This is obviously false. The IRS software handles everything TurboTax does and more. As does the software that professional accountants use, such as ATX
Also: TurboTax's many retail competitors like HR Block.
It helps when you are the incumbent and you get to build the system in lockstep from day 1.
Interestingly, they now can: under the Free File program, tax prep companies would offer free filing (for taxpayers below 72k AGI) and the IRS would not compete with their service.
After a ProPublica investigation in their dark pattern shenanigans (leading to about 3.5% of taxpayers to use the program when 70% are eligible) confirmed by the HSGA Senate Committee and NYS DFS, the IRS both updated its rule to preclude e.g. hiding Free File programs for search engine, and removed the rule which prevented them from competing.
Sadly the IRS has been hamstrung time and again by the GOP, both financially and politically. They can't even do their core jobs of collecting tax and auditing the taxpayers they need to, so it's unlikely they'll have the clout and funds to set up a free filing program any time soon, let alone one properly integrated with their likely antiquated and in dire need of updates computer systems.
We now have an opportunity to test your hypothesis- for at least two years there will be single party rule by the other party.
The filibuster itself is not some sort of switch that gets flipped. The parties need to be careful how often they use it and for which reasons. It's just a part of the procedural possibilities and its effectiveness is not some sort of set-in-stone rule.
In our particular case right now, the reason the Senate does not allow us single-party rule is due to the makeup of the senators themselves. It only takes a few to not vote down the party line to negate single-party rule. We've seen this a few times already since the start of the new administration.
https://www.americanprogress.org/issues/democracy/reports/20...
The current reason we care about a few senators is because we are looking at budget reconciliation where you only need 50 votes. Outside of that you need 60 votes or you get filibustered.
> Note that, in some cases, filibustered bills were eventually passed but with substantial concessions to the senators blocking the original bill.
We have clearly seen over the past many decades an evolution in the kinds of bills we pass, and I think it's quite easy to observe that controversial bills are front-loaded specifically to combat this. The negotiations have changed to meet the needs of the new battlefield.
Perhaps this is "naive," of me but the kinds of bills the Senate has passed recently have me surprised its use has only gone up 3x.
Your original point was that use of the fillibuster was judicious. The article goes on, at length, about exactly how the use of the fillibuster has only substantially increased over time.
And then here you plucked out a single sentence from the article used as a good-faith caveat before presenting data to say the article "proved your point."
Those two Senators are from more conservative states and they know if they don't toe the line their constituents will likely throw them out for GOP alternatives.
*In fact, the Senate was originally appointed by each state's legislators and the House was the only Congress elected by popular vote.
“Cleaning up the tax code” and “reducing the size of government" aren't really the same thing; the former could very easily serve the opposite purpose of the latter.
Or, not; alternatively, it would allow the IRS to be more responsive in its supportive activities and more effective in its enforcement activities.
Cutting staff is a separate decision from streamlining the rules; the IRS hasn't had staffing expanded to keep workload constant when we weren't simplifying, there is no inherent reason it would ha r to cut staff and keep workload constant if we were simplifying.
- Many of them will virtue signal on Twitter but are uninterested in actually challenging oppressive power structures as they exist.
- They have the slimmest of majorities, requiring either bipartisan support (lol) or the support of “moderate Democrats” whose positions are at best center-right. Republicans were in this position for the first two years of Trump, and they couldn’t get any signature legislative achievements but their tax bill passed. The same is likely to be true for Democrats this time around (a watered down stimulus bill passed through budget reconciliation).
- The American system of government is a vetocracy that leads to resentment over government’s inability to govern/keep promises made when campaigning.
- The complication of being beholden to corporate cash. Great ROI for Intuit and every other company that benefits from nothing substantially changing in America. Being beholden to corporate cash is the strongest form of bipartisanship in America.
I logged in to check that they did it correctly, which they did, and approved it. Literally took ten minutes. Nine of which were just reviewing all the fields on the form.
Obviously this does not work for people who have very complex/unusual tax situations, but for your average person it's great.
It blows my mind that The USA doesn't have something like this. It's basically taxes at work
But I still believe that paying taxes is the right thing to do (how else do you keep a country running, even a corrupt one?). And as someone who really hates doing any kind of admin, this was a breath of fresh air, and highly appreciated, even if their motives are not perfect.
I'd just not vote for that person again.
It’s part of why Mitch McConnell was majority leader; he isn’t necessarily well liked, but he is willing to take the heat for not taking up a bill and letting his colleagues avoid awkward votes.
[1] I hate this term but it's the one that caught on. Almost no one votes positively based on a single issue but many people have disqualifying issues which people treat as the same thing. "Sure they're pro baby eating but their stance on taxes is really quite progressive."
But voters are also responsible for those systems being in place.
Then at the end of the year, you'd log in and click one button to verify the numbers and either pay or get a check.
Now it would be great for a tax program to ingest this PDF and auto-populate your tax return. Unfortunately no PDF for 2020 exists yet and it says it might not be available until October? I don’t know if generating this PDF is a slow process or if this information is intentionally withheld until after the tax filing date to make sure you are “honest” on your taxes.
https://www.irs.gov/individuals/transcript-types-and-ways-to...
