April 15, 2010

• fifteen

  It’s time for my yearly rant against filling out taxes.

  Don’t get me wrong. I’m not against HAVING taxes. I think we really NEED taxes. A progressive tax system is a great and necessary thing in our society.

  But the thing I never understood is why we have this pointless ritual of filling out an irrelevant form every year in order to have our taxes apportioned correctly?  It strikes me as a really inefficient system in that it requires a lot of individuals to keep track of a lot of documentation and fill out a lot of forms they barely understand. The flaws of this system are many:

  - It’s time consuming for the people. This hurts people whose lives are very busy disproportionately.
  - It’s prone to errors. In particular the people with lower education are more likely to make errors that could cost them money and even make them legally liable.
  - It’s easy to game. Those who are more savvy are more able to not just fill out the forms to maximize their benefits, but are also able to manipulate the system, even lie, in order to reduce their tax burden.
  - It creates a lot of bureaucratic overhead. Far too much money goes into processing these forms.
  - It’s harmful for the environment. The amount of paper needed to process these forms as well as the costs in terms of gas used to mail these forms around the country is a waste. Even though a lot of people file their returns electronically these days, there’s still tons of people who have not the means or ability to file an electronic return.
  - It encourages the development of costly middlemen industries who lend their “expertise” to people to fill out their taxes.  That just drains money away from the poor who are more likely to rely on them.
  - It’s extremely expensive for the government when people fail to fill out their forms to have to track people down
  - Lots of tax revenue is lost just because the IRS doesn’t have the resources to manage this complex clunky system

  It would make enormously more sense to have a more automated system. Most of the information that is required is already filled out in our I9 forms or sent from our employers or already possessed by the government through other means.  The way to set this up is to have a sort of online login for everyone. You login. You setup your information and that’s it.  If you ever have to change anything, say you have a new dependent or something, you can login and change it. Otherwise, every single year you should have to do nothing. You’ll be mailed a check or have your cash deposited directly to your bank account if you get a return, or you’ll be mailed a bill if you owe.  The default system should be intelligent enough to be able to figure out the maximal return you can get or minimize the amount you owe. This isn’t really rocket science. It can be done systematically. It’s not that hard.

  All the information based on your normal behaviors that effect your taxes could easily automatically accumulate in this account. If you get interest on a bank account, the income would appear. If you make a purchase that qualifies you for a tax break, the information would appear. When you donate for a charity, the charitable donation can appear. If you buy stocks, the information about the stocks would likewise appear under your profile. All this information exists in electronic form. I see it every time I look at my bank statements. I see no reason you should have to do anything in order to have the tax system be aware of it.

  Privacy concerns can be taken into account as well. For example, there’s no reason your account needs to be under your real name. You could be identified by an anonymous identification code. No personal information needs ever be collected or held under your account. The site would obviously be encrypted and all information secured. You could even have control over access to the information in your account so you can share it if you want.

  The site could even give you statistical analysis of your returns. So you can see visibly how your tax burden compares to other peoples. This could help avoid a lot of the stupid falsehoods that tend to be bandied about around tax time. Nonsense statements like that the poor don’t ever pay taxes and the rich are soooo overburdened by taxes. You could see quite clearly what percentage of your income went to taxes, how much people in your age group, tax bracket, income group, race, career path, etc. have paid in taxes. There’s no end to the amount of easily available information could be accumulated for you in one easy to access place.

  But for now, since we DON’T have a nice system that lays this all out for us in an easy and obvious form, here’s a chart from Citizens for Tax Justice as reported by MotherJones that shows that the amount of taxes paid by the rich are not substantially higher relative to their percentage of income than that paid by the poor:

   

  In any case, my point is that symplifying our tax code has typically been a Conservative issue and usually it’s couched in language that says we have to use regressive tax systems that unfairly burden the poor.  But it doesn’t HAVE to be a conservative issue.  It’s entirely possible to simplify the tax system and still keep it progressive.  And such a system I’d say would be substantially more progressive than the one we have now simply because our current complicated system is a burden on people in terms of time and energy required to be spent, and benefits the wealthy (who know all the tricks or can easily pay someone who does) while hurting the poor (who either don’t know the tricks and make mistakes or are required to pay their hard earned money to organizations to do it for them that could be fraudulent).  

  Any system that eliminates this kind of dichotomy would be much better for the country as a whole.

  • 6:56 pm
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