I understand the point you're making and it's a valid one, but that sentence really isn't actually true for most people.

If you get your income from one job during the year there's an excellent chance you have almost no variables to work with. Maybe owning one piece of real estate or a dependent or two, but the standard deduction tends to wash out almost everything else for most people.

What you're saying is somewhat true for most people who itemize deductions, but most people don't and have no reason to itemize deductions.

The people who don't itemize have almost no burden right now; you can fill out a 1040EZ or use TurboTax free edition.

The middle class is who is going to get screwed out of deductions.

Also even if you have a drop dead simple tax situation, it's still navigating and filling out a form that reads like the worst spaghetti code. "Go to line 31 on form XYZ". Even if it cost people 30 minutes, that's still less than just writing a check and putting it in the envelope.

Young me wants this so badly.

Who do you think is subsidizing the free edition?

It's time to kill third party tax products.

https://www.irs.gov/pub/irs-pdf/f1040ez.pdf

Its literally one page. The 2nd page is for the simplified instructions (full instructions / documentation is a lot more complicated... but if you qualify for the 1040EZ its a very very simple form)

If the IRS could put the 1040EZ online on a free website, that'd be great. I think I can support this Senate bill that is more or less suggesting that.

Unfortunately, I now own stocks, bonds, and am claiming deductions on mortgages and church contributions. So... I no longer qualify for the 1040EZ and have to use the more complicated form. But I bet a lot of normal people will benefit from the 1040EZ Form.

Intuit is simply rent-seeking, plain and simple.

> Unfortunately, I now own stocks, bonds, and am claiming deductions on mortgages and church contributions.

There is _no reason_ the IRS couldn't handle this data as well.

Paid tax preparers make a mistake on roughly 60% of the returns, while the typical person only makes a mistake on 50% of their returns.

So... yeah. In any case, I use $20 TaxACT but do miss Intuit's integration with ADP's payroll system and a lot of their databases.

In any case, the $20 to $50 you spend on tax-preparation software is honestly a serious improvement to the status-quo... of paying an unregulated, mistake-heavy part-time tax preparer to do the job for you at roughly $200+.

If we can switch everyone towards doing their own taxes with TurboTax Deluxe edition at $50, that would actually be an improvement. That's the sad state of tax preparation in the USA.

At $50 for TurboTax (which is still more than the $20 I pay for TaxAct), its still an adequate solution that beats the current status quo.

--------

So my question to you is: do you not realize how bad the status quo actually is? The average preparation cost is $200 according to the IRS, which is very far above "TurboTax Deluxe edition", and far far above any of the other 3rd party tax solutions.

If people would prepare their own taxes with TurboTax, life would in fact be better than the current state. Period.

---------

Now we can imagine the IRS creating a website and everything will be Rainbows and Unicorns, but lets not forget about the Obamacare website. Turns out that competent web-developers are expensive, that government employees aren't competent web-developers, and finally aren't even that competent at figuring out contractors.

I can imagine a future where the US Government raises wages for once, builds out some competent project managers, retains talent, attracts talent, finds a contractor who can help them develop this hypothetical website, and then hope that the next $500-million+ web-project is actually successful.

Or... you know. I can just recommend people to use TurboTax (or TaxAct). Which already works, and is better than the status quo.

You do realize that the IRS already gets a copy of your W2, 1099s, 1098s, etc, right? You can order up a transcript of the data that the IRS has on your file for a given year and they have a pretty complete set of data from all the various mandatory forms.

What they don't have (and can't have, because only you have them) is data you'd need for schedules C and E and much of the deductions for schedule A. Guess what? Intuit and your local "tax guy" don't have those either, unless you give it to them.

I worry more about the tax law changes that might come if people started paying EVEN LESS attention than today about how their taxes are calculated than I do about the IRS ability to execute this.

Clicking a webform and getting a bill or direct deposit divorces people from the fact that this is real money in play.

But at the same time, the IRS has no real competitive alternative to something like TurboTax. Sponsoring the creation of yet another tax-preparation software feels like XKCD Comic number 927

http://xkcd.com/927/

Given how damn good turbotax is, do you really trust the government to write something better?

Now if the government pledged to standardize API access between state and federal, and made it easy for startup companies to light a fire under incumbents, you get competition and government action/improvement.

Yes.

https://www.whitehouse.gov/digital/united-states-digital-ser...

https://18f.gsa.gov/

EDIT: I both know people at the USDS, and have interviewed with them. They are passionate about getting tech in government fixed. I believe (if Congress doesn't defund them), they'll deliver.

