I read an article this weekend that made me angry. It’s titled “TurboTax, H&R Block spend big bucks lobbying for us to keep doing our own taxes.” The basic premise of the article is that Congress has been working to develop a method to reduce the time and frustration of filing tax returns. This tax reform plan would have the IRS pre-populate tax returns for a vast majority of tax filing Americans. The IRS is able to do this because they usually already have a bunch of your information. Companies report the wages that they pay you to the IRS. In addition, your brokerage provider will report any investment earnings you have to the IRS. The IRS would simply use this information, populate your tax return, and mail it to you come tax time.
You could simply review your pre-populated tax return, sign it, and send it back if there are no errors. Wouldn’t it be a great tax reform bill that made this into law? On top of that, the whole process would be free. Tens of millions of Americans would be able to submit tax returns with no time and no money expended. The overall gain to the US economy would be enormous, as people would no longer have to waste time and effort trying to figure out a complicated tax code which no one understands. Unfortunately, two large tax filing companies spent millions of dollars lobbying to guarantee that the bill didn’t pass.
Three Pillars of Tax Reform We can All Agree On
- As many people as possible should be allowed to file their tax returns for free and without tax filing assistance. This is a net gain for everyone. Those who are poor can’t afford the money, and those who are high income earners can’t afford the time.
- If the IRS already has the information, it’s better to simply supply the completed form to people, so they don’t have to spend extra time and effort making sure they don’t make a mistake. This reduces worry, frustration, and endless hours sorting through the tax code by regular people.
- Reducing the role of for-profit corporations in filing taxes will only benefit the economy. Filing taxes is a necessity in our modern world. However, time and money spent on filing taxes is not spent on improving our infrastructure, researching novel technologies, or providing charity to those in need. Tax reform that focuses on minimizing this aspect of the economy will simply reallocate the resources and people currently in those industries to more productive uses.
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