Andrew Yang, who was the 1st declared Democratic presidential candidate for 2020, has a whole policy around the strange aspects of US taxation, including automatic filing and getting a breakdown of where your money went.
>> Instruct the IRS to implement a system whereby any American can opt into a program to have their taxes filed automatically.
>> Instruct the IRS to coordinate with the Treasury to prepare a report on federal spending, and send each taxpayer a rundown of the actual amount of their taxes that went to each major spending area (e.g., domestic programs, foreign aid, military, etc).
>> Increase the budget of the IRS by 50% to $16.2 billion and modernize it with the latest technology. Money spent on the IRS will almost certainly pay for itself many times over via better tax compliance and less wasted time of citizens. Running the country like a business means both taking care of constituents and collecting revenue as seamlessly and efficiently as possible.
> Instruct the IRS to coordinate with the Treasury to prepare a report on federal spending, and send each taxpayer a rundown of the actual amount of their taxes that went to each major spending area (e.g., domestic programs, foreign aid, military, etc).
I think this is outstanding. I'd love to know how my tax dollars are spent, and I think once people see this they can begin to push for meaningful reforms that they feel spends they money more effectively.
This might sound like one of those "the people I disagree with are evil" kind of exaggerations, but it is not. This is a real position that is fairly common among Republican thought leaders. For example, Ronald Reagan literally said "Taxes should hurt."
The basic logic is that if filing taxes is too easy, people will not have a good grasp on how much the government is asking of them and will accept tax rates that would irritate them in a system with more direct participation. (On the flip side, this seems to assume that the taxes are being used to create a good enough quality of life that people are generally satisfied and not poor, so if that's happening, it might actually be a more realistic perspective than if people focused on the tax rate more.)
> The basic logic is that if filing taxes is too easy, people will not have a good grasp on how much the government is asking of them
This basic idea seem patently ridiculous to me.
I've more-or-less made a career of doing math and managing complicated procedures, yet still, I find the current tax prep process to be such a mind-numbing grind that, by the time we get to the point where I've calculated how much tax I actually owe, I've long since quit caring to calculate what percentage of my income that is. By that point, the only number I care to see is how much I owe or will be refunded, so that I can just be done with the whole mess.
It's hard to imagine that someone who's got a more typical level of comfort with math is going to be any more prepared to do that one extra calculation.
If the GOP really wanted me to be aware of how much tax I'm paying, they'd reduce the whole process to a simple report they send me, with everything already calculated, that has "your calculated income tax in dollars" and "your calculated income tax as a % of net income" listed in big bold print at the very top.
It seems much more parsimonious to me to suppose that the logic is, "If we make income tax a hateful process, people will come to hate income tax."
(Which, incidentally, is a line of reasoning that would play very well to the position of those who want to get rid of progressive taxation. Most other forms of tax we have in the USA are either flat or regressive.)
And yet it seems the majority of Americans don't understand marginal tax rates nor how refunds represent interest-free loans to the government. If the point was to educate the public about how taxes are applied, it's not working.
Right, but that actually is part of what GP is describing. They want tax filing under the status quo tax calculation system to be as difficult as possible so that they can use simplification of filing as the sales pitch for changes to the calculation method which decrease nominal, and even moreso effective, progressivity.
This. As long as most people have to grind out their own calculations, you can't have both easy taxes and progressive taxation. It's all the bits and bobs that have been done to maintain and (over, arguably) refine the regime of progressive taxation that make the math complicated. The math is only truly easy under a flat tax.
The actual calculation of the amount due from the taxable income uses a lookup, which is equivalent difficulty under any scheme other than a flat capitation, where the table reduces to a single value, and even the GOP hasn't proposed a capitation.
Getting from a collection of other information to the final taxable income is most of the complexity, as are things like credits that apply after the initial application of the rate. But there is nothing inherent about the flat vs. progressive rate distinction which drives practical calculation complexity, they are just orthogonal concerns where the popular one (simplification of calculation) is used as a tool to sell the one that is less compelling to the broad public on its own.
