It's funny that, with the importance of tax to government revenue, why do governments not make a habit of funding/creating really high quality tax software for businesses/individuals to use? Increases in collection efficiency have historically been associated with growth of the state coffers (and state's whose bureacracies failed to adequately capture tax had to resort to funding themselves in other ways, frequently in the past through "expansionist tendencies", ie, war--for territory, resources etc...which then only works if you can pay for soldiers and equipment). Not that governments seem great at making software (in general), but with something so critical, a focus on this seems like a "sort of" low-hanging fruit...
> It's funny that, with the importance of tax to government revenue, why do governments not make a habit of funding/creating really high quality tax software for businesses/individuals to use?
Not just the “TurboTax” lobby, but also a strong contingent of anti-tax conservatives. One of their approaches to gain sympathy to their cause is to keep making taxes hard. If taxes are hard, the general population will want less of them.
>One of their approaches to gain sympathy to their cause is to keep making taxes hard
I'm not sure where you get this from. People on the right have been yelling about simplifying the tax code for a long time. Flat tax, "postcard-sized tax form," national sales tax, all kinds of ideas have been floated. Even eliminating the income tax altogether and going back to funding the government through tariffs, those the people who suggest that wear a lot of tri-corn hats or subscribe to "Reason" magazine.
The fact of the matter is the tax code is the biggest trough from which politicians can reward donors, lobbyists, and other allies. A nice tax carve-out for left-handed buggy whip manufacturers is easy and cheap, and nobody reads all 1100 pages of some omnibus bill, so whoever slid it in can claim to be "for small business!" (the right), or "making the rich pay their fair share!" (the left).
As for the general population, all of their taxes are taken out of their paycheck. Taxes aren't hard for them. They pay a few thousand in income and payroll taxes over the year, they get a thousand or so back in a refund, and they think everything is great.
If there was a bill that eliminated all the tax code and replaced it with a brochure-sized alternative, there might be some on the right who would object, but EVERYBODY on the left would lose their minds. I can't think of a single progressive who has supported a simplification of the tax code.
Straight from the horses mouth. Grover Nordquist and other anti-tax conservatives have been staunchly against allowing the IRS to do any sort of tax prep for the public for fear that will somehow lead to more taxes (ignoring the fact the IRS doesn’t create tax policy out of thin air).
You seem to recognize that "tax prep" and "tax code" are completely different things, so I don't understand how or why you are making this your argument. Simplifying the tax code is much more a right-wing thing, maybe even an entirely right-wing thing.
Because I was responding to a question specifically about government-provided tax prep solutions...
why do governments not make a habit of funding/creating really high quality tax software
Nordquist can be both against improved tax prep software/procedures and for simplified tax laws. We know he's against the former; he's explicitly stated he doesn't want the US government producing tax prep software or doing any sort of additional legwork on the behalf of tax filers.
Your comment was showing up as a reply to mine, so I assumed you were responding to me.
I read Norquist's article as more along the lines of "don't let the IRS determine what is and is not taxable," not so much about having them produce tax prep software. I suppose you can squint and read that, fair enough, but that does not address the issue of whether Norquist supports or doesn't support simplifying the tax code.
The only right wing proposals to "simplify" the tax code have been ridiculous proposals like the flat tax.
You know, the one where a single mom with children to feed pays the same percentage of her income as the single billionaire that wants to buy a 3rd yacht.
Look up Grover Nordquist. He has devoted his life to making sure paying taxes doesn't become too easy. And he ain't no lefty.
>You know, the one where a single mom with children to feed pays the same percentage of her income as the single billionaire that wants to buy a 3rd yacht.
I guess you have never read anything about the various flat-tax proposals. There have been several, and they have all accounted for those with lower income levels.
One of the fundamental tenets of the flat tax is 14th Amendment "equal protection." Is it constitutionally acceptable to treat a rich person differently from a poor person? The flat-tax people say no. Progressives say yes. I do agree that a progressive tax system has merits with which I agree, but I also think it's perfectly reasonable to assert that falls afoul of equal protection, and therefore should either be rejected or an Amendment should be presented and passed to account for it.
Progressives tend to turn this distinction into a moral argument about fairness, which is not how a government that is bound by law is supposed to work. If you want the government to work on a moral basis, don't be too surprised if a later government with different moral frameworks do things you don't care for.
