Tax stupidity redux

So, I recently referenced an excellent Planet Money episode on how stupid it is– and very much a political choice– that we waste billions in dollars and hours on tax preparation.  The government has the information; they can do this for you.  TR Reid has written a new book on tax policy comparing US to the world (naturally, we come up very short).  He’s got an NYT column today on the tax preparation stupidity part:

Americans will spend more than six billion hours this year gathering records and filling out forms, just to pay their taxes. They will pay some $10 billion to tax preparation firms to help get the job done and spend $2 billion on tax-preparation software (programs that still require hours of work). Millions will subsequently get a notice from the I.R.S. saying they got the figures wrong, or put the right number on the wrong line or added wrong in calculating line 47 — which means more hours of work or more fees to the tax preparer.

And here’s the most maddening thing of all: It doesn’t have to be this way.

Parliaments and revenue agencies all over the world have done what Congress seems totally unable to do: They’ve made paying taxes easy. If you walk down the street in Tel Aviv, Tokyo, London or Lima, Peru, you won’t see an office of H & R Block or a similar company; in most countries, there’s no need for that industry.

In the Netherlands, the Algemene Fiscale Politiek (the Dutch I.R.S.) has a slogan: “We can’t make paying taxes pleasant, but at least we can make it simple.” It is certainly simple for my friend Michael, a Dutch executive with a six-figure income, a range of investments and all the economic complications that come with an upper-bracket lifestyle.

An American in the same situation would have to fill out a dozen forms, six pages long. Michael, by contrast, sets aside 15 minutes per year to file his federal and local income tax, and that’s usually enough. But sometimes, he told me, he decides to check the figures the government has already filled in on his return. At this point, Michael was getting downright indignant. “I mean, some years, it takes me half an hour just to file my taxes!” …

Our own Internal Revenue Service could do the same for tens of millions of taxpayers. For most families, the I.R.S. already knows all the numbers — wages, dividends and interest received, capital gains, mortgage interest paid, taxes withheld — that we are required to enter on Form 1040…

The “Tax Complexity Lobby,” as it has been called, includes big national preparers like H & R Block and tax-prep software companies.

Intuit, the maker of the top-selling program TurboTax, has reportedly spent millions over the years to persuade members of Congress to “oppose I.R.S. government tax preparation.” In an annual report, the company warned investors that “government encroachment” — the I.R.S. filling out the forms for you — would be a significant competitive threat, which is why it has to fight the idea. So you do more work, they make more money.

Ugh.  Only in America.  Why do we have to be so uniquely bad at policy in this country?  Or maybe, if I were in Denmark I’d’ be complaining about a lot of Danish policy stupidity.  Anyway, we can do so much better.  At least now we have Trump, as “only he can fix it.”

Also, the tax preparation aspect is only a small portion of how our tax codes don’t make a lot of sense.  Reid’s book takes a nice broad look.  I haven’t read it yet, but great interview with Terry Gross.


About Steve Greene
Professor of Political Science at NC State

3 Responses to Tax stupidity redux

  1. R. Jenrette says:

    “Why do we have to be so uniquely bad at policy in this country?”

    It’s not stupidity. It’s deliberate policy to protect the tax preparers and to keep the rules complex. How else are some people and corporations going to be able to use the tax laws to avoid paying big taxes? And to make big money on preparing those taxes?

  2. Mika says:

    “Tax Complexity Lobby” 🙂

  3. Henrietta Jenrette says:

    The more complex the law, the less it is understood, the more money it takes to hires experts to game the system and lobby for more complexity, so mainly the all ready wealthy corporations and individuals benefit.
    Throw a few crumbs to the general public like charitable contributions, something for married couples and children and homeowners and the citizens should be happy.

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