If the default bill sent by the IRS wouldn’t include all those things, then the result would be exactly what the Norquists of the world fear: a de facto tax increase.
Note also that the H&R Block/Intuit software are free for 70% households. The remaining households are the higher income ones that would most likely itemize anyway.
If you only have W-2 income, are single, have no children, and aren’t eligible for any education credits, then the IRS can probably do a good job estimating your taxes. But that probably describes 20% of folks. If the IRS sent a bill to the other 80% without those deductions, it would be an overestimate. And sure, those folks could file their own returns, but many would not. That would result in a de facto tax increase, which is exactly what Norquist doesn’t want.
For automated tax filing to be workable, it has to at least be accurate for nearly everyone. If it overstates taxes for most people, I think that's a big problem. In the U.S., I don't think you can achieve that level of accuracy without either changing the tax code, or having the federal government track a lot more information about people than it currently does. I owe the IRS money every year because my wife and I are subject to the marriage penalty. You can't calculate our correct taxes without knowing we are married to each other. And the IRS doesn't know that unless I put it on my returns.
Note that many countries track their citizens much more closely than does the U.S. For example, in Germany, you have to register with a Registration Office within one week whenever you move between cities.
Things like marriage records and children aren't currently kept private such that the Child Tax Credit and Joint Filing rules couldn't be automatically applied. It's not immediately apparent to me that vulnerable populations would necessarily be at a disadvantage.
(Basically, I figure that if I'm high-income, it's my problem to sort out my taxes to my greatest advantage, but it should be easy for folks who don't have the luxury of time or money.)
And even relatively high income people ($100,000+, which might just be a household of two teachers) might be hesitant to dispute a "bill" sent by the IRS.
As to applying these deductions automatically: the IRS simply lacks the information. There is simply no database (federal or state) tracking which children live with which adults (the credits are computed based on dependent children, not biological or legal children). There is no federal database of marriages, and while there are marriage certificates at the state level, it's unclear whether there are any easily accessible databases of married couples. There are no databases tracking which daycare you send your children to, what you spend in college tuition, etc.
We may just disagree on the size of the burden or the ability to ameliorate risks/downsides, but I'm having a hard time imagining that they cannot be addressed with _implementation_ choices on a pre-filed return.
I feel like this is important because it seems like we agree on the fundamentals: that the tax code should advantage the vulnerable, that filing should be as easy as possible, and that taxpayers should be able to discover and utilize all breaks available to them. The status quo does not seem _nearly_ good enough at these things to be worth preserving.
The main result of this would be the government stealing from poor and middle class people who should've spent less than $100 on a 3rd party tax preparer that is incentivized to act in the interest of the taxee.
For what it's worth, in the Netherlands it takes most people 5 to 10 minutes to flip through an app that has all your tax info filled in already. If you need to add anything that isn't already filled in, you get every chance to do so. It doesn't stop you from getting an accountant to do it for you either, if you'd prefer.
> How would you even know if it is right?
Because it's still the same tax system you had before they made it easier by filling it out for you already. It doesn't get automatically filed, you still have to check it yourself and approve it.
The sheer magnitude of the difference between the US and the Netherlands is crazy, and it is like comparing a house to a town.
Communism works on a small scale, the bigger the scale, the less you can just trust everyone is doing the right thing. The bureaucracy of the IRS has every incentive to maximize tax revenue, and that is what they will eventually do.
Most people in both the US and the Netherlands work for one employer, own or rent one house, have a few credit cards, and a car. In most cases they have no complicated investments or debts. So how does the simple fact that one population is larger than the other have any effect?
In a larger community you simply need proportionally more computer power to process proportionally more data, but the data types and business rules are the same for all the individuals.
Running a small business is not the same as a large business.
Ok, have you ever played civilization? In civilization corruption goes up as you build more cities and the farther those cities are from the capital. That is to reflect the reality of managing larger and larger groups of people.
Solutions that can work on the state level don't necessarily work on the federal level. The Netherlands are basically the size of a state with an extremely homogeneous population, and a far less cut throat culture than the US.
In small groups of 10-20 people communism works very well. It doesn't work in bigger groups though. The bigger the group the more perverse incentives are acted upon.
Even beyond that though the US is a cut throat competitive culture. Eventually the person in charge of treasury will want to show that the democrats/republicans before them did a bad job of collecting tax revenue. They will realize by not offering deductions a lot of people will just pay and this will end up with them looking like they did a really good job. Or maybe it will be someone lower on the totem pole that wants to move up and can show that they did a better job at collecting tax revenue.
Also, solutions that work in the US probably won't work in China or India because the population is so much larger that US solutions won't scale properly.
It's not that they can't. It's that eventually someone will be in charge that will decide they shouldn't.
Your statement could easily be flipped. Turbo Tax is incentivized to keep the tax code as complex as possible, the government is incentivized to do the opposite.
If they filled out a return with all that info, it would take just a couple of minutes to review it if it were already pre-filled out.
And worst case, you have other income and deductions, such that you've saved a bunch of time entering information the government already knows.
If anything, it would be the upper middle class who would lose out because they would just be lazy and click "ok" instead of doing their own taxes.