I have a better idea. Simplify the tax code so anyone can do theirs on an index card. There is absolutely no reason for the gargantuan tax code in a free society.
>Simplify the tax code so anyone can do theirs on an index card.
Aim higher.
In the UK, your employer informs the government about your wages and HMRC figures out how much you paid and whether it's the correct amount. And if you want you can check the numbers.
In other countries it's basically the same but you have to log into the e-government portal to click 'yes, the values you have are correct'.
Obviously if your finances are more complicated then you need to file; but it's not very difficult.
Yes, of course. Obviously if the IRS knows your income, knows you mortgage interest, interest on savings and dividends and it is all electronically recorded, there what is the point of filing. Only to keep accountants and tax software companies in business. I can guarantee you that if you file a return and copy the numbers in wrong from your W4 you will get a computer generated letter. I did that by accident once I transposed two digits in the amount on a 1099 and I got a letter from them that was computer generated. So obviously they are having computers check it, so what is the point of me wasting time and money on filing. The UK system (and many other countries) is obviously the way to go.
Even on mortgages, the IRS doesn't have all the information.
I refinanced my mortgage and paid points for the refi. Those points have to be amortized over the life of the loan (which the IRS knows the law, but doesn't know that I paid points on the loan).
I just refinanced that mortgage again, meaning next year that I'll write off the rest of the points for the previous loan as a 2017 expense.
There's plenty that the IRS doesn't know until you tell them.
Intuit may have gotten to the Canadian government too (or they are just incompetent) because I lived there a few years, and then moved back to the UK and it sort of crazy how simple and easy things are here, especially for people who are only employees. You don't file anything at all if you are an only an employee in the UK.
Not entirely true, there are lots of reasons why you do need to file in the UK as only an employee. See https://www.gov.uk/self-assessment-tax-returns/who-must-send... Although HMRC's self assessment website does make it pretty simple (compared to the US system, at least).
Thanks for the link and correction. Most of these apply to people who have income other than employment, but a couple of them affect employees only (such as those collecting child benefit). I think there's a huge difference how the UK handles this where having to file for an employee is usually an exception rather than a rule whereas every single employee in Canada must do this paperwork.
Or if fortunate to earn over £100k! But I do totally agree with you. And it does seem the obvious way of doing things. The recent changes to the personal allowance are another example of trying to keep the common case simple.
The problem is that every individual provision is popular with one group or another.
But we could move to a system like the UK has where taxes are calculated for you and if you don't have contractor income you don't even need to file. But this would need changes to things like the Married Filing Jointly status.
Married filing jointly is one of the more sexist things codified in US law. It basically says women make no money and the man has to provide for everyone with a big salary so deductions and credits for the big earner. Or it says that if you're a dual income bunch of shmucks, that your wife must make 80% of what you do.
Think about when these laws were written and look at it through a historical context. Once you do, it will outrage even the most even keeled.
Since some people are downvoting for bad reasons, I'll just toss in this anecdote:
My parents were audited by the IRS for 5 years straight. They were convinced that my father "was hiding income through losses in your wife's business." My father was a surgeon; my mom ran an antiques shop. The IRS auditors setup camp in our living room for a month going on five years. That quote was straight from the lead auditor's mouth. I remember it very starkly as a young teenager. (I said hi to them each morning on my way to and from school) It really peeved me that they viewed my mom (the woman) as a failure and only a place for my father (the man) to "hide income."
Every year they came to the same results. My mom's bookkeeping was a mess, but she always overpaid her taxes and we got a refund at the end of the audit. The best kicker? My mom made more than my dad. The IRS thinks women should make less than men (by word and by audit).
As for the historic reasons of this thinking, see my reply below.
If married filing jointly isn't sexist, why are the income brackets different? Even for married filing separately, why are they different than for single people? Sit and think about it for a minute.
Sure. When the federal income tax was instituted in 1913, all of the tax rates were individual (and the lowest bracket covered most Americans). People who were married could lump sum their income and divide by 2 to find the correct rate. Married filing jointly back then was just a way to save on paperwork and hassle. Lump the two incomes together, divide by two, and treat the two people equally. That was it.
In 1948, you got the official married filing jointly "status" and with it, the various income credits, deductions, etc. One would think that the married filing jointly tax rates would simply be double what the individual rates were, right? Wrong. The joint rates were about 1.8x the individual rates. Someone was 100%, someone was 80%. This being 1948, the woman in the dual income family was 80%. The IRS didn't want to appear to favor married couples over single people (even though they did), so they said 1.8X instead of 2X the individual rates. If you were lucky enough to be a big wage earning white male in 1948 America, you got a huge tax break since stay-at-home moms were the norm, there was a baby boom going on, and only about 20-25% of women worked.
Married filing jointly is silly. It should be a sum of the family income, divided by two, then mapped to the individual rates.
> One would think that the married filing jointly tax rates would simply be double what the individual rates were, right?
Certainly not, why would I expect that? That's mean that if there's a family of two paying individual rates, they pay X% of the income, but if they file MFJ, they pay 2X% of the same income, or twice as much. How would it make sense?
> The joint rates were about 1.8x the individual rates.
Do you mean the tax brackets and not rates?
> Someone was 100%, someone was 80%.
That is a weird conclusion - why not each one 90%, or one 110% and one 80%, or one 180% and one 0%? Having MFJ rate does not imply any distribution of income, not that I can see it at least.
