake again because now I know not to make that particular mistake again."
This year things got complicated enough that after spending an entire Saturday staring at forms, instructions, and spreadsheets trying to figure out what I was supposed to do, I finally gave up and hired a CPA that specializes in tax returns do my 1040.
The whole thing ended up being 27 pages long. I guess I needed forms 1040-ES, 2210, 8949, 8995-A, 8960; Schedules 2, B, D, and 8812; and several worksheets. I consider myself fairly capable and experienced in filing my own taxes having done it 20-something times, but I don't think I would have ever figured out that I'd need all those forms and schedules this time around.
It's particularly frustrating that they are somehow able to tell me that it's wrong after the fact and harass me to correct it. If they can do that, why not just tell me what they think it's supposed to be in the first place, and then give me the option of correcting what they send me if I spot something that doesn't make sense to me?
that’s a common talking point, but that is not exactly true. they don’t know how many dependents you have, if you are eligible for certain tax credits, whether you use your home as a work location, etc., etc.
If only there were a way for you to tell the IRS how many dependents you have. Seems like we should just scrap the ability for folks to fill out anything and let Daddy Intuit do it for us since we're all so helpless with our taxy waxies.
> It’s amazing that 54% of adults in the United States have a literacy below 6th grade level
I wonder if this issue is due to the overall spread of academic abilities, or if it's because progressive education systems focus more on caring for students' feelings rather than setting higher standards
Like many things in America, the government is lobbied to create an unnecessary problem by private companies who aim to profit off of solving that problem.
TurboTax. It’s really that simple. They pay a very small amount in bribes (er lobbying), and they ruin what could be a very good thing for millions of Americans.
Following tax forms is so braindead simple, I honestly can't see how anyone can be that incapable without being mentally deficient enough to be under conservatorship. It's literally step by step "Add this" or "subtract that". If you have a calculator and a 3rd grade level understanding of English, I can't see how you'd have a problem.
A typical federal tax filing for our household is over 100 pages long, and that’s just the stuff that we need to mail. The accompanying directions and worksheets are probably close to 1000 pages.
Also, lots of the directions are incredibly obfuscated once you start getting into those 1000 pages.
> If you do A and not B then you can do C.
> Example calculation of C (usually over a page long):
> Bob wants to do C but encountered corner case exceptions E and F in the absence of event G. That implies B, so here’s the arithmetic for doing D (which is covered elsewhere in this book, and is probably irrelevant to your situation).
This is just standard stuff TurboTax handles. God help people with filings too complicated for that!
One year, I had to spend a good deal of time working around a cycle in my taxes--VA wanted me to do my CA taxes first and CA wanted me to do my VA taxes first, and the instructions that explained how to handle this situation were only one on the one form that needed to be used to solve it, with nothing telling you maybe you should look for that form instead.
Furthermore, there's quite a few cases where the instructions basically tell you "fill in the number that belongs here" without giving a good idea of what numbers actually belong there. Here is an example of such an instruction in its entirety:
> Enter in line 5 the amount of pension, annuities, IRA/Keogh distributions not taxed on your Massachusetts Form 1.
The hard part of taxes isn't knowing whether or not to add or subtract two lines. It's knowing which lines shouldn't be 0!
It's not about knowing the income sources. It's about knowing how those income sources fit into the tax rules. Put differently, for the purposes of taxes, your money has a kaleidoscope of colors, with different colors incurring different tax rules, and most people are to a degree colorblind when it comes to their money's colors. Not completely colorblind, but trying to work out if your color is mauve or magenta, for example.
The solution to this of course is to simplify the tax code so that you don't have so many colors to your money. I very much would love to see this happen, but it will produce howls of protests from every special interest group who benefits from special tax advantage to their interests.
We can have a problem with forms being on paper and not doing "add this" or "subtract that" automatically? It was available in other countries 10+ years AGO ;)
>54% of adults in the United States have a literacy below 6th grade level
I don't care how many times this is repeated it's utterly preposterous. Imagine being so naive or less charitably to possess the motivated reasoning to actually believe this shit.
Yes you can. It’s capitalism. The owners of the current system lobby and advertise and “manufacture consent” in keeping the current system because it is wildly profitable.
Withholding too much is literally required under the law. If you don't withhold enough, at tax time you could be liable for penalties unless you also pay quarterly to make up the difference. This counts for all of your income, not just the income from a W-2 job.
