Doing taxes in the U.S. is notoriously complicated and costly. And it gets even worse when there are delays and backlogs, making it especially hard to reach the Internal Revenue Service for assistance.
But to me this raises an important question: Why should taxpayers have to navigate the tedious, costly tax filing system at all?
The case for a ‘simple return’
In 1985, President Ronald Reagan promised a “return-free” tax system in which half of all Americans would never fill out a tax return again. Under the framework, taxpayers with simple returns would automatically receive a refund or a letter detailing any tax owed. Taxpayers with more complicated returns would use the system in place today.
In 2006, President Barack Obama’s chief economist, Austan Goolsbee, suggested a “simple return,” in which taxpayers would receive already completed tax forms for their review or correction. Goolsbee estimated his system would save taxpayers more than US billion a year in tax preparation fees.
Though never implemented, the two proposals illustrate what we all know: No one enjoys filling out tax forms.
So why do we have to?
As an expert on the U.S. tax system, I see America’s costly and time-consuming tax reporting system as a consequence of its relationship with the commercial tax preparation industry, which lobbies Congress to maintain the status quo.
A costly and time-consuming system
Return-free filing is not difficult.
At least 30 countries permit return-free filing, including Denmark, Sweden, Spain and the United Kingdom.