At some point they are going to calculate what you owe based on what you provide them and what is reported to them, no matter what.
Laws that authorize "auto tax" can also come with extra reporting requirements.
I'm mostly a W-2 schmo without any particularly complex business arrangements and with a spouse who employs themself in a consulting capacity, puts the statutory maximum into tax-deferred accounts every year, and we have minor kids who are required to file returns due to kiddie tax laws.
I can imagine many people would rather pay a high three or low four-figure per year bill for tax prep and representation rather than give the IRS full access to their financial lives.
I do support (and strongly so) the idea that the IRS could provide simple, default tax prep based on the information they receive. Where I break is what escalation path should exist; I think there must remain an effective and private escalation path for more complex scenarios. (In many ways, that makes it even easier to implement. Make the simple case automated-by-default. Punt all the complex cases to the current system.)
Other things are needed only if we elect to method A of calculation, but not if we use method B of calculation. So I give him all the data; he computes my obligations using method A and method B, chooses the better option, and reports only the data needed to support that method's calculations.
I pay my preparer to be an expert in tax code, to represent me in any audits, and incidentally to prepare my return correctly.
Part of that expertise is that I don't have to be an expert, so I tell him everything and he politely rolls his eyes and smiles when I dump irrelevant things on his desk.
The not needed now but maybe later financials should already be reported by the financial institution to the tax agencies.
There should not exist a system where there is a method A, B or C and if you have thousands of dollars a tax accountant can find all the loop holes to make you pay the least. You should just pay what is owed, not more or less.
You wouldn't pay for tax preparation if the potential savings weren't more than what you pay him. With a simplified system there also wouldn't be much need for the audit help you are usually offered when using their assistant
That’s the information that I only want my paid advisor(s) to have; this is a privacy concern, not a cheat-on-taxes concern.
My data is my data. I truthfully and completely provide to people, companies, and government agencies who have a need to hold or process only that data is required.
I also have a group of advisors whom I trust entirely and I share data more openly so they can help me plan and execute better.
What specific positions (or even total account value) I hold in my various accounts is not required for the IRS to compute my taxes. My advisors on the other hand I willingly give that information so they can give me better advice/guidance.
My tax preparer knows what is required for the IRS and ensures they get that correctl, completely, and precisely nothing more. There's no way the IRS could find all the data that's relevant to my taxes without getting any not relevant data without some expert actor doing that filtering (and from a comparative advantage perspective, I want to pay someone more expert than me to do that)
> What specific positions (or even total account value) I hold in my various accounts is not required for the IRS to compute my taxes.
How can they compute your financial gains without knowing your portfolio changes? (sorry I'm not american and thus my preconceptions of how do you do taxes are weird for you).
But I think a better solution to the very real problem you've identified would be for your stock plan administrator to hold that information and transmit it to the IRS as basis information just like your retail broker now transmits basis for closed positions on a 1099-B, but only transmit it in the year the closing transaction happens.
If I vest RSUs this year and sell them in 2026, the IRS needs to know that basis in 2026, but they don't need to know it now (other than as it is already included in W-2 boxes 1 and 14, but that's only a dollar figure, not a per-share basis figure).
Cool beans. Literally nothing preclude you using a tax prep service but using the IRS's tax declaration system, which would double up as a simple tax prep system.
That's what happens just about everywhere in Europe: you log in a dedicated government service, and you do your tax declaration. All the stuff the government knows about (salary, loan deductions, dependents, …) is already input, but nothing precludes drilling down and updating details. Nothing is lost compared to a paper declaration.
I can't imagine any scenario that most people (anywhere close to fifty percent of tax payers) would be willing to lose a significant portion to all of their refund check by needing to pay a tax preparer potentially thousands of dollars.
I can't imagine the majority of people happily accept a 10% (more for half of households) tax hike, when companies already CC the IRS on all the forms they're regurgitating.
"The most recent IRS data revealed that Americans who filed taxable returns paid an average income tax payment of $15,322 in 2018. This number was calculated based on the returns of over 153 million American households who filed during that period, which included just over 100 million taxable returns."
The IRS is not motivated to collect more income or to deprive taxpayers of refunds. They're motivated to do their jobs, whether that means issuing a notice of amount due, or paying out a refund check (which they do for millions of taxpayers without issue, every year).
Even if you have super low income and you are on the border for benefits (EITC, Medicare), donating to a charity will not make you eligible for those benefits because that eligibility is determined by AGI, which is income before deductions.
The only situation which this makes sense on net is if you tell your tax advisor that you want to donate some amount of money over the next few years. Then the advisor might tell you to donate in high-earning years to offset a higher marginal rate. In the above proposed scheme, the IRS would only get one year's worth of data, so it cannot recommend you this type of tax avoidance.
If you bunch deductions, you might alternate between the standard deduction and itemizing deductions, meaning if you want to support charities with $10K per year, you're better off to donate in Jan and Dec of the same year (itemizing), then skip 13 months (taking the standard deduction), then donate twice in the year after that (itemizing), etc. With the increased standard deduction, this may be needed to allow your donations to become deductible at all.