> This being 1948, the woman in the dual income family was 80%
What you mean "was"? Do you mean average married woman's income was 80% of average man's income in 1948? Maybe (I have no idea, didn't check) but what this has to do with tax rates? If it was so, it was certainly not because of the tax rates.
> Married filing jointly is silly
No it's not. The fact is our society is organized around families. It's not everybody, but mostly that is how it works (and MFJ is optional of course, so if you don't like the model, you can stay away from it). Taxing family - or household - as one unit makes a lot of sense, because that's how the actual households commonly work, the income and the expenses are shared. Just as taxing a company as a unit makes sense, instead of taxing each employee's production individually, so does it make sense for a household.
> It should be a sum of the family income, divided by two, then mapped to the individual rates.
That's another question. Maybe specific tax brackets need to be adjusted, maybe not - at least this link suggests that MFJ has actually lower brackets (and thus higher taxes) than two individual incomes: https://en.wikipedia.org/wiki/Marriage_penalty
But: all that explanation failed to show where does it say "women make no money". It is true that in 1948 a lot of women did not make any money as employees, and instead were providing services to their families which weren't remunerated monetarily, but I see how having (optionally) the household as taxpaying unit implies "women make no money". It still makes no sense to me.
How about the IRS calculates, you click OK if you agree, and if you don't, you're free to file? (Maybe this is how the UK system works; I've only done American and Canadian.)
Great idea in theory, but hard to implement. Tax breaks were often created for a reason. Take them away, and that special interest group will try to protect it and lobby to keep it in place.
Not that I believe you think it is, but this isn't exactly a startling new idea.
The same forces described in the article are also responsible for lobbying against simplicity in general.
There is a whole giant industry that would go away in a puff of smoke (or at least be drastically reduced) if individual taxes weren't unnecessarily complex.
Also, everyone wants a simpler tax code except for the parts that benefit them. Few economists think the mortgage interest deduction is a good idea, but try telling that to homeowners.
I'd exchange MI deduction for equivalent reduction in income tax. But the government wants to keep power to induce people into doing what it thinks is better, taxes and deductions are a major tool in this. Without explicitly giving up that power, nothing would change, so homeowners are not the main thing to blame it, they just do what the government wants them to do and makes profitable for them to do.
If you object that this isn't sufficient for you or someone else, I'll be happy to argue that whatever behavior would make you 1040EZ-ineligible should either not be permitted in a free society (because it's a tax-avoidance scheme for certain types of rich people with political power) or should be taxed as W-2 income (because otherwise it'd become such a tax-avoidance scheme), but good luck getting the people who benefit from those schemes to allow it.
Foreign tax credits to balance out foreign taxes for overseas income is another thing that nixes an 1040EZ. That's a pretty tough one to argue against.
> Use this form if: Your taxable income (line 6) is less than $100,000.
For a lot of the folks on HN, I'd bet that isn't true.
At the end of the day, US taxes are super weird. This may be an overly simplistic view, but I'm definitely of the opinion that we need to drastically simplify taxes. Complex systems generally produce more opportunities for exploitation.
I wonder just how simple a viable tax system could be.
I assume that's because it gets vaguely into AMT territory (nothing in the normal 1040 changes at or even near $100K), and the AMT mostly exists because of the complications of tax law.
If I change jobs in the middle of the year and my income is high enough I might overpay social security taxes. There is no way to recoup that with the 1040EZ.
The solution to this is to do away with FICA taxes and fold collection of that money into the general tax tables (including the employer side of FICA which a lot of people forget). You may or may not be in favor of this idea?
Do we get more value out of charity donations by normal people than we lose in charities being used as a tax-privileged vehicle for rich people to exert their desire on the world?
Also, charitable donations have weird constraints. My church would like to end deportations of undocumented immigrants based on our reading of Leviticus 19:34, and the most effective way to do that would have been to campaign against certain presidential candidates. We couldn't do that. Another church wanted to end civil recognition of same-sex marriage based on their reading of Leviticus 18:22, but that involved campaigning for a ballot initiative, and they were allowed to do that to the tune of millions of dollars.
I'm obviously not inclined to say "Please start taxing my church," but the fact that we can participate essentially by chance in some political activities and not others doesn't seem like it would exist in a "free society".
First, your distinction between "normal people", which are moral, and "rich people", who are just evil, are kind of disgusting. Having a lot of money doesn't automatically make one evil (to remove all suspicion, I am not rich and likely never will be, at least by US standards :). I'm not sure what your point is there, but it doesn't sound good.
> the most effective way to do that would have been to campaign against certain presidential candidates
That's certainly not the most effective way. US law has very clear immigration provisions, which require certain documentation, and US president swears to uphold the law. Most efficient strategy would be to change the law, thus voting for specific - namely, open-border - candidate for Congress, that can change the law so that US has immigration procedures no longer, and thus does not have to deport people who violate them. Note that I did not say "efficient" but "most efficient" - I see no really efficient strategy that would make US a country without immigration law anytime soon, and having such law, it is natural to have to enforce it - otherwise there's no point in having it.
In any case, nothing prevents you to from campaigning for or against any policy or any candidate, be it open border or not, as a private person or as a part of an organized effort. Why you need the church to do it? Just create an independent organization and campaign as your hear pleases.
> I'm obviously not inclined to say "Please start taxing my church,"
If you register a non-profit and make all the requirements that tax-exempt non-profits have, and do charitable work and so on, nothing prevents you from calling your organization "church", but I don't see why doing so should give you any special status not available to any other nonprofit. And if it doesn't qualify as nonprofit, then it should be taxed by the same rules as the rest of organizations are.