Fixing the withholding system to account for the real world would go a long way toward simplifying reporting and would improve compliance.
> Withholding too much is literally required under the law. If you don't withhold enough, at tax time you could be liable for penalties unless you also pay quarterly to make up the difference.
You only need to withhold 90% of the taxes you owe to avoid an underpayment penalty, so you don't need to withhold too much.
What's sad to me is the level of apprehension people have towards doing taxes. It's not that hard! The first few years of my adult life I did it by hand, using the paper forms. It is very easy to do if you can follow basic instructions, yet people act as if it's super difficult and requires an expert.
If having spent some time in IT support has taught me anything at all, it’s that “reading basic instructions and following them” is not among the talents of a huge portion of people.
Even the people I work with as team mates often call me and do a screen share for a problem and most of the time the answer is “dude, you’re just machine gunning the buttons before I can even read them. Lets just slow down for a second here”.
Listening to Congress “debate” this made me unreasonably upset. If you as a sitting politician have received monetary benefits from a tax filing service you should not be allowed to speak.
Even worse: individual states are on a campaign (nationally) to ban ranked-choice voting [1] among their constituencies (e.g. Tennessee recently did so, to prevent a Memphis-area jurisdiction from implementing fairer voting).
Both sides? There should be just one side; the citizens they are supposed to be representing. This comment kind of sums up how far gone we are in America.
No. Congress represents the American people, not corporations. There is no “both sides” between people and corporations any more than there is a both sides between Americans and Canadians when discussing a trade bill.
With voting to elect a representative, the point is to choose whoever you feel best represents your interests. A conflict of interest does not matter because the self interest is kind of the point.
With voting on passing legislation, the point is to choose what best represents the interests of your constituents, conflicts of interest matter because they may cause you to not properly represent the interests of your constituents. Self interest is not supposed to be the point.
When it comes to taxes, the problem is that politicians tend to be already rich enough that they need some kind of professional help doing taxes, so passing legislation that effectively forces the same onto others doesn't directly affect them in that sense, while it does аffect the campaign contributions they receive from the companies that sell this kind of software.
I didn't say whether anyone should or shouldn't vote. I asked a question regarding whether people with conflicts of interest should be prevented from participating in a democratic society, through voting, or as a politician.
So should that be allowed or not?
I think people using roads, or schools, or getting welfare should be able to vote, I believe politicians getting monetary benefits from tax filing services should be allowed to speak.
I mean that's a pretty harsh decision, deciding that the government determines who is allowed to speak. That's what I was responding to.
I did my Canadian taxes for me and my spouse on a free filing site last night, in less than two hours, for $0. Everything was prefilled; practically the only thing I had to fix was to convert an imported investment statement from USD to CAD, and double check that everything was accurate.
I welcome the Americans to the delightful convenience of hassle-free taxes!
This last year when filing my taxes with a paid turbotax product some value was auto-filled and looked about right. After submission I was notified that the IRS rejected my form because the field was wrong. They did not correct the field or otherwise communicate what they believed the value should have been. Tracking down what number they actually wanted there was a hassle.
So... they have on file what they expect your taxes to be, will reject your filing if you get it wrong... but won't just use their gathered values to do your taxes. Very frustrating.
Huh, I've never had my filing rejected but I've had the IRS send me letters a couple times. Once a year or two later, the other time (last year) a few weeks later or so before I got the refund: each time they told me exactly what they thought I'd missed.
Which still highlights the absurdity of making me re-enter the stuff they already know.
In most cases, you know the information (and may have to file) before they’ve processed it. Request your tax account transcript (what they know about your account) on April 15 and again on August 15. I can pretty well guarantee they’ll be different for the prior calendar year.
It might be stuff they’ll eventually know, but it’s not necessarily stuff they already know at the relevant time.
Rejection is usually something the IRS can suss out immediately when you e-filing such as incorrect SSN for dependents. Correction letters are just form letters from automated audits, usually forgetting to input a 1099 misc from some bank account.
They'll send you a letter with the wrong value and the value they think is correct. And if you agree, you usually don't have to take any action (beyond maybe paying more).
Most people get money back from the IRS. If anything, making tax returns optional for people with just employment income would mean the IRS would keep more money.
