If, like me, you are annoyed about all the hours (and money) you just spent filling out your taxes, then you should be extra pissed off about the demise of the Democrats’ Build Back Better bill.
The legislation would have started the process of making it easier for millions of Americans to do their taxes, and save the country billions of dollars. Today’s Republican lawmakers oppose the idea — even though it was boosted by former president Ronald Reagan and has now been implemented in other countries around the world.
At issue is the cat-and-mouse game millions of us have to play every year — the one where we spend hour after maddening hour trying to figure out what we owe in taxes, and then hope our calculation matches what the Internal Revenue Service already knows is due. The process is one of the many ways America overburdens its residents in ways other countries don’t. This annual ritual of red tape is such a defining feature of the American experience, it was a storyline on the original version of The Wonder Years. It remains such a tedious tax on our free time that it’s become a joke — literally.
When I’m spending late nights away from my kids buried in end-of-year spreadsheets, receipts, and tax forms, I feel a deep sense of rage knowing it doesn’t have to be this way — and I know that because it isn’t this way in many advanced industrialized countries.
That’s right: Sweden, Denmark, and more than thirty other countries offer many residents so-called “return-free” filing, where the government does the tax preparation itself. Though the systems vary, the basic process is this: tax authorities use employers’ filings to calculate levies that are owed, then send taxpayers their forms already filled out and let them decide whether to sign and pay or do the calculations on their own.
Reagan loved this idea so much he gave a national address in 1985 expounding on its virtues.
“We envision a system where more than half of us would not even have to fill out a return — we call it the return-free system, and it would be totally voluntary,” he said. “If you decided to participate, you would automatically receive your refund or a letter explaining any additional tax you owe. Should you disagree with this figure, you would be free to fill out your taxes using the regular form. We believe most Americans would go from the long form or the short form to no form.”
The IRS Taxpayer Advocate Service has said that this system would “free tens of millions of taxpayers from the requirement to prepare returns.”
In a country where the average tax filer spends eleven hours a year on tax paperwork, experts estimate that, each year, this kind of system would collectively save Americans somewhere between 155 million and 255 million hours that we are currently forced to devote to bullshit paperwork that the IRS and state tax departments could easily do on their own. It could also collectively save tax filers somewhere between $2 billion and $5 billion a year that is otherwise spent on tax software and tax preparation services.
And yet, even though California implemented a pilot return-free program that proved wildly popular, those billions of dollars of potential savings are the reason return-free filing hasn’t already happened across America. Those potential savings are the huge profits that the tax preparation industry reaps — and that industry doesn’t want to give up that pile of cash. So it has used campaign contributions and a sophisticated lobbying operation to block the IRS from implementing return-free filing.
In securities filings, the tax preparation cartel admits that it has a financial interest in the government continuing to make it all but impossible to fill out your taxes on your own.
“Federal and state governments have considered various proposals through which the respective governmental taxing authorities would use taxpayer information provided by employers, financial institutions, and other payers to ‘pre-populate,’ prepare and calculate tax returns and distribute them to taxpayers,” wrote the tax preparation company H&R Block last year. “The adoption or expansion of any measures that significantly simplify tax return preparation, or otherwise reduce the need for third-party tax return preparation services or financial products . . . could reduce demand for our services and products and could have a material adverse effect on our business.”
Likewise, Intuit, a financial software company, told shareholders that “government funded services that curtail or eliminate the role of taxpayers in preparing their own taxes could potentially have material and adverse revenue implications.”
A handful of states have experimented with return-free filing — and right now there is legislation in New Jersey that would make it a reality there. But for the most part, the initiatives haven’t gone anywhere.
In Washington, Senator Elizabeth Warren (D-MA) has tried to break the tax preparation industry’s cartel, and she actually succeeded in inserting language in the Build Back Better proposal that would instruct the IRS to begin exploring how to create return-free filing.
Soon after, the GOP reverted to reflexive partisan obstructionism, depicting the initiative as a socialist plot.
“The goal of having the IRS file their taxes for them is not to cut red tape or simplify tax filing,” wrote Representative Jason Smith of Missouri, the senior Republican on the House Budget Committee, in a nonsensical Washington Times op-ed. “It is to further weaponize the IRS to go after hard-working Americans because Democrats want to use even more of your paycheck to fund their socialist priorities.”
And so Reagan’s dream of saving Americans millions of hours remains just that — a dream, but not a reality, thanks to his own political party.
Keep that in mind the next time you are buried in tax forms — you now know where to direct your anger.