>Look up Grover Nordquist
Somebody else brought him up in a comment. Taking your assertion at face value, you have one data point suggesting the right doesn't want to simplify the tax code. Good job, but I've got a competing data point of Paul Ryan, who was an actual Congressional leader in the Ways and Means Committee talking about the flat tax, and not an activist gadfly. I think my singular data point carries more weight than your data point.
A progressive tax treats everyone equally. It taxes Jeff Bezos the same rate for the first $25k as it does me. Just like it would charge me the same rate for the last billion I earned. Everyone lives by the same set of rules. Anyway, progressive vs flat tax is orthogonal to simplifying the tax code because a graduated tax rate is not complex and is the very least of our current worries when it comes to tax code complexity.
As for Paul Ryan, he proves my point. His proposal included a huge break in corporate rates in exchange for a modest break in middle income taxes.
>You know, the one where a single mom with children to feed pays the same percentage of her income as the single billionaire that wants to buy a 3rd yacht.
And the proponents of a flat tax would say "so?"
There's a fundamental ideological incompatibility here and unless one side stops caring or puts the other in the ground the bickering will continue.
That's not fully true. There is also a contingent of people who like to use the the tax code as a mechanism of policy apart from efficient collection of revenue.
Tax credits for education, clean energy, penalties, small businesses, mortage interest, each one of those one-off changes adds complexity, and in total ultimately can make the process dramatically more difficult.
While all of this is true, other countries have a system where the government tells you what tax they believe you owe, and provide the details of how they reached this number.
The citizen can either pay that number, or offer amendments to the details which imply a lower rate (or higher if you're a masochist, I suppose).
That's independent of the complexity of how that number is derived, and in balance I would rather the US (as a citizen thereof) use this sort of system than the one we happen to have.
One thing to add: You're typically still obligated to file a return if the prepared taxes are not correct. You're not "off the hook" in any way by accepting what the prepared statement says. This mostly bites e.g. entrepreneurs with more complicated taxes, especially if you filed for an extension on the business side.
> There is also a contingent of people who like to use the the tax code as a mechanism of policy apart from efficient collection of revenue.
There is nothing inherently wrong with that. Whether you do or do not agree is a different question.
It's interesting to look at different cultures:
The Swedish word for "tax" is "skatt", which literally means "treasure". Historically it was part of the treasure to be collected by the monarch and other people in power. So, not really a way to cover government expenses, but for somebody in power to enrich themselves further. Luckily, the country has moved on from that, just kept the word (and the king).
The German word for "tax" is "steuer", which literally means "to steer". That makes it clear that those fees are not just collected to finance government expenses but to even steer society in a certain direction, i.e., what you mean with policy.
In the US that's mostly because that's the biggest lever the Federal government has to pull. The power to legislate things within states directly is mostly devolved to the states so Congress mostly has the tax code to point a firehose of money to incentivize things. It's why the Affordable Care Act hinged on the individual mandate initially, all the regulation of healthcare legally depended on the existence of a tax to put it in Congress's legal authority.
One could make taxes very easy in a way that would definitely boost the popularity of the anti-tax crowd. Makes taxes a single bill sent out at tax time. No tax collections, not withholdings, etc. You get a bill, you log into an IRS website, enter in the information for donations, dependents, etc., and you get your final bill you have to pay. IRS can even prepopulate that data for you and just have you sign off or make any needed modifications.
You can streamline the process and at the same time turn it into a single bill that would be much more shocking to tax payers than the current situation where they often get either a refund or a small bill.
Given how bad people are with money, the number of people who can't pay their taxes would skyrocket if withholding is replaced with the scheme you are proposing.
Let's say somebody makes 100,000 USD a year and pays 40,000 USD in tax on it. Today, they see 5000 USD on their account every month. Sometimes it gets adjusted a little up or down, depending on what they did on the side, had some stocks, mowed the neighbors lawn, whatnot. But their lifestyle is generally adjusted to 5000 USD a month. Housing, utilities, entertainment, restaurants, hobbies. Now tomorrow we switch to a scheme where they instead get 8333 USD on their account every month, and a 40,000 USD bill every spring. You'd be surprised how many people would adjust their lifestyle, with direct consequences even for tax revenue. You can even imagine a new loan sector that offers you those 40,000 USD in spring that you then can pay off over time. Great, now the monthly payments essentially go through a bank before ending up as tax, but the bank takes their cut. Everybody loses. (Well, except the bank.)