There are other planning strategies that a combined advisor and preparer can help with. (Using your HSA optimally as a retirement account. Optimizing your Roth conversions over the years. Modeling whether Backdoor Roth contributions make sense (or "what would you have to believe is true to have them make sense?") For business owners, setting the balance between your salary and distributions of profits.) Those are advice activities that overlap with a detailed understanding of your financial and tax situation and often mean that you have to change something about the structure or timing of your activity to accomplish your goal.
The IRS is in an OK position to look back and judge "based on what actually happened, here's what you owe", but in a terrible position to offer optimization advice.
Wait, can you explain how tax brackets work because I think there may be a fundamental misunderstanding here.
If we have two brackets, 10% for <=$100 and 90% for >$100, what do you think the tax bill would be for someone who earned $101?
$10 for the first bracket. The remaining untaxed income is $1, taxed at 90% = $0.90 tax.
But the Republican Party has spent a lot of money to make people think that the tax would be $90.90 (i.e,. a flat rate), which is why so many people are opposed to increasing the tax bracket rates...even though the actual affect is marginal to most people (even those affected).
I feel like every April news orgs should just run segments with accountants doing this example.
For example, if you fill out your form by hand and say that you owe X, using the single-filer rates but you're married and should have used the married-filer rates, the IRS will notice your error when they process your return and send you a refund check for the difference.
A tax advisor will advise you to possibly make a donation...if it makes sense to do so (i.e., if you itemize). Because you're specifically paying them a lot of money to minimize the amount of tax that you owe.
The tax authority sends you a summary and you just approve it.
I'd wager the majority of people wouldn't have a reason to submit a revised return. And if the federal government generated your return, hopefully that would give them reason to automatically exclude you from audit, (ideally) reducing the burden of auditors.
Most people file somewhat simple returns. We can get most people using "Auto-tax", where basically the IRS sends you some information to check over, including what you are going to get back or owe. We can do this for all of the commonly used forms, not just the EZ forms. Most folks aren't subject to "subjective" taxes.
Other places do it, after all. The IRS has the information. And it would probably increase tax revenue since it is easier to collect taxes that are easy to pay. (Sales tax is collected at purchase since few people self-report: Sales tax is even easier on the average person if included in price instead of added at the register).
You can require that the IRS err on behalf of the taxpayer and require it to give the maximum refund (or pay the least tax). And it isn't like the auto-file would be final: You still get the option for corrections (because mistakes happen) and can still self file.
Tax prep software is worth every penny IMO, but they do nickel-and-dime you for many pretty simple situations.
For tax year 2017 (a pretty typical year), there were over 5000 Federal/state forms/interview scripts to be updated. This requires a seasonal army of tax accountant/developers to update the app "content." It's not uncommon for providers to be updating forms/interviews well into March (when filing opens in January).
Source: worked for a Turbotax competitor
Here's my dream for a simpler tax code: The only tax is a Sales tax/VAT/GST.
Pros:
- Individuals never have to think about tax. It would completely eliminate tax returns. That alone is worth it's weight in gold since tax returns are such a time and money burden.
- It would close all the loopholes megacorps/wealthy individuals use to pay less tax. You cannot avoid spending money in the place where you operate.
- To add to that, if every country implemented this system we would be able to move freely between countries, spending as much time as we desired, without having to worry about tax implications. Obviously that's a much much longer term vision.
Cons:
- Won't this disproportionately tax the poor?
- Firstly, the existing tax code already does. Poor people don't have the time to understand the tax code enough to get everything they can out of their tax return. The also don't have the money to hire an accountant to do it for them. They also don't have the tax avoidance opportunities available to them that come with the scale of being a wealthy individual.
- Secondly, many countries already discount or eliminate the ST/VAT/GST on essential items. You could even have a higher tax on luxury goods. You could even have a negative tax (subsidy) on essential items if you desired. The point is it changes the framing of tax discussions to "where does this good/service fall in the scale of essential item to luxury item" which is much much simpler for people to understand.
Look, I know it's pretty radical, but I think this is the only sensible taxation in the future.
Yeah, it would "fix" this situation by just having them pay _less_ tax without needing a loophole. The percentage of income/wealth that someone spends decreases as wealth increases, so in other words the poor pay proportionally more under your tax scheme.
A system that only taxes spending fundamentally has problems in that the richer people can afford to save and invest.
The initial, flawed response to this issue would be to construct some "massive political and logistical complexity" in order to track everyone's income and spending and family situation and lots of other stuff too and calculate their VAT refunds based on some formula. The much simpler solution is to just give everyone the same amount of money. Poor people will spend some portion of it on sales taxes, and they'll use the rest for other purposes of their choosing. Slightly richer people will spend all of the UBI on sales taxes but will come out even. Slightly richer people will be able to offset some portion of their sales taxes. Really rich people won't even notice they got a UBI.
Perhaps you really meant that "massive political and logistical complexity" is required to get anything through the legislative process? After all, the more complicated it gets, the more places lobbyists can hide loot for their employers.
TL;DR: my fear with UBI is that unscrupulous people will do unfair things like significantly raise rent to eat into other people's free money thus leaving the poor in the same spot, more or less.