Bracketing isn't the only mechanism for progressive taxation at play. There's also EIC, child tax credit, AMT, and a whole zoo of other exemptions and credits and deductions, etc.
Not to mention that the only reason a lookup is being used is to reduce opportunity for error in hand-calculating one's tax obligation. And it's also another big reason the current tax system doesn't fit on a post card: A pretty big chunk of the instruction booklet is those tax tables.
Tax complexity is mostly unrelated to bracketing (progressive or otherwise); it's mostly due the difficulties of computing "income" against the torrent of schemes out there to obfuscate it.
Virginia had basically this system until about a decade ago. The tax lobby managed to kill it off under the argument that $40k/year to maintain it was too much for the state budget. The new e-file system costs a family $40 or so for in-state taxes if you don't want to mail in paper or make less than $66k.
H&R Block, Intuit, etc... made huge bank off of killing the state e-file system. There is zero chance they're going to let the feds implement something similar without an enormous fight.
> I'm not sure many people even think about how possible this is.
Lots of people do, it gets lots of talk every few years, and nothing happens because the people that don't want it to happen do so a lot more intensely than the people that do want it to happen want it (because the former literally have major businesses that depend on it not happening.)
That's quite an understatement - a vast majority of _employees_ don't need tax to be digital or not because it's all done for them through PAYE (Pay As You Earn, i.e. deducted on your payslip before you see it) and other mechanisms anyway.
For UK employees without complex affairs, it's already done: my tax happens without any interaction, no digital conversion required.
I spend £0 and about 60 seconds on my taxes every year. It's all arranged automatically between my employer and the tax authority. I just get a letter in the post every year telling me the calculation that I check is sane. My tax payments are deducted by my employer from my monthly pay.
If you live in the US and you think your taxes are bad, you haven't seen anything yet. The IRS starts to really make your life miserable once you move out of the country and live as an expat. The reporting requirements (FBAR and FATCA) border on ridiculous. As an example you need to report all your financial accounts, interest on them with no minimums, you have to know the maximum amount in each account over the course of a year, and BTW, if you are a shareholder in a non-public company, that company's statement goes into your tax filing, too. Preparing your tax return becomes a major project that you do once a year, and you really have to pay a specialized company to do it for you, because there are so many pitfalls.
The part that I found most surprising is that in the US there is basically no way for an individual to read the law and follow it. The law is way too complex and murky. As a contrast to that, in most countries that adopted German law principles, it is perfectly normal for a person to go read the law if in doubt.
I've spent at least $2000 this year to figure out how to make this work—and I'm going to spend more to actually fill and send the forms off. . .
The additional requirements of the recent tax legislation which make it effectively impossible to own a foreign corporation (as an American living in said foreign country) and retain earnings according to the corporation's "home" country's tax laws is even more ridiculous. The IRS demands 10-20% by fiat disregarding all international tax law.
The FinCEN (FBAR etc.) stuff is the troublesome stuff, the IRS is actually very easy to work with and the forms are not difficult to file once you know what you're doing (you can go to a cross-border professional filer the first time around to get a handle on it, and then just follow the memos about changes to the procedure each year).
As a Canada-U.S. dual citizen I used to find it very difficult to file both, but I think it's just a knowledge gap.
The IRS has obligations to you which you'd be laughed out of the room for attempting to exercise with the CRA, so there are positives, even if the tax codes and anti-money-laundering procedures are somewhat onerous.
Americans are (in my opinion, excessively) concerned about money laundering and "dark money", so the result is that money is accounted for when Americans control it abroad. The procedures stem from that desire to account for holdings and transactions of Americans abroad: reporting any transactions with other U.S. persons abroad, reporting bank accounts which exceeded 10,000 USD at a credible exchange rate (the IRS posts their own) for the time during which it exceeded 10,000 USD, etc.
Evevn here in this thread, you see people concerned that somebody who gets rich in Canada, using Canadian infrastructure and capital, may not be paying "their fair share" of U.S. taxes, which is pretty ridiculous if you imagine the injustice of double taxation that entails. I might make enough money one of these coming years that I have no prudent choice except to become resident in the U.S. to avoid these tax peculiarities.