But 18f is a relatively small project (~100 employees), and overall USDS is relatively new. Veteran's Affairs for example STILL isn't digitized and is almost entirely a paper-run system. USDS is likely going to focus on that as opposed to building out a new website for the IRS.

Just realistically speaking, the kind of project you are proposing will take years to deliver version 1.0, and there's no guarantee that the USDS team will even handle it as there are definitely higher-priority tasks.

You are grossly overestimating the US Government's capabilities. I'm not lying when I say that the US Government needs to

1. Create a budget (we're still under continuing resolutions here. A budget hasn't been passed since like 2012)

2. Raise wages for once to attract talent (it has almost been a decade without wage growth, very bad for morale). FYI: the government shutdown threats (ie: federal employees / contractors don't get paid randomly) aren't helping.

3. Build up the IT teams, and I mean more than just a single 100-man team at 18F. The entirety of 18F, as good as they are, are way too small to handle a project on the scale of "Recreate Turbotax for All Americans... for free".

4. Build up project managers in the meantime who can handle contractors.

5. Hire competent contractors to build things out.

6. Execute all the above while Congress continues to refuse to pass a budget and the Republican half of America seems like they're going to lynch "greedy" Federal Workers who don't actually have great pension plans anymore (only the older Federal Workers have the crazy-good pension plan. Any millenial / college age kid who gets hired by the Feds don't really see as many benefits)

There are some fundamental problems here that need to be fixed before the US Government can tackle a project like you say successfully.

EDIT: one of the leading Presidential Candidates (Ted Cruz) is on the record for wanting to "Abolish" the IRS. People in general don't like Federal Workers, and that harms recruitment efforts. Which harms the kinds of project you want to start up. Its partially a self-fulfilling prophecy at this point.

> Raise wages for once to attract talent (it has almost been a decade without wage growth, very bad for morale). FYI: the government shutdown threats (ie: federal employees / contractors don't get paid randomly) aren't helping.

This is hard to be fair. If you want to work in the USDS, you need to undergo a drug test (which is inconvenient even if you're not a drug user), an extensive security background check, and you can still be drummed out if they find something they don't like after you've already been working there for a bit (I asked). Compensation was fair though (~$132K/year, full medical benefits and TSP retirement plan access).

The tech industry is always going to be able to attract top talent better than government in this regard.

I agree with the rest of your post.

It has: https://www.irs.gov/uac/Before-Starting-Free-File-Fillable-F...

I have relatively simple taxes but I did hire someone for a few years because I was receiving a 1099 for some part time work. I had no idea what to do to pay for this self-employment.

This bill would have made that process easier and free for me. My 1099s and all of that relevant documentation are provided to the government. If the government had estimated my taxes and sent them to me before I was required to file them, it would have given me a much better idea of where to start, while still leaving me the option of hiring a 3rd party if I thought it in my best interest.

Which, by the way, is ridiculous.

There is a very large swath of the US population (people like this, using 1040EZ) that should not file taxes at all.

The government already knows what you made, it already knows what it withheld, and it already knows your (most likely) net refund. It's a pointless, stupid, almost spiteful waste of time to make people go through these motions - almost daring them to get the numbers wrong ... the numbers that the IRS already knows.

Any substantive, meaningful tax reform needs to remove filing requirements for this type of taxpayer.

"The middle class is who is going to get screwed out of deductions."

I don't want to pick on you, but these two sentiments said so closely together proves that "middle class" means whatever the speaker wants it to mean.

Less-wealthy property owners might own property in a low-enough cost-of-living and low-enough-tax state (or have bought long enough ago) that their mortgage interest and property tax is still less than the standard deduction.

  - Have a job that pays enough to get you in the top 5%
  - Don't own a house
  - Live in one of the 7 states without an income tax

That's going to be a very small set of frequent-travelling professionals. Also, having a top 5% income but no savings/investment income from previous years of saved top 5% income seems unlikely.

No it's not. It's a huge swath of technology workers (and other professionals) that live in cities with expensive housing. Many of the commenters on HN fall into this exact category!

You're right about savings & investment income, but that won't have anything to do with your deduction status for most people.

Once again, we are giving away more of our power for convenience.

In general though, it seems some of the most popular itemized deductions are:

1.) Deduct state income tax 2.) Mortgage interest 3.) Child-oriented tax credits

Most deductions seem to favor homeowners and families.

The default is to go with the standard deduction which would be throwing away money.

IANAL but as per the text of the bill you won't be "eligible" if you itemize.