I don't claim to know anything about your town, but I've lived lots of places and in general, in order to really fuck people over the bastards first have to limit their freedom somehow. Are there only certain parts of town in which the poor are allowed to live? Has public transportation been limited in arbitrary ways? Do zoning regs or HOAs enforce impractical restrictions on housing? Would it be OK if your neighbor parked a mobile home and camper behind her house for her recently-divorced sister-in-law plus five kids? What if her nephew and his girlfriend also moved out back?
> A system that only taxes spending fundamentally has problems in that the richer people can afford to save and invest.
That is an existing problem inherent to any tax system. It's just saying "Rich people can afford to not spend all of their money". I don't see how that's fundamental to taxing only spending.
Lets say apples have a -5% tax rate, and cost $1. Every time I buy an apple from the store, I pay $0.95 (the government pays the rest, which is a problem in and of itself). I can sell that apple for $1, and the government basically just paid me $0.05 for selling an apple.
The problem with the government paying that $0.05 is that sales tax is assessed at time of purchase, but the government isn't there to pay their part. The grocery store basically has an IOU from the government. 5% may be higher than the grocery store's margins, which means the customer payment is actually less than the good is worth, so the grocery store's ledger actually goes down for that sale until the government pays back their part.
And then you have to deal with fraud. Nobody wants to overreport their sales tax, it costs them money. If you can make money off sales tax, people will filing fraudulent tax reports, and I really don't want the IRS having to track how many apples the grocery store actually sold. I'm sure money launderers would also find a way to use it to buffer their costs.
Subsidies probably still have fraud, but it's a smaller number of entities to work with. We can also budget for it because we determine the amount. I can give a budget to the subsidy, but I can't tell people to only buy 10,000 apples next year.
There are similar issues in agriculture subsidies and price regulation. E.g. High fructose corn syrup is probably as popular as it is because corn has been subsidized and cane sugar has a regulated (high) price. It's kind of like an inefficient arbitrage between physical goods to avoid taxes.
If you taxed only assets it wouldn't be a problem. Mo money mo taxes.
Whether you want to tax predominantly assets or spending usually reflects which side of the capital divide you see yourself identifying with - predominantly a recipient of unearned income (e.g. landlord/FIRE) or a payer (e.g. renter).
In this proposal, sales tax is the only tax. You can't run a government without money.
I run a small business, I do my monthly PAYE in a simple spreads sheet - one line, type in the gross income out comes the numbers to include in the online filing web page including PAYE, and 401K equivalent. Doing the same in California was a nightmare.
We have no need for TurboTax or it's equivalent
Ok, I'll share mine: the only tax is on pollution and/or scare resource usage.
It's weird that we tax anything that's considered "good" in my opinion. Taxing housing, income from labour, consumption -- who came up with these shit ideas? Tax only, ONLY, what is considered bad (or should be reduced to a minimum), mainly: pollution. And the market will organize itself accordingly; optimize for all of us to survive a little longer on this planet (instead of exploiting it ASAP).
Perhaps the main tax of the whole humanity should be a carbon tax, at least in the 21th century.
Also, quality of living is determined by income, not wealth. Fresh retirees are generally wealthier than other age-groups because they've saved for retirement. But that doesn't mean they consume more. Also, consider the citizens of the Netherlands. They enjoy a comfortable existence while servicing an enormous amount of debt. If wealth were the primary determinant of quality of life, you'd think the Netherlands were as as destitute as Somalia.
The American capital, legal, and tax structure collude to reduce wages, whereas the Dutch system incentivises responsible 'market based solutions'
The only people who want to live with a somali gov are gop
Another way of thinking about this: A wealth tax is like inflation, except assets are also devalued alongside your savings. Which means the wisest strategy is to consume now, save nothing, invest nothing.
Or startups - is your loss making one a 0 or a $1bn? You could have work arounds for tax but it complicates things.
(Genuine question) how would one determine the value of something for taxation purposes if there's no market involved?
What's the value of a painting? You could use the price I bought it for, but what if we just swap paintings instead? You know, I give you this fancy painting, you give me some Goodwill shit and you pay me a $100k "finders fee".
What's a yacht worth? What are super fancy houses worth? One of Mike Tyson's old mansions is still abandoned, so I assume it was worth nothing since they couldn't sell it.
Properly valuing things is hard. Wealth taxes are also regressive, in a way, because poor people are much less likely to have access to financial instruments that will return greater than the wealth tax rate. The poor and the middle class are far more likely to have their money in functional investments (homes, cars, etc) than they are to have them in something that generates profit.
So you'd still have to just not assess the tax on assets under the value of a reasonable home and car, at which point we're basically just back to what we have now, which is carving out a loophole for the poor.
1. own the largest market 2. Own the world reserve currency 3. Have a means of charging exit taxes
I used to think this because it's often said, but learned it's not true. This sums it up:
The top 50 percent of all taxpayers paid 97 percent of all individual income taxes, while the bottom 50 percent paid the remaining 3 percent.
The top 1 percent paid a greater share of individual income taxes (38.5 percent) than the bottom 90 percent combined (29.9 percent).