Those laws were written to make sure the government gets their tax money from people who are way wealthier than you. that's why the law is nearly incomprehensible: it's a compromise between lobbyists of moneyed anti-tax interests and those who are trying to solve legitimate tax dodging problems that arise with expats and international wealth in general.
> The part that I found most surprising is that in the US there is basically no way for an individual to read the law and follow it. The law is way too complex and murky.
The FBAR is the worst--there is very little difference between what you report to the IRS and what you report on the FBAR. If they actually need something that's not on the IRS form then add it to the IRS form. Take the FBAR out and shoot it.
The worst part about taxes is that I never know if I did them correctly since the feedback loop is up to 3 years. Just shoot them off into the ether and cross your fingers you don't get a giant bill next year.
The first time I filed, I had not updated my W4 soon enough after moving and owed NYC like $4k in taxes which came up around 18 months after I filed. The following year the software I was using said I owed around $10k in taxes, which I was pretty sure was wrong, so I went to an accountant and they did it for me and said I owed nothing. Even after all that, there is no way to know who is right until 3 years from now (IRS theoretically doesn't look back more than 3 years for individual returns).
Idle NY tax thought -- it's wild that you have to file a NY return just because the company you work for is based there -- seems weird that other states put up with that (not that it takes revenues away, but seems like it forces an additional paperwork/accounting burden on them)
NY makes you file based on the source of the income not your residency, "You must file Form IT-203 if you: were not a resident of New York State and received income during the tax year from New York State sources", also NYC has it's own tax rate and form, as does Yonkers.
I don't know if it's true for NY, but many people live in western Wisconsin and commute to St. Paul / Minneapolis in Minnesota, and none of those people are required to file income tax returns in Minnesota. They file only Wisconsin returns.
In UK there is not even a box to tick. Vast majority of people don't ever file a tax return themselves, I've recently had a discussion with someone who has worked in the UK for 15 years and he was surprised to hear that tax returns are even a thing - it's so automatic that he has never even thought about it.
There are still some things I had to fix, for instance: support payments from my parents, which are tax-deductible for them, and that I have to declare; the fact I got in a PACS [0].
If I moved abroad, I'd be worried some things like that get missed for whatever reason ;)
Yes, of course there's loads of circumstances that require you to fill a tax return manually. But even then the sections about your employment are filled automatically based on the returns submitted by your employer.
The thing is that if you are a British resident who only works one job and doesn't receive money from any other source, then such person would literally never have to think about their tax return - it will be done fully automatically without any input from them whatsoever.
Do charities in the UK report donations to the government? Do they not have business expense deductions? That's the kind of thing that usually requires someone to fill out a return.
The donor doesn't have to file anything, and charity gets the extra money. When donating to UK charity you specify your name and address and confirm you are a UK taxpayer. You pay in after-tax money, the charity then gets extra money from UK government at the standard tax rate.
Yeah, in Sweden it's trivial to do your taxes: you log into a website online, you check that the salary number seems accurate, and if you have no amendments, you just click "OK" (more or less). You sign it with something called BankID, which is an internet-identity thing you can get from your bank. I think it took me all of 7 minutes last year.
Planet Money just did a story on this, someone in California tried to get Ready Return passed (which does almost what you're stating). It didn't pass by one vote.
I'm Chilean. It just took me ~40 seconds to complete my tax declaration, skimmed through all companies involved (employer, banks and pension fund), typed in my bank account for my tax return and done.
The single thing that bugged me the most this year was on my state taxes. I got this nice W2, with copies for the federal tax filing, the state tax filing, and my own copy. But my state doesn't want me to send them the W2. No, they want me to print out their own special little additional form, and transcribe the numbers from the W2 onto that. Seriously, WTF?
I actually thought about civil disobedience on this - just staple the state copy of the W2 there and let them deal with it. Maybe next year...
tl;dr: All the infrastructure is in place and everybody loves the idea (Literally 99% approval in the test-run of 80,000 taxpayers); but Intuit (Makers of the TurboTax software, who get rich thanks to people's confusion and frustration), spent $28 million lobbying against it.