" “During the term of this agreement,” the contract read, “the IRS will not compete with the Consortium in providing free, on-line tax return preparation and filing services to taxpayers.”10 The IRS would reaffirm its pledge to avoid developing tax preparation services in the 2005, 2009, 2014, and 2015 Free File renewal agreements.1 ... Today, fewer than 3% of eligible taxpayers participate in Free File, in large part because the program’s maze of eligibility requirements and product offerings are so difficult to navigate."

The problem being targeted is the backdoor deal where private companies (TurboTax) _prevent_ the IRS from providing free filing services. They then turn around and obscure features and promote their paid services so that less than 3% of Americans who could and should use the "Free" tier end up paying for the paid product anyway.

This legislation is two parts:

First, it requires the IRS to develop free filing services to allow Americans to file taxes without having to use third-party services. This is to reduce the requirement that Americans have to share their personal information with third-party corporations in order to pay their _Federal_ taxes. It will also bring some much needed competition to the market where products like TurboTax can't just lock features required by certain users behind paywalls by creating a Federal, free base-line.

Second, it _explicitly_ prohibits the IRS from entering into agreements with corporations which restrict itself from providing goods and services (specifically, "provide free online tax preparation or filing services"). The fact that corporations were able to do so in the past is disturbing, so this is a much needed change. The IRS is a governmental body for the people, it shouldn't be entering into agreements that benefit corporations and place burdens on the governed.

Tax code is still going to be a mess, especially for the more complicated cases, but this has nothing to do with the focus of this bill.

Given that complexity and what I firmly believe to be its intractability, this is a hacky but OK solution to make taxes less awful for most people.

[0] http://techcrunch.com/2013/03/27/turbotax-maker-funnels-mill...

What is the likelihood that we would get some sort of sweeping reforms like the ones you're looking for? What is the likelihood that the reforms you are imagining are even possible at all? (If you're a self-critical type, how certain are you that the reforms in your imagination would really help people that much?) Passing a bill like this would be a boon for hundreds of millions of people. It is certain, it is immediate, it is politically achievable.

It has already been implemented in some European countries.

Nonsense. The tax preparation software did fine in the 80's and 90's when doing your taxes on your computer was a niche thing.

Propping up a tax software industry for the benefit of the few people who benefit from it is a drag on society. Why should I subsidize the R&D of the software to handle your complex taxes?

I think you're really oversimplifying things. A free option is great, but a paid option can still exist and thrive as long as it provides some kind of added value.

In fact a free option can actually increase the market for a paid option as more people get frustrated by limitations of the free option and discover value in the paid option.

I'd much rather the government just give me a tax bill and then I could only worry about doing taxes myself if and only if it was actually worthwhile to do so.

> It would probably put turbo-tax out of business though, this is true. The default, free, option is going to win against a paid product.

That is largely what this is:

https://turbotax.intuit.com/personal-taxes/online/free-editi...

This is where it is now - plus the non wealthy end up paying TurboTax $200. This bill would save them the $200.

> This bill would save them the $200.

First, most people pay turbotax $50-100. $200 would be deluxe + 3 states, which is highly uncommon.

And it's highly likely it would cost them MORE than $200 in credits they are not automatically given by the IRS. The IRS does not know what you donated to charity, properties you own which get credits for, educational tax credits etc.

It will spit out a number with a refund, sure. But this change will take more from the lower-income and middle-income proportionately than from the wealthy.

But it could if provided with the data.

In some cases, free federal filing already exists!

https://www.irs.gov/uac/Free-File:-Do-Your-Federal-Taxes-for...

Funny, I thought the part where they take your money was the evil part.

Until we resolve that root cause anything else is like applying a bandaid to a severed vein.

There are /many/ discussion threads about what such a resolution might be, some of which include Basic Income Guarantee / Universal Basic Income.

The top 1% receives 19% of all income and pays 49% of all income taxes. The top 10% pays 82% of all income taxes. What exactly do you plan to do, to make it more fair?

Most other developed countries have dramatically higher income taxes on their middle classes and have less progressive income tax distribution in terms of who pays. Which is why the US has roughly 50% higher median household disposable income than what Sweden, Britain, or Germany do: it's thanks to much lower taxes on the middle class (in those countries it's used for eg healthcare; in the US, people have a choice as to what they do with that disposable income).

http://taxprof.typepad.com/taxprof_blog/2015/03/joint-tax-co...

That is to say: for the marginally lower taxes we pay in the US relative to other developed countries, what do we get? With healthcare, it turns out: not much! Not only do we have to pay our healthcare ourselves, on top of our tax burden, but we pay hyperinflated prices at that. Our insurers operate like cost-plus defence contractors that take the spiraling provider costs and just pass them on to the policyholders.

For paying ever so slightly higher taxes, our W. European/AUS/NZ/Canadian brethren get a lot more social safety and peace of mind for their money. We mostly get a military-industrial complex and corporate welfare.