The top 1 percent of taxpayers paid a 26.8 percent average individual income tax rate, which is more than six times higher than taxpayers in the bottom 50 percent (4.0 percent).
https://taxfoundation.org/summary-of-the-latest-federal-inco...
> The big picture: The very richest Americans pay much less tax, as a proportion of their total net worth, than the rest of us.
> By the numbers: The bottom 99% of Americans pay about 7.2% of their net worth every year in taxes, per Warren. The top 0.1%, by contrast, pay about 3.2%.
Source: Section 3 here: https://www.axios.com/newsletters/axios-capital-d213524e-b2f...
Let's say you and I start off with zero wealth, but we both graduate with a good degree, both get high-paying jobs and both make the same amount of money.
We also pay the same amount of taxes - which sounds fair, right?
Lets say we both make 150K a year, but I spend it all on my living expenses/fun while you are able to live on 50K and save 100K every year.
In 10 years, you will have over a million dollars in savings/investments while I lets say managed to save 10K.
We still make the same salary and pay the same tax but our wealth is grossly unequal. I pay 100X tax-per-wealth than you do. That sounds horrible but in the above example is totally reasonable.
Obviously the Warren Buffet example is a bit different than that but - he pays a ton of absolute $$$s compared to you, me, and anyone else, why is his total wealth an absolute necessity to look at?
In reality, factors outside of someone's control (ex: parent's education and wealth) are greater predictors of their wealth than _any_ decisions they make. I am ok with allowing some people who make irresponsible life choices to get away with lower taxes if it makes the system as a whole fairer.
> why is his total wealth an absolute necessity to look at?
Your claim was that the poor aren't disproportionately taxed. "Poor" is a statement about wealth, not income, and income is an inaccurate substitute for wealth.
Because money needs to move. Having it sit somewhere in a bank account is not something you want to encourage (as a government).
For example, they are often LPs that invest in VC funds to give them cash which is then given to startups to build a business.
Take another look at the last point I cite, I THINK it goes to what you're asking: the richest 1% paid 26.8% of they income in taxes. The poorest 50% paid only 4% of their income in taxes.
Let me know if your question is something different.
Firstly, AGI is post-deductions, so people who play games with their taxes show up as paying more.
Secondarily, and more importantly, income is a trash metric anyways. Poor does not mean low income, it means low wealth. In your data somebody who inherits a ton of money but has 0 income counts as "bottom 50%". Rich people have a disproportionally lower income vs wealth.
I think the biggest single thing that would simplify the tax code is removing the separate capital gains tax and just counting it all as income. There is significant complexity in the tax return to calculate everything independently and to show that your capital gains aren't really income. You could eliminate Schedule D, Form 8949 (which you have to up to 4 times), and the Capital Gains/Schedule D worksheets to figure income.
HSAs are also super painful. E.g. CA doesn't respect the tax-exempt status of HSAs, so you have to add the HSA back into your income so they can tax it. There are also a lot of bookkeeping requirements for relatively low amounts of money. In practice, they aren't very useful since the fees are high, the returns are low, and their function is redundant with insurance (i.e. paying premiums now to cover large future expenses).
In general, there are a ton of random little exemptions and extra taxes that you might qualify for and it just takes time to figure out if they apply to you. E.g. Form 8959 (Additional Medicare Tax) is a 0.9% tax for income over a certain amount. They should have just adjusted the income tax graduations in an equivalent way. Form 8960 (Net Investment Income Tax) has a similar problem. CA gives a $60 renter's credit if you make under certain amounts, which is just too insignificant to matter (e.g. 0.3% of $1500/month annualized).
That's okay during times like ~1990-2020, a time of wonderfully low dollar inflation. The justification behind the long-term capital gains rate is this: during times of high dollar inflation, taxation on capital asset values turns into an outright tax on investment.
If the dollar is inflating rapidly then an investment which simply maintains its value in real terms -- neither gaining nor losing real value -- will see its value in dollars increase and will therefore be taxed, heavily. The lower rate for capital gains tax was in recognition that not all of that gain in nominal value was real income. All of the major reductions in the long-term capital gains rate (i.e. reduction of the rate, shortening of timespan for "long term", and increase/removal of cap) occurred after highly dollar-inflationary periods (1934, 1942, 1978-1981).
Without a lower capital gains rate, during times of high dollar inflation the wealthy will shift all their money into non-fungible assets (real estate, artwork, patents, Persian rugs, domain names, antiques) which aren't fungible commodities with liquid markets and therefore can't be marked-to-market or taxed until sold. This kind of economy-wide, sudden, and simultaneous disinvestment would be a catastrophe for the economy.
Not to mention the resulting real estate boom would make the homelessness problem an order of magnitude worse in a matter of months. When your money is losing value every day, buying up every apartment in sight, jacking the rent to the moon, and evicting the tenants (so it can sit empty and maintain value without any management effort) is, unfortunately, a great strategy.
Note that the 1990's were a boom time for the US (Cold War peace dividend), and from ~2000-2020 we had a massive onlining of cheap Chinese labor providing a deflationary counterpressure to our outrageous money-printing escapades. All the cheap Chinese labor is now fully online and "Fed go Brrr" is in permanent COVID-hyperdrive, so the party will end real soon now.