The Planet Money podcast just had an episode on this topic ("Joe Bankman, professor at Stanford, figured out a way to make filing your taxes easy and painless. Then the tax lobby found out about it.")
Just listened to it. It kind of annoyed me how breezy they were - corporate interests and the Republicans making 120 million American lives miserable - ah it can't be helped.
The screwed up taxes is a symptom of a dysfunctional government.
The fix is to address the root cause--reducing excessive lobbying that seems to control the government and implementing a direct democracy that puts the government better under the people's control (it's time to replace the electoral college).
I'm not sure it as simple as blaming lobbyism or the electoral college. In France and Germany filing taxes is also an insanely painful procedure.
There are massive bureaucratic institutions and processes that need to be changed, huge IT systems to be created and maintained (doesn't the IRS use magnetic tape??) and laws to be adjusted.
Making complex things simple is one of the hardest jobs out there.
I'm a German citizen working and living in France, I think I have a pretty good perspective on how hard it is to file taxes in both countries. There is the theory of how to go through the process and then there are the countless small obstacles that make it hard in practice. You don't get a thriving personal tax industry and millions of people complaining (it really is cliché at this point in France) because a trivial web-form takes care of everything.
I don't know the French situation, but for Germany: If you are an arbitrary employee with only a salary and maybe a savings account you don't have to do anything.
The employer will file salary taxes, the bank will file taxes on interests.
At the end of the year they send summaries and that can be it.
As soon as you have income from other sources (i.e. self-employed work etc.), want to deduce more than 1000€ etc. you have to get into the paperwork and then it can become quite complex if you want to really take all benefits in.
This was my first year doing my own Swiss taxes (US citizen in CH). Even though I only know German to an A2 level, the free software provided by the Canton and the instructions on how to fill out the return completely guided me with no problems, even through the additional forms. In addition, as a side effect I have accurate numbers for my income, my interest payments, my wealth, and my debts.
The US side of things has been... not the same experience.
I’m in the exact same position as you (first year filing taxes in CH as a US citizen). I filed for an extension because I’m waiting for AHV to be resolved due to some ambiguities in my tax status (employed vs self employed), but I’ve read the paper form and it’s so straightforward. My friends here are so confused when I talk about US taxes and ask questions from that perspective—my questions make no sense because it’s just obvious how to do here vs the US where you have to hunt for every tiny little detail.
If you ever want to meet up and compare notes as a US expat in CH, let me know! Email in profile.
That seems like an uncharitable characterization of a group that has argued for a simpler tax code with generally fewer loop holes (as opposed to an elaborate tax code that no one can understand, with a pre-filled form that in theory one could double check but in practice few would check).
"uncharitable characterization of a group that has argued for a simpler tax code with generally fewer loop holes"
Fewer loopholes for middle and lower class folks? Yes. Repealing the estate tax is very literally a new loophole that allows the rich to keep more money while closing that pesky mortgage interest deduction for the middle class. Taxes are just a way of redistributing money. Calling a party pro-tax because theyre moving the burden from one group to another is...interesting.
About 50% of the US government's spending is social programs. Unless every penny of that is spent on those who paid the taxes to fund it, then wealth is being redistributed.
Yes. Our two biggest budget line items are defense and entitlements. Defense very much pays out the megacorps more than the poor. Entitlement spending favors the rich who tend to live longer. Also, social security and medicare are regressive taxes.
I think you mean more of the money go to wealthy recipients, which (true or not) is different from saying there are more wealthy recipients than non-wealthy recipients (probably impossible since there are so few wealthy people).
Poor taxpayers spend 200+ dollars to file their taxes. Every single one of my employees goes to H&R block or some tax guy to pay taxes. Almost all of them have 1 job. Most of them 1 or 2 W2s and most don't houses.
A pre-filled form will help every single one them to save money.
And you can still have your pre-filled form verify by an accountant or H&R Block. No one is stopping you from that.
You should listen to the latest Planet Money Podcast - Tax hero. Republican don't support this because having complicated form will make people oppose taxes in general. That is the republican motto.