That's still a crazy demand on the time of someone paying for everything. My bank, my employer and my brokerage all report on me, the IRS should be able to just mail a check or a bill most of the time.
I have a bunch of USD-denominated stuff for which my brokerage doesn’t always issue complete tax slips for, so it required going over my statements to double check that everything was being accounted correctly.
My wife’s (uncomplicated) taxes basically took 15 minutes. You do always want to check to make sure that you’ve hit every tax deduction you can - for example, work-from-home deductions, donation deductions, even things like paying for news subscriptions gets a tax credit. That’s the sort of thing that doesn’t get reported to the CRA, but which you can claim tax deductions on.
Here in Norway I just have to look it over on our IRS' own site (so no selling of private data to god knows how many unknown third parties), add a couple of items they don't get automatically, like a private loan, and click save. Less than 10 minutes.
For years the big hassle was that housing loans only got put on one of us, but since we're both paying on the loan, the loan and deductions should be split as well. So that had to be manually calculated and corrected on each of our declarations.
However last year they fixed that. Now they get the split from the property ownership registry and distribute the loan and deductions according to that. For most people they pay similar to their ownership, typically 50/50, so no need to change that anymore.
Our IRS' has a quite good internal development team[1], rather than relying on contractors for everything. Their digital solutions has been several steps ahead most other agencies.
So this free site was not run by the government of Canada. Are you concerned that you just gave all of your personal and financial data to a third party site? If you’re not paying anything they’re likely data mining your data and selling it. And we haven’t even talked about the security implications of trusting your data to these companies.
Due to a similar approach to privacy, I use GenuTax, which is a Windows program not a website, and does not send anything anywhere except to the tax authority. Not everyone cares about this aspect of privacy and security, but for those who do, there are options, both free (GenuTax) and paid (StudioTax, etc.).
It can be even better - in the UK unless you earn over a large amount, or know for a fact you have some special circumstances, you never have to do a thing.
That's why I use one of the free options. Both GenuTax and WealthsimpleTax are free to use and user-friendly, albeit in different ways. What extra thing does UFile do to justify its price?
At the time it was just the convenience of getting it done and moving on since I’ve been using it for over a decade. Next year I will probably just use WealthSimple, since I have fair amount of investments with WS anyway.
I didn't qualify to use the site, but it's definitely a step in the right direction. Everyone agrees that doing taxes should be free and easy, like nearly every other country...
did you ever try to use any USA federal service? (veteran benefits, free tax filing, ssn, etc). you're required an id.me account.
what's that? well some anonymous group saw login.gov, realized the value of the data, and lobbied that it should be open to free capital markets to explore, not the government!
so now if you want to even talk to the irs or veteran service, you need to go to that privately owned id.me site, do a video call, scan all the documents they ask for (even ones without visible anti counterfeit mechanics like your typewritter filled ssn card).
and the best part? right after you create your account, you land on a coupon clipping page that is a facsimile of the garbage pamphlet the usps is forced to shove daily in yout physical mailbox! and among the links on that page are links to Whitepapers about how advertisers can benefit from buying user data from them because it includes gov affiliation like vetetan, taxpayer, etc and bank information!
my point being, after you've already filtered anyone with a brain and means to avoid that (i paid intuit even qualifying for free filling, and a lawyer to deal with veteran stuff in person), of course you will get high marks on a survey.
i bet Stalin also had good approval after the purge
There are a lot of things that remind me that the government doesn't work for the people, and tax time is just another one of those times.
Getting taxes automated is a solved problem. There is only one reason this status quo persisted for so many years. it's just to bad that we must bend the knee before the real americans, Intuit's lobbyists.
I'm glad the IRS is showing signs of wriggling free of such influence, but it is unfortunately to late a fix for yet another unforgiveable position for me.
The US government has shown me its priorities again and again throughout my life, and it's not the people. There is no rehabilitating this image in my eyes.
Hopefully I can be proven wrong, and the next generation can grow up far less cynical of our elected representatives.
Most Americans don’t do their own taxes. They go to H&R Block or Jackson Hewitt, and if your family makes under $60k you are almost certainly paying no income taxes and are receiving a refund via the EITC, getting a check back. So people think tax preparers are voodoo priests that do their incantations to get free money because the average person can’t understand the jargon, can’t handle forms, and the whole endeavor is purposefully opaque.