I don't know, it sounds like a great opportunity for the non-super-wealthy to buy shares in productive assets at a discount. Haven't all the prudent people in the room spent the past 8 years grousing about how poor the P/E ratio of the S&P is?
Those people generally end up in prison. The few who don't are not economically significant.
Not to mention that as I get older, I expect my income tax bracket to drop. I'd rather buy productive assets cheaply now, and deal with the tax consequences, than be cut out of buying productive assets, period.
Not a bad idea per se, but regressive, as many pointed out. However, in conjunction with a UBI it might make sense, and be progressive.
I agree with you that VAT would be cool to have as the sole tax, though.
I’m sure it’s cool if you’re worth a few millions or above. VATs are highly regressive taxes, though they are also consumption disincentives (essentially luxury taxes on a number of non-luxury, which is why essentials like food tend to be low-rated).
The tax code is being used as a tool to funnel money through industries and as kickbacks to bureaucrats. A non-communist government can't force the population to do something (invest in this, build this, do that), but they can encourage/discourage it through taxes.
The tax code is not getting simpler any sooner.
And just forcing the bureaucracy into the businesses collecting a sales tax doesn’t reduce the burden, it just puts it out of sight for consumers.
This is true.
> Unless we simplify our tax codes in the US, tools like turbotax will stay.
The two are linked because a lot for he lobbying comes from the same place, so its unlikely that one would get changed without the other, but there's less essential link other than shared lobbying interest than you seem to think: even with the complexity of the system quite a lot of the information is already in the IRS’s hands.
There isn't a need for anything else...
I am in camp-AMT-only and it seems like both parties could get on board.
As such, "killing TurboTax" is the correct first step.
But plenty of other countries have those too and manage to not have an insanely complex tax-filling regime?
> but it's not that simple
I think if the main difference between the US and other countries is the aforementioned "corporate bogeyman", it probably does boil down to being that simple.
Citation needed. How can you have a non-complex tax filing regime when you have so many deductions and credits that only the taxpayer knows about or has documentation of?
When I donate to a charity, they don’t report my donations directly to the IRS (nor should they - we don’t want the government to be collecting data on everyone’s charity giving). I have to collect the letters they send me at the end of the year and total my donations in order to deduct my charitable contributions. The government never even knows what charities I donated to unless I’m audited and they ask for proof.
Therein lies the rub, I suspect; other countries do know about what you're doing with the deductions and credits which means the tax office can handle all that for you - and, indeed, they are much more suited to be handling this - rather than pushing it onto each individual to try and scrabble together once a year.
I suppose we can add "incoherent fear of the government" to "corporate bogeyman" to the list of reasons the US has a messed up tax situation.
> (nor should they - we don’t want the government to be collecting data on everyone’s charity giving)
You do if there's specific tax breaks for doing that.
Hmm, if the government were to run a quadratic funding of charities thing, with only rather limited requirements for eligibility, perhaps that would somewhat alleviate the "undemocratic" complaint? (It would have to make it illegal to pay someone else to participate in your stead though.)
The rest of your post is based on the implicit assumpion that anything government run is inherently bureaucratic and slow and charities are instead simple and fast. But that's an orthogonal issue. Some level of bureaucracy is needed to prevent misuse, otherwise you have a rich guy pay their fines from their charity. Beyond that, there is no inherent reason for charities to be more efficient. You could make those governmnent-charities have local oversight, they could be organized very efficiently too and have the advantage of democratic legitimacy.
If only there was a massive logistics network for getting food everywhere we could use.
then you run into those who think , why should I give to charity because its the government's job to fix that...
and finally those who just don't care
charity exist for those want to focus their person effort to fix their world and should be encourage but never be required
In a democratic government, you might like how a powerful tool is being wielded when your people are in charge, and be terrified when the 'other' is in charge.
I think it’s unlikely that Intuit has the power to steer the complexity of the tax code. States like NY and CA, for example, oppose a standardization of tax law for “road warriors” because they make so much money from non-resident workers who step foot in their state.
US tax policy is about 70,000 pages (mostly regulations, bulletins, and case law). And that doesn’t include state and local taxes.
If you stop being an easy case, for example you want to claim FEIE within 5 years of spending > 30 days in the US, then the IRS tells you to get a lawyer to pay for a private letter ruling. This is because, where other countries don’t tax their citizens income worldwide, the US does and then gives a moderate exemption. AFAIK, US tax code complexity dwarfs that of any other country.
I find it hard to believe that it’s TurboTax’s fault, a day after reading about Sen. Warren’s plan for a wealth tax and a $100B to the IRS to help them calculate and enforce it...
That's not how the proposed systems work. The proposed system is: gov sends you a notice "here is your filled out tax return based on everything we know about you" and then you look over the return, make any modifications you believe are correct, and send it to them. You're not "challenging" something.
Or more likely, they send you their estimate, based on a tiny fraction of the tax code, you recalculate it from scratch, send it to them, and then they audit you.