Poor taxpayers spend 200+ dollars to file their taxes. Every single one of my employees goes to H&R block or some tax guy to pay taxes. Almost all of them have 1 job. Most of them 1 or 2 W2s and most don't houses.
We own a house, two high-tech incomes, and loads of 1099Bs to deal with. IOW, I can't imagine the tax situation of your employees is any more complicated than mine. In previous years, I could whip it out on a Saturday morning. This year, it was an hour of importing forms electronically, if that (umm, thanks, higher standard deduction?).
I'm not trying to take away from your point, I'm still chafed each year that I have to give money to TaxAct (at least they don't lobby for complicated taxes, AFAICT). But taxes aren't that complicated for simple situations. Maybe have an hour brownbag or something on "here's how to enter the control # off a W2 and import it. Import from Fidelity. Sorted."?
In my experience, it's less the effort required to do it, and more about the risk of getting it wrong.
There's a lot of domain-specific knowledge that goes into filing your taxes, and it's easy to be afraid that you're gonna mess it up and be on the hook for thousands of dollars.
> Poor taxpayers spend 200+ dollars to file their taxes.
Through the Free File Alliance, TurboTax and other such software is free for anyone making less than 66k.
Maybe this problem could be solved with education? I know there are also issues where people in poverty don’t file and then miss out on $1000s they might have gotten from the government via EITC.
There's nothing stopping low income people from just filling out the forms. With a trivial income situation and no complicated deductions it's dead simple. The problem is that much of America is functionally innumerate and doesn't want to take a little time adding up some numbers.
They may be referring to the Republicans' decades-long campaign to suffocate the IRS, which has resulted in more audits for the poor and fewer for the rich, more easily allowing wealthy taxpayers to drag them on past the 10-year statue of limitations: https://www.propublica.org/article/how-the-irs-was-gutted
So to be against loopholes you must support the 30% tax rule on incomes over USD 1m? I feel this conflates tax avoidance with having a very high income. Mr Buffett for one might be upset at the implication.
They may argue for that, but they also argue for a dramatic reduction in taxes overall, in terms of the number of different types, the rates, and the total amount of revenue raised.
I was particularly entertained by the tax forms this year. The 1040 is now only half a page, but there are several other required forms that didn't exist last year.
I hate filing taxes so much. I wish we would switch to purely sales tax and corporate tax. I know the arguments against them, but I just don't want to do paper work.
I have never had to do any income tax paperwork. It’s not intrinsic to the concept of income tax, just a feature of the particular implementation in your country.
Right, it was a flippant remark meant to express exasperation in one particular thing. Not a well thought out policy proposal.
Although, when you say "a crushing burden on those people who could least withstand it" are you assuming I am suggesting a flat sales tax?
It is possible to have a federal sales tax that has categories, with different percentage scales. So maybe a bag of rice has 0%, pork fried rice from the local Chinese food place has a %5 sales tax, and Lobster risotto from a fancy restaurant has a %50 sales tax.
All I am suggesting is the burden of filing taxes should be pushed to businesses who already have to deal with accountants and lawyers and whatnot.
I'm not advocating for a purely consumption based tax system but, if we were to have one, it seems to me that a small amount of ingenuity in the design of the tax scheme could mitigate that problem almost entirely.
This story is disingenuous. For people with "simple" tax situations (no itemized deductions, etc) the forms are already very simple.
The scenario they paint with chasing down form after form simply does not happen for most people. For most people it's one page.
But the idea that your taxes can be pre-computed by the IRS is fantasy beyond that, unless the tax code is significantly changed.
Sure they know your W2 income and some other standard stuff. How do they know your self-employment or business income? How much you gave to charity? How do they know what unreimbursed expenses you had? How do they know how many kids you have? How do they know your marital status?
I guess most of that could be addressed by just eliminating all deductions and allowances but even at that there are a lot of things they simply cannot possibly know until you, the taxpayer, tell them.
In the UK you only have to file if you have particularities like that which you describe. For everyone else, the PAYE system seems to deduct the right amount ("withholding" in the U.S.). It's simple enough that not everyone needs to file: https://www.gov.uk/self-assessment-tax-returns/who-must-send...