I support free file for most people. I also support radically simplifying the tax code, which would make the Byzantines blush.
Just a minor comment, but: why does EITC exist? Just a hidden welfare payment?
That out if the way, I agree with the earlier comment: why does the government automatically know all your financial details? Where is the privacy? Where is the requirement for a warrant, to access your private information?
I wouldn’t describe it as hidden. It’s a pretty straightforward form of income distribution. Compared to most government programs for the poor, it’s refreshingly simple.
If you ever work with poor families to help them navigate the government resources available to them, you develop a strong appreciation for the EITC as opposed to, say, SNAP (food stamps)
FICA taxes are, as a matter of inarguable, objective fact, regressive, which is to say that people who make more money pay a lower rate of FICA taxes. This is due to two facts: (a) FICA taxes do not apply to interest or capital gains or other income sources that apply solely to middle class and above; and (b) FICA taxes do not apply to income above ~$160k.
The FICA system, of which taxes are one component, also pays out a lower proportion to higher earners. https://www.ssa.gov/oact/cola/bendpoints.html It is incorrect to describe the system as regressive.
It's a little weird to lump it all together as FICA taxes, too. Social security is more of a mandatory pension program that caps both contributions and benefits for high earners (in addition to progressively lower benefits for higher earners on the back end). Medicare taxes are straight up progressive -- there is an extra 0.9% tax bracket on higher W-2 income and the 3.8% NIIT investment income tax on stocks.
The question was, why doe EITC exist, not is the reason still relevant today (although I'd argue it is). The additional medicare taxex you mention have only existed for about ten years, EITC goes back to the 1960s as I recall.
The primary historical motivation of the EITC was to "reform" the former AFDC welfare program. There was concern that AFDC was growing too quickly: welfare rolls increased from fewer than 1 million families in 1964, to more than 3 million in 1973. There was also concern that the AFDC program discouraged working. The EITC is structured to incentivize work, even at low wages. Another precipitating motivation was a recession in 1974 (EITC dates to 1975).
Regressive has a specific meaning regarding taxes. It means that the rate of the tax decreases with income. Whether a tax is regressive or not is a factual question.
Actually (refundable) EITC is often literally a welfare payment. Depending on income and family status, you may get back 100% of the tax you paid not counting EITC, then EITC is just a straight cash payment on top.
> if your family makes under $60k you are almost certainly paying no income taxes
How is this possible? Where I live, you can expect to pay around 30% of your income as tax almost regardless of how much money you actually make (as long as it's above something like $600 a year).
Pretty easy, assuming 2 kids filing jointly. Standard deduction is $29,200, so effectively only $30k of taxable income. Of that, 23k is taxed at 10%, 7k @ 12%, or $3.14k/10.5% effective.
Then $1.6k/kid gets subtracted due to the Child Tax Credit, for a net -$700 in taxes paid.
Keep in mind the cost of living in the USA is higher than many other countries. 60k for a family of four is doable in most places, but it is not a life of luxury.
edit: the family will also end up paying 7.65%/$4.6k in a separate tax for a mandatory retirement scheme (FICA)
Where do you live? In the US federal taxes are capped if you’re below the standard deduction. You still have to pay social security and medicare taxes but those are about 6%. Some states have an income tax but most do not. Do you live somewhere where there is an income tax?
Yes. If you and your spouse both make minimum wage and not a cent more, and you have two children or more, you can come out about even. How many two child families do you know with both parents earning absolute minimum wage?
Not available in my state but am looking forward to if/when it becomes available. I do my own taxes with the free fillable forms site. I would rather use this direct file service if possible. State of NJ has a free online site but NY does not for non-residents so I end up mailing in a return for them. It’s silly really.
One thing that the article didn't mention, which I think needs to be considered, is the savings if we can get rid of paper tax forms. Right now, the IRS has to have the staff to be able to process those. How much will they save there, and does it offset the ongoing costs of running the website?
"Experts say a nationwide rollout could someday disrupt the multibillion-dollar tax preparation industry; Americans spend more than $200 a year, on average, to file a return using software or a tax preparer."
This year it took me five minutes and cost whatever I pay for my bank account, which I used for identification. $30 maybe? I could have waited a bit for papers through the mail and approved with a SMS.