Civil disagreements with the IRS start under the assumption that the IRS is correct (e.g., “your cost basis is zero,” or “that wasn’t a valid deduction”), and then you must prove to them that they are wrong.
I've yet to hear any stories where anything like your nightmare scenario has actually happened. Perhaps you would not be part of the group who could rely on a pre-filled return - and you would still have to file manually, but nobody is proposing taking that option away or even making it harder than it already is.
Can you give an example of any country whose tax code is more than 70k pages long?
Or a country where it requires, by default, taxes paid on money earned while living oversees, depending on a large number of international treaties, case law, and expensive private letter rulings? Or a country that requires you to file a different tax return in almost every state you step your foot in while working remotely? Or a country that requires you to essentially recalculate taxes on a quarterly basis to determine if you should be fined for underpaying estimated taxes?
> nightmare scenario
That’s not a nightmare scenario. That’s just a standard audit. They assume, e.g., zero coat basis, or residency, or it wasn’t used for business, or ... and you have to prove otherwise.
> As of 2014, the tax code was only about 2,600 pages long
The usa hardly has a monopoly on tax code complexity. We're talking about personal income tax right now and I can't find a complexity index for that, but for business taxes the usa ranks fairly low on https://www.taxcomplexity.org/
> That’s not a nightmare scenario. That’s just a standard audit.
The "nightmare" scenario was "you recalculate it from scratch, send it to them, and then they audit you." - a scenario you put forward where this improvement to the tax code (auto-filled returns) results in a world where any time your return isn't what they auto-filled you get audited. That sounds bad, but has not happened anywhere where auto-filled returns have been implemented.
> “a tax practitioner who relies just on the tax statutes will go to jail” - Tax Foundation
https://taxfoundation.org/how-many-words-are-tax-code/
> nightmare scenario has not happened anywhere
I’d be surprised to learn that any country had zero audits, because their file-free tax system worked for everyone. Is that the case anywhere?
Nearly every bill out of Congress can effect tax law and this includes even special appropriation bills; all the covid bills have had tax law changes.
there are some three thousand pages comprising Federal tax law however much of this is additionally subject to various regulations that can affect when and when not a tax takes affect. then throw in every state, city, and more.
To be honest I don't know of a good fix. there are too many forms of income and taxation that Congress would have to reduce the number of definitions for what is income into much simpler categories, say employer paid income, interest, capital gains, money transfers from others, and such, and then macro the rest into miscellaneous subject to a permanent fixed rate.
As in, account for the most common forms of income at a lower rate and they get all those that don't fit that definition and charge it at a higher rate as likely none of these would ever be claimed by the average tax payer.
when it comes to deductions, simply do what the Trump tax change did in 2016 but do it again, raise the standard deduction so that if you are under 250k you never need to itemize.
https://www.nytimes.com/2006/03/05/magazine/who-needs-the-mo...
People have been arguing about unnecessary complexity in the tax code since before computers, let alone before TurboTax, so it can't be that simple.
So let's just nationalize TurboTax.
In other words, think back on all the talk of Democrat being "socialists" over the recent years and imagine the field day conservatives would have if any national figure mentioned this as an idea out loud, and how that might be used to shift the balance of power such that other meaningful programs that could deal with additional governmental support and regulation (healthcare) get set back.
But it's really interesting to me that what you wrote is about the feasibility of the idea and not the idea itself. Of course, you may think it's a shitty idea - and it may indeed be! But I'd claim that it says something really fucked up about America that your first response was what it was: "couldn't ever happen, plus it would hurt what we do have if this were 'mentioned out loud'" instead of "here's why that's a bad idea".
> imagine the field day conservatives would have if any national figure mentioned this as an idea out loud, and how that might be used to shift the balance of power such that other meaningful programs that could deal with additional governmental support and regulation (healthcare) get set back.
"Shhh! Don't say that too loud -- they'll hear you and then take away our nice things!"
My reply to this is that "other meaningful programs" are already being set back with or without talk of currently-insane ideas like nationalizing a ghoulish company like Intuit/TurboTax. They've been getting set back since the 70's at least, and so-called "conservatives" are coming for more! Let's ask George W. Bush, who at the end of what he deemed a successful presidency only regretted that he wasn't able to kill Social Security!! These peoples' mission is to ensure that any vestige of a welfare state in the US is not only erased, but that merely talking about such a thing becomes so ludicrous-sounding that people dismiss it as impossible. It's working!
The other part of this is just this: love him or hate him - and yes, he's not the president - Bernie friggin' Sanders has walked around this country extremely visibly for the past half-decade calling himself a "socialist" in public, advocating for a complete "political revolution" and millions upon millions of Americans heard him and went "actually that doesn't sound so bad".
I believe that the world we live in is one we made. That's scary, because look at this fuckin' place, but it's hopeful too: we can make a different one. If there are obstacles to doing so, so be it -- but our silence, no matter how rational, doesn't need to be one of them.
From there, we'd just shut down or deprecate the original TurboTax service, and launch our rebranded fork as a free government-provided service like healthcare.gov (could call it taxes.gov). That would work as a short-term solution to make taxes easier for everyone, and it would remove lobbyist pressure against implementing long-term improvements like simplifying the tax code and automating everyone's taxes by default.