Not really. The IRS really does know your W2 and all your bank and investment income. If you've worked for several different companies, you often have scattered investments that you have to chase down that, in fact, they already know. There's really no reason why they couldn't provide you with pre-filled forms for all that stuff. Sure, there's stuff they don't and can't know, but for most people those are the simple things (how many children, marital status.
> How do they know your self-employment or business income?
If it's 1099 income, they know it for the reason that the 1099 gets filed with the IRS, as well as a copy going to you.
> How do they know how many kids you have?
That doesn't change very often, and there is interaction with the federal government which easily could be, if it isn't already, shared with IRS for the most common reason for changes in the positive direction.
> How do they know your marital status?
Again, that doesn't change frequently, so mostly they have a good basis for it by assuming whatever it was he previous year.(For this and the preceding, and a lot of similar status issues, it would be easy enough to move the data collection to a pre-filed form—for regular workers you could collect it, or changes to it, as part of the W-4—instead of the equivalent of the current retrospective tax return, expanding the accuracy of precomputed taxes and reducing the need for supplemental retrospective filing.
But, yeah, you'll probably always need an option for at least supplemental filing for information that differs from information the IRS has from other sources or is outside of it.
Most people do not have income that doesn't already show up in the IRS records. Yes, there are those of us who are self-employed and would still have to fill out stuff. Charity? Most people don't itemize and if you don't charity doesn't matter. Unreimbursed expenses? Didn't that get eliminated this year? Kids? Same as last year, if that changed you modify the return. Marital status? Same thing.
Personally I wouldn't gain that much from simply a pre-filled return (I'd keep B and D and chuck the rest) but many would.
For most people that’s not a problem in the UK. Partly that’s because all employed income has to be reported to HMRC by your employer, and party we just don’t have the same system of tax deductions - you can’t write off charity donations, and expenses are only deductible by companies. For children you have to register for child benefit payments with the government.
Even for the self employed it’s generally a pretty simple process of filling in your income and expenses and then everything else is calculated for you.
If you have other income you can just go to the HMRC web site and fill in the forms on-line. I've had to do it a few times, and its not a big deal.
If you have a simple one-off event (like a capital gain when selling something) then you can just write a plain ordinary letter telling them about it and they will sort out the tax bill for you.
Taxes are extracted during payroll and that’s a very easy process for individuals. The tax return is just an adjustment. It’s an annoying process to get a direct deposit for at least as many people as it is an annoying process to send a check.
If I were a strategist in charge in making taxes hurt, I would try to help people understand how much bigger their paychecks could be. Please read this comment as politically neutral.
If you wanted to make taxes hurt and have political consequences, you wouldn't necessarily put them exactly on the opposite side of the calendar from elections. (Unless you also wanted to maximize the public's frustration about doing them)
That’s why it’s a common sentiment among the “taxation is theft” crowd that withholding should be eliminated and people should be writing a quarterly check to the IRS.
It’s also part of why price tags in the US almost never include sales tax.
I'm not saying it's not justified, specially when i have seen my family friend's life being saved without ruining them financially because of free healthcare, i was just replying to the last sentence of OP. It's justified and i'm still allowed to hurt a bit by seeing the amount of tax i pay.
You probably know this, but it is possible to set things up so that zero taxes are taken out of your paycheck. Now, come April 15th, you will owe those taxes, but if you have an idea or know what that amount will be (in theory, you should be able to know it exactly), then...
...you can elect to not take those taxes out, and instead via your bank or employer have that percentage of your check put into a savings account of some sort. Then you can let that money sit and accrue interest (and laugh at the small return), or use it to invest (which has a greater risk, because if you invest wrong, now you've lost that money and you still need to pay it back at the end of the tax year).
If this sounds interesting to you, then (unless you already have the experience) I would look into some form of small time investing, or other financial instruments for wealth accumulation from which you can still withdraw an amount at the time you need to pay your taxes.
Assuming you can find something with a decent return over a year's period. Which is probably the most difficult part of it all.
