Here it is November and time for tax anxiety to start building. Little by little and scrap by scrap over the next five months I'll be gathering and filing trivial bits of financial information about myself. Then at the first of the year I'll buy some tax preparation software and spend more time putting the data I gathered into the blanks on those forms. I'll also have to study the worksheets and discover if there are any new tax laws that affect me and my return particularly. Naturally, there will be some complications and peculiarities, so I'll have to spend more time on hold waiting for a tax preparation expert at the IRS's toll-free number. By the time April rolls around I will have spent upwards of sixty hours and fifty dollars just calculating how much tax I owe the government.
Suppose your income is $30k a year and suppose you spend sixty hours a year screwing around with your IRS paperwork. The value of your time is $15 an hour. That's $900 worth of work. And nobody gets the benefit that $900. You don't get to spend it on consumer goods. You don't get to invest it The government doesn't get the taxes on it. $900 worth of GDP just vanishes like piss on a hot rock. Multiply that loss by the American workforce and you've got a couple hundred billion dollars worth of work done for no pay.
Here's another way to think of it. Sixty hours is a week and a half of vacation that you don't get every year because you have to do your taxes.
A system of taxation should be simple. Ours is complicated. A system of taxation should be fair. Consider that money made trading stocks is taxed at a lower rate than the money made with hard work. Is that fair? A system of taxation should raise enough money to run the government. Our government carries a debt of trillions. A system of taxes should be stable and predictable so that people can make financial plans far in advance. Our system changes every year. Clearly our income tax does not do anything a tax system should. Eventually the present system will have to be replaced.
Lately we hear ideas about a flat tax or national sales tax replacing our current system. Such formerly maverick ideas are finally beginning to come from moderate voices, and either one of those options sounds workable to me; but I just don't see it happening any time soon and here's why.
Too many influential people make their livings off the present madness.
So while reasonable voices work on the long-term solutions, here's an idea for a minor procedural change which will eliminate millions of those unpaid hours of useless work. Nobody will have their taxes raised or reduced. Tax law will be as complex as ever, so corporate tax lawyers will still have work to do. Nobody at the IRS will lose their jobs. It might take a bite out of businesses that specialize in preparing tax returns for the average working Joe, but I think the loss of that seasonal work is minor compared to the gains in quality of life for the affected taxpayers.
The problem as I see it is that we're trying to push water uphill. We've arranged our system backwards, climbing the mountain from the steep side. Here's what I mean:
Every year I collect a stack of documentation, W-2's, 1099-int, 1099-div forms, data on capital gains, withholding, charitable contributions, medical expenses and so on and so on from dozens of sources. I arrange all this information on forms and schedules and go through a complicated series of calculations to decide how much tax I owe or the refund I am owed. I then send those forms to the government and they put all that information into the same forms and their giant infallible government computer checks my work and it compares the data I provide with the identical data that was sent to them by the same people that sent the data to me.
There. Clear as mother's milk and as patriotic as borscht.
Do you see the stupid part? EVERY YEAR I SPEND SIXTY HOURS COLLECTING AND COMPILING SO THAT I CAN SEND THE IRS INFORMATION THAT IT ALREADY HAS.
The solution: Reverse the procedure. Instead of having the IRS check my work, let me check the IRS's work. If I decide to itemize deductions or if I have unreported income I can file my own return as usual. But at my option I could request that the IRS take all the data for my account and generate a return and send it to me. If I sign it and return it, that's that. That's my return, and because I had been given the chance to check the figures I would be responsible for the information on it just as if I had filled it out myself.
This wouldn't work for people with complicated returns, but it would work for all taxpayers who don't itemize and get all their income from reported sources like wages, interest, dividends, social security, workman's compensation, veterans benefits, pensions and certain kinds of capital gains; and if such a system were adopted there would certainly be hundreds of thousands of taxpayers who would have sixty more hours a year of free time and certainly they would be grateful.
So that's my short-term stopgap measure to reduce taxpayer anxiety until reason can prevail and we can get rid of this Rube Goldberg income tax machine.