And then to deal with that, a new company emerges with a service that makes even TurboTax easy to use!
The idea that bureaucrats would competently manage it this time is difficult to believe.
To me, that is kind of nuts, and not something that follows from normal logic (i.e., it isn't something that you will "get right" by just filling out a standard 1040 form).
If you are financially independent then you should make sure your parents aren't claiming you as a dependent, if you aren't then you should be receiving those covering funds from your parents since that's the sort of dependency the dependent class is all about.
It just isn't logical for most people to know that their unemployment income is also unearned income, and that you could be underpaying your taxes even after filling out the 1040 completely (and following the instructions in the 1040 instruction book).
Maybe this case is called out specifically, it doesn't apply to me so I haven't looked for it in the instructions, however it was just something that I ran across that made me scratch my head.
This does not exist in the US the highest levels of government have no incentive to provide it.
But your point about the state income tax is well taken, this does make it a much harder problem here than in Australia.
This is a valuable podcast episode to listen to to learn more about this: https://www.npr.org/sections/money/2019/04/03/709656642/epis...
If you don't understand the tax forms, though, or can't figure out the codes, you are stuck paying someone. The IRS won't give definitive answers if you call them.
TT has a large moat but behind it must be a ton of technical debt.
Would an open source solution work here?
I don't think this is much at all a technical problem. I suspect most people use TT because it's convenient--it files for you, they'll even pay themselves from your refund. And TT knows well this is a huge user base, as you'll see them hide away little features like education credits into the premium version.
I agree though that state taxes are part of the moat here, let alone municipal. In the few states I have experience though, state taxes are vastly simpler than federal. Still it'd be great to see some kind of centralized digital infrastructure that states could all normalize around instead of each building their janky web portals.
Apple is just getting started with finances built right into the iPhone. The credit card is already rolled out, and now comes a built-in bank account that can accept your payroll. This is just too valuable for Apple to pass up. The next step is push-button tax filing. Classic innovator dilemma where you start with basic returns. Think Uber driver.
Or for that matter, would Google or Robinhood enter the industry?
With Apple it's like anything else, if you are fully bought into the ecosystem it's going to be the best. I think there is a reason Apple Card isn't compatible with Intuit Mint right now. From a privacy and business model standpoint, Apple thinks they can do better. What I think we'll see soon is a budgeting tool similar to Mint built into the iPhone, with the Apple Card supported and a way to link 3rd party credit cards, with a pro-privacy data sharing model. Apple spins up a bank account for you via Goldman Sachs new platform. Apple encourages/incentivizes payroll deposits. Tax filing gets added to this product.
As soon as my tax situation got even the slightest bit complex I started using an accountant. They use TurboTax, I'm pretty sure, but they also know all the questions and what they really mean and can answer my questions on what the tax impact of various situations I encounter might be. They also go to bat for me if I have an audit.
Not only do I consider that far more valuable than the $500/year it costs, but I'm also confident my tax savings more than cancel the expense.
Just my experience, but I recommend a tax accountant to all adults.
In Hong Kong, you literally get about 3.5 pages of A4 to fill for your annual income tax returns, the vast majority of which you can leave blank unless you are one of the richer people and do rich people things.
And then we have taxes on very few other things, which you simply pay at the time of purchase: - Alcohol - Motor vehicles - Real estate - Stocks I don't think I'm missing anything important.
We have no other sales taxes otherwise. And look at us, we are a 1st-world economy, despite being such a small city.
Imagine a legal document that is written using terminology that is ultimately just a series of higher-order functions. A human could make sense of it with some training, and a computer could directly execute it with determinism.
The tax code is relatively straightforward for a programmer. It’s a bunch of conditional statements and simple math. Even the cases you mention are straightforward compared to the usual ambiguity that comes with engineering a product.
TurboTax is awful software. One question at a time, their user flow is AWFUL. Truly abysmal design for even the simplest of tax situations.
The IRS’s free file fillable form site is similarly awful; their asynchronous, background xml validation of forms after they’ve been submitted to notify you that their system let you input something invalid is a laughable system design.
This market is ripe for disruption. I do feel that should come from the government itself, but that seems unlikely for political reasons.
Genuinely it is a horrible experience, but I suppose it is better filing by paper and waiting a few weeks for a small correction.
I re-filed with paper... still hasn't showed up on the IRS website.
There is no software development team on earth who could catch up with the full capabilities of TurboTax without some sort of fundamental shift in the business. I really hate to say this as someone who makes a living out of it, but dealing with the current amount of complexity in the tax code with a piece of software that a non-expert could use is virtually impossible.
For the happy path (i.e. single individual, no dependents, no investments, no retirement, rents home), you could certainly build an application that handles these scenarios. The moment you factor in individuals who are bringing stock sales, multiple investment properties, ownerships/K1s and other complex scenarios to bear, its a different hellscape altogether.
Also don't forget that most states have their own independent tax codes as well, which further complicate matters. There's difficulty multipliers all over this problem domain, and you can be certain that the lobbyists employed by Intuit, et. al. are encouraging this.