This is bad advice. The IRS will fine you if you adjust your withholding to be significantly less than the tax owed. You can’t just hold onto the money until April 15.
The best strategy for withholding that conforms to the law is to use the IRS online withholding calculator to set your exemptions and aim for a payment/refund of around $0
It's painful here in Canada, too. I read passages like this about civilized countries, also heavily socialized like my country, and am envious:
> "Netherlands, the procedure is simple ... Dutch citizens can file their taxes in minutes ... in Sweden, 72 percent of taxpayers say filing taxes is easy"
I enjoy what I receive from paying my taxes. Please make it easier.
Is it? With SimpleTax [0] and Auto-fill [1][2], tax filing for an average person (with a bunch of T4s and T5s, some RRSP contribution, etc.) shouldn't take more than 30 minutes. That's how much I have spent on preparing my taxes every year since Auto-fill was introduced, even though I had to input T2202As by hand.
Thanks. I generally use an accountant because with some investments and side businesses I am (overly?) concerned about making an error. I'm considering SimpleTax this year.[0] No affiliation but I'm a sucker for a scrappy startup.
It's cheaper to offer a 10% gift voucher than a 10% discount.
Where I live, most people approve a pre-filled statement. This boosts tax revenue, because people don't think twice about deductions that are not pre-filled.
It's more convenient not to do your own math, if you trust the actor who does the math for you.
FICA alone is 15.3% starting from the first dollar earned. Add in local income and sales tax and I don’t see how anyone who earns money could be paying a single digit rate.
By the time you account for income tax, FICA tax, state tax and health insurance you can say good bye to about 40-45% of your income at an average software developer wage who happens to be self employed. That's effective rates too.
Effective rates. The child tax credit; 401k and other income deductions; the standard deduction, - it all adds up. Your tax can be much less than the minimum rate if you want. (of course this is about trade offs, if you don't otherwise want a kid the child tax credit isn't of much use)
As an engineer who needs to work in order to eat and keep a roof over my head, my effective tax rate is more than double that of someone who doesn't need to work because they live off of capital gains, dividends or inheritance.
Well, you've got dozens of different taxes out there, and most of them are regressive. A "flat tax" income tax would probably have a lower bound number below which your taxes scale linearly down to zero.
But tweaking the income tax does nothing for the other payroll extractions. Or the gasoline excise tax. Or the sales tax. Or property tax (paid through rent). Or tariffs.
Or the hidden tax on the everyone: inflation. That paycheck doesn't go quite as far each year, does it?
Beyond that, you've got land-use controls and building restrictions that artificially drive up the cost of housing close to job centers. Then school zones create more barriers. You'll spend more time commuting, which means the rest of your life is more difficult. And buying a car is more expensive as the regulatory burden on auto-makers increases year after year.
Unfortunately, this is where many say, "Well the government just needs to help those in need." So taxes go up. Rent control is added. Rinse & repeat.
Yes. Fair doesn't necessarily mean equal. A 10% tax could eat up literally all the disposable income of someone who is barely scraping by, but is hardly noticed by a person who is bringing in hundreds of thousands of dollars a year.
In a fair society, it would become more and more challenging to move up the economic ladder as you reach higher levels.
In our society, life gets easier as you move up. Beyond a certain threshold, you can set up a self-maintaining rent seeking empire and stop working entirely, while your wealth accumulation continues to accelerate.
Is there any reason we don't require the government to create software that largely does the taxes for us? They have the W2s, etc. and it seems like they could fill most of the forms out. We'd just need to set the deductions.
The argument they try to make is that the government could take advantage of its citizens. As in, it wouldn't be in their interest to reduce our taxes as much as possible.
Here in NZ most people do not need to file - the tax system is deliberately simple, there are essentially no deductions/etc.
