Apparently (link to tweet), most countries have straightforward automated systems for tax collection, requiring minimal user input. Obviously, this setup saves everyone the pain of filling out confusing tax forms.
But the US has confusing tax forms because intuit (the company behind turbo tax), successfully lobbies to keep the current system in place, so that they can charge people for the service of helping them fill out their confusing taxes.
It’s true. We usually have a house tax night, and one time this fell when a Latvian guest was present, and we were all crying and tearing our hair out and drinking heavily, and he was like “wtf is this? in Latvia they just send you a bill”
I’ve heard rumors (and I think a planet money episode) that it’s not just them, but also small-government conservatives who think taxes will be easier to raise (less opposition) if they’re easier to file (people are less aware of them).
There are two kinds of problems with filling out tax forms:
One is understanding the meaning of inputs, like if they say “income of type X goes here, income of type Y goes there”, you need to know whether your income was of type X or Y.
Another is following the processing instructions, such as “line 20 is line 17 plus line 19, assuming that line 19 is not greater than $500 + 0.15 × line 18, in which case line 20 is zero”.
In Slovakia, we recently have an online system, where you enter the data, the processing instructions are automatically validated, if all validations are okay then you sign it with your password and it’s done; you receive a confirmation e-mail.
You need to understand the categories of income. “Income from employment” is one of them that most people will use, but if you are an entrepreneur, an artist, or have other sources of income, you need to do some research. But ultimately, it is: this type of income goes into this input field. (It gets more complicated if you have income from other countries where you also paid tax.) Then your deductible expenses, like health insurance, social insurance, kids, etc. Plus a few more details. But once you do this successfully with someone else’s advice, the next year you probably can do the same thing alone.
The online form is a 1:1 copy of the old paper form. It doesn’t do the calculations for you (although it has enough knowledge it could), but instead highlights the values that do not follow the rules. Slightly less convenient, but perhaps it makes you pay better attention, dunno. Then you attach scans of your tax reports from employer(s), birth certificates for kids, etc. That’s all.
The tax report from employer essentially contains four important numbers—gross income, health insurance paid, social insurance paid, tax advance paid—which you need to copy to corresponding fields in tax form; in case you had multiple jobs, you enter the sum of corresponding numbers from each employer.
If you only had one employer and no other source of income during the whole year, the employer is legally required to do this whole thing for you (but you have to explicitly ask them). Otherwise, it’s your task.
(If someone would be seriously interested in this, feel free to ask, I can show you how it works.)
Apparently (link to tweet), most countries have straightforward automated systems for tax collection, requiring minimal user input. Obviously, this setup saves everyone the pain of filling out confusing tax forms.
But the US has confusing tax forms because intuit (the company behind turbo tax), successfully lobbies to keep the current system in place, so that they can charge people for the service of helping them fill out their confusing taxes.
It’s true. We usually have a house tax night, and one time this fell when a Latvian guest was present, and we were all crying and tearing our hair out and drinking heavily, and he was like “wtf is this? in Latvia they just send you a bill”
I’ve heard rumors (and I think a planet money episode) that it’s not just them, but also small-government conservatives who think taxes will be easier to raise (less opposition) if they’re easier to file (people are less aware of them).
Here’s transcript of the episode
This focuses on a pilot attempt to introduce this for California state taxes.
Some highlights
In the 2004 tax season, they sent ReadyReturns out to about 11,000 taxpayers along with this little survey.
99 percent of the people said that they would like to use it next year
And indeed
Norquist thought ReadyReturn is tantamount to a tax hike because
Norquist put out the word to California Republicans—if you back ReadyReturn, you have broken the pledge [to not rise taxes]
“so and so—I’ve even forgotten the legislator’s name—is not with us. It looks like we’re going to be one vote short.”
the bottom 50% of taxpayers also contribute 3% of tax receipts. So after accounting for frictional costs it is almost certainly a deadweight loss.
There are two kinds of problems with filling out tax forms:
One is understanding the meaning of inputs, like if they say “income of type X goes here, income of type Y goes there”, you need to know whether your income was of type X or Y.
Another is following the processing instructions, such as “line 20 is line 17 plus line 19, assuming that line 19 is not greater than $500 + 0.15 × line 18, in which case line 20 is zero”.
In Slovakia, we recently have an online system, where you enter the data, the processing instructions are automatically validated, if all validations are okay then you sign it with your password and it’s done; you receive a confirmation e-mail.
You need to understand the categories of income. “Income from employment” is one of them that most people will use, but if you are an entrepreneur, an artist, or have other sources of income, you need to do some research. But ultimately, it is: this type of income goes into this input field. (It gets more complicated if you have income from other countries where you also paid tax.) Then your deductible expenses, like health insurance, social insurance, kids, etc. Plus a few more details. But once you do this successfully with someone else’s advice, the next year you probably can do the same thing alone.
The online form is a 1:1 copy of the old paper form. It doesn’t do the calculations for you (although it has enough knowledge it could), but instead highlights the values that do not follow the rules. Slightly less convenient, but perhaps it makes you pay better attention, dunno. Then you attach scans of your tax reports from employer(s), birth certificates for kids, etc. That’s all.
The tax report from employer essentially contains four important numbers—gross income, health insurance paid, social insurance paid, tax advance paid—which you need to copy to corresponding fields in tax form; in case you had multiple jobs, you enter the sum of corresponding numbers from each employer.
If you only had one employer and no other source of income during the whole year, the employer is legally required to do this whole thing for you (but you have to explicitly ask them). Otherwise, it’s your task.
(If someone would be seriously interested in this, feel free to ask, I can show you how it works.)