Now you could argue that's the individuals' problem. Get better with money. Educate people, teach it to kids in school. (Really? The education sector is already overwhelmed as-is.) That's not how society works though. Even if the well-off educated elites would like (which is what the HN crowd is part of, no offense..). Humans are not rational agents. If they were, the world would look very different.
>Given how bad people are with money, the number of people who can't pay their taxes would skyrocket if withholding is replaced with the scheme you are proposing.
If I was optimizing my actions based on what would create the most anti-tax sentiment, this would be a positive outcome, not a negative one. What's worse than a bill from the government? One you can't afford to pay and that causes you to take on debt.
To be clear I'm not optimizing my behavior on such a metric nor advocating for others to do so. I was talking about the purposed hypothetical of lawmakers who were making such an optimization and what sort of laws they would, in theory, be supporting.
> why do governments not make a habit of funding/creating really high quality tax software for businesses/individuals to use?
They do. We can leave aside the practice in many European countries to compute your income taxes for you, based on reporting by your employer and financial services. Even in the US, high quality software is provided for sales tax compliance. In fact, according to the Supreme Court, the presence of that software is one of the main reason they overturned their "no interstate online sales tax" decision in 2018. One reason was
> Streamlined Sales and Use Tax Agreement. This system standardizes taxes to reduce administrative and compliance costs: It requires a single, state-level tax administration, uniform definitions of products and services, simplified tax rate structures, and other uniform rules. It also provides sellers access to sales tax administration software paid for by the State. Sellers who choose to use such software are immune from audit liability.
Which, I guess to return to the point we set aside, is because companies can lobby for public software for their benefit, but tax prep companies can lobby against public software for their benefit.
I have enough experience with local and federal government that there is no way I want them to build any kind of software. Much less a complicated tax software.
It might work in the EU but in the US there’s state/county/municipality taxes that can get quite complicate. My zip code has a small area in my county and my county is at a 6% tax rate. Most of the zip code is another county that has a %7.5 tax rate. I have to double check large online purchases just to make sure it’s correct. Almost every place shows the wrong tax at checkout due to using my zip but’s it’s always fixed when my card is actually charged.
Most people are using SAP or Oracle to do this kind of thing because they already know the ins and outs of tax locales.
The software would have to work everywhere. The tax collections (review/enforcement, really) process only has to work in one place. Tax law in one place is usually clear enough; the complexity is in the aggregate.
My state doesn’t have to give a rip that NYC has a city surtax on this but not that, or that some other jurisdiction treats clothing items up to $100 as non-taxable while we put the limit at $175.
The federal government is only one part of it. States, counties, and cities can also impose their own income taxes or sales tax. Or like Florida they can choose not to have an income tax.
I suppose that would be like asking the EU commission to provide tax software for all its member states.
Not sure how software is going to always find "...credit card fraud, internal theft, mis-priced items, mistakes....".
I don't care how good AI in finding tumors in x-rays is, I still want a set of skilled eyes to confirm findings.
It's the same reason I double check all my paychecks to make sure I'm paid the right amount and the deductions are correct. All of it's automated on the backend, but it's still my money and worth double-checking.
> why do governments not make a habit of funding/creating really high quality tax software for businesses/individuals to use?
In the US, jurisdictional/funding issues are the biggest blocker. There is no federal sales tax, so the IRS can't use its budget to pay for this. State agencies are not going to be able to use their funds to pay developers to add functionality for a different jurisdiction, and ditto for counties/cities/special districts, which tend to have much smaller budgets anyways.
The best avenue would probably be something like ITOR (the funds that give USDS its wide remit to help any gov agency with their tech needs), but states and localities aren't always open to receiving this kind of help. (It did happen with unemployment programs during the pandemic, but the lawyers had to lawyer pretty hard to make that possible.)
That said, congress could fund this tomorrow if they wanted. Budgetary concerns apply to executive actions in this arena, but the whole idea sounds like it's necessary and proper for smooth interstate commerce.
That’s honestly only a small part of why I would never want this. More significant, for me, is that this TaxSoftware.gov idea would mean literally thousands more employees on the government payroll, being ineffectual, slow, and bureaucratic. And when their government career is finally over, those people will all take home government pensions, as will their future replacements. Once you create more government, it will never end and will never go away.
“The only thing government is good at is creating more government.”
- P.J. O’Rourke