Most people who have a single regular income will find that their employer has paid the exact correct amount of PAYE on their behalf, people who have multiple employers may receive a tax refund, they can file for it by filling out a 2 page online return (I think this year the IRD will start doing this for you, you'll just get a cheque in the mail)
As an employer filing monthly PAYE is equally trivial, it can be done with 1 line in a spreadsheet - I spend 30 minutes a month paying bills/taxes/etc for my company
A fair tax system would be one where you are sent a bill every month and you allocate your money as you want it to be soent. Some baseline auto-allocation should be a part of this. Perhaps you control 75% and the rest is automatic. No tax filings and the IRS is reduced rather than grown into a larger monster.
People don’t revolt about taxation because they never see the money. If people had to pay the bill themselves every month there would be riots in every city within a year or less.
I agree with you. My point is that people need to wake up and understand just how much they are giving up and what for. If they had to pay it as a monthly bill they would be compelled to question it.
Well, unless you're poor, at least you likely don't have to worry about being audited. The IRS is too busy auditing the poor and minorities to worry about anyone else.
I'm not saying that conclusion is incorrect, but I'm not convinced by the article's preemptive rebuttal to the population heatmap counterargument. To its credit the article mentions it:
> The sociologist Kieran Healy has joked that most data visualization maps of the US show one of two things: population density or the percentage of the population that’s black. This is decidedly one of the latter maps, with the notable additions of heavily Latino counties in southern Texas and Indian reservations in South Dakota and Montana.
However...statistics are pernicious. This is an extraordinary accusation, and before I accept it as true I'd like to see more due diligence to ensure there isn't (for example) a stray, superfluous correlation between population density and Hispanic/Black demographics at play here.
With that aside, this looks like something that should definitely be investigated more thoroughly. Even if this is ultimately a side effect of minority groups being correlated with greater population density (and I don't know if that's true, to be clear), the ultimate consequence looks pretty negative.
I've long wondered why the government doesn't do the calculation first, then you have the right to appeal if you want a change. If they have the data to check the calculations you make, they have the data to do the calculation.
I am deeply disappointed in the gratuitous attack on Republicans at the bottom of the article. Low for even the Atlantic, it shows this is not an unbiased source but rather a politically biased one.
Filing your taxes is an expensive time sink if you're wealthy with a lot of assets. I'm not, and it takes me about ten minutes to file mine on the free website. Fill in my W-2, answer about ten questions, hit the "File" button, done.
the article uses the netherlands as an example of how its supposed to be done. the problem in the netherlands is that there are some things you are legally entitled to, but that aren't on your tax app. like 'averaging' in case of varying income. Dutch tax law is not so simple as implied. also i'm supposed to be paying wealth tax over the part of the property i'm not using as my own living space (i rent out part of it). right now it is impossible to do this. saves me a bit but it could land me in trouble as well.
A couple million dollars a year [1]. It's always interesting to me how relatively little money it takes to make life objectively worse for everyone else in the country while making a small number of people richer. For the cost of a nice house or a low-budget indie film you can make sure taxes are difficult to file for everyone. Of course there's more to the influence these companies have than the dollar value they spend per year but still, it ain't that much money.
That makes me wonder if there could be a model of some sort of "People's Lobby" where one could set up a fund that individuals could contribute to in order to lobby for/against something.
Probably more complicated than that and corporations would respond in kind. But it does seem like giving citizens the ability to compete in the lobbying space only makes sense.
I used to do IT work for a very large (>5000 employee) tax/audit firm. They sent out memos at the time telling associates to encourage Obamacare as much as possible in their communities, and to encourage amendments making it more complex, because then they got to bill $250/hour per person to help companies unravel that complexity... I am very glad I am no longer there.
>> Instruct the IRS to implement a system whereby any American can opt into a program to have their taxes filed automatically.
>> Instruct the IRS to coordinate with the Treasury to prepare a report on federal spending, and send each taxpayer a rundown of the actual amount of their taxes that went to each major spending area (e.g., domestic programs, foreign aid, military, etc).
>> Increase the budget of the IRS by 50% to $16.2 billion and modernize it with the latest technology. Money spent on the IRS will almost certainly pay for itself many times over via better tax compliance and less wasted time of citizens. Running the country like a business means both taking care of constituents and collecting revenue as seamlessly and efficiently as possible.
https://www.yang2020.com/policies/filing-income-taxes/