This is relevant to the question of how we implement taxation and how we distribute the tax burden.

If you have money to pay for experts in knowing all of the loopholes to exploit, and the types of investments / 'responsibilities' that special interests have had written in as possible deductions (the top n%) then the effective tax rate (per unit of currency) paid is less.

Edit, adding this:

I suppose you've also asked what I would consider fair. I find it easier to reach a stance of agreement that the current system is /unfair/ and needs a fresh start, so I hadn't elaborated on the outcome I'd like to see from such a process.

I would find a system with a simple, preferably automated, process to be more fair.

I would find a system where the more you make, the more you take home, to be fair.

I would find a system where the more you make, the higher your relative rate of being taxed to be fair. (Is anyone REALLY worth 100 other people? 1000? At what point to you reach the true value of life: priceless (free)?)

The best approach that I've seen so far mentioned is to tax assets. Property, objects, financial instruments (dollars to contracts of various sorts) all have a market value. You are not directly taxed on your income, but your net worth. Obviously there would be some forms of shelter (deferred net worth, like for retirement. Insurance buffers, etc).

If the top 10% earn 45% of all income and pay 82% of all income taxes, that means the bottom 90% are earning 55% of all income and paying 18% of all income taxes. Which is another way of saying, the bottom 90% are paying a very low tax rate.

And in fact, another important thing is extremely obvious as a connection to this:

The bottom ~50% in the US pay nothing net in income taxes. This is a pretty well known tax fact.

That means the bracket between 50% and 10%, that 40% group, is paying an increasingly very low rate as you go down the income scale, as the 10% to 20% bracket is carrying a high share of that remaining 18% income tax revenue base just as the top 10% group is. Put a very simple way: the bottom ~70% of income earners in the US, pay an extraordinarily small share of all income taxes, and inherently must have a low tax rate given their share of the income base (but that's also another trivially easy stat to retrieve).

Explain to me again how anything I said is incorrect or disingenuous, and or how the rich aren't paying their fair share of income taxes. The sole argument you have left that I can see, is to claim that the top 10% should go from paying 82% of all income taxes on their 45% income share, to paying 100% of all income taxes off of that 45% share of national income.

This however comes close.

https://en.wikipedia.org/wiki/Progressivity_in_United_States...

A fair tax system would not have a hump, or a ramp that then levels off, but would instead be a slowly rising graph with a continuously accelerating rate of being taxed, such that past some arbitrary point that extra return for every unit earned is virtually nothing (reflecting the stratospheric difference that already exists).

I say that would be fair because I believe that even a truly exceptional person, let us say that they are unquestionably a genius instead of merely someone particularly good at business, is not worth 1000s of times or more what someone else is worth.

If you're earning more than 1000s of peoples worth of taxes, you should be /paying/ like you're 1000s of people (without the per person tax credit).

In absolute terms yes. Individually, and as a proportion of their total income the bottom 90% are paying more than the top 10%.

I may be in the minority but I believe governments shouldn't discriminate based on income for the same reason they shouldn't discriminate based on gender, race, religion, sexual orientation, etc. All people should be treated equal in the eyes of the law.

While I do think that there is room for individuality and competition, I don't think that it's logical that someone can be three orders of (base 10) magnitude better than average. Any such level of compensation / wealth is surely an irregularity that should be corrected by tax (law).

What you are talking about is equality of outcome.

I'm talking about equality before the law.

They are 2 different things.

https://en.wikipedia.org/wiki/Equality_before_the_law

I'm not sure what you mean by better but it's perfectly logical to me that someone can provide 3 orders of magnitude more economic value than someone else. The more leverage there is the more the differences between people will be exaggerated. By leverage I mean capital, education, technology, outsourcing, etc. I find it perfectly reasonable that someone who builds a product that enriches millions of lives should be paid orders of magnitude more than someone like a waiter who only services 1 person at a time.

It doesn't make sense to me that someone providing more value to society should be forced to pay more. That seems unfair to me.

HN: the place to go to hear rich people described with a straight face as an oppressed class.

> The best approach that I've seen so far mentioned is to tax assets.

How do you propose to automate the taxing of assets? I have a piece of artwork. How much is that worth? I have a fairly complete set of mechanic's tools. I have computing equipment. I have... I'm in favor of taxing consumption (as proxied by a VAT), but taxing assets seems like a senseless boondoggle, especially if that now means there's a database of what people own sitting out there.

This is false.

Almost none of the complexity of the tax code comes from this. The complexity comes from counting up how much income you have. After that it's a trivial calculation to determine your tax owed.