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Stanford Professor Loses Political Battle To Simplify Tax Filing Process

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Re: Stanford Professor Loses Political Battle To Simplify Tax Filing Process

#121

Post by aianus »

smt88 wrote: post #104
aianus wrote: post #94

Earlier quoted context omitted.

> We basically are subsidizing investing and rich people are the biggest investors. What's wrong with subsidizing investing? Without investment in capital we'd all be subsistence farmers tending the fields for 12h a day. If some rich guy wants to make $100 billion and spend 1% on himself and 99% on improving the world for future generations through investment, that's great, no? I guess it comes down to whether you be…

It's not that subsidizing investing is bad. It's that we're subsidizing investing by shifting the burden to people who pay income tax . If someone makes $100M by inventing an amazing product, and someone else makes $100M by earning interest on the fortune he earned from his mother, which of those behaviors do we want to encourage? Earning money from investing is often a passive way of using money.

> If someone makes $100M by inventing an amazing product, and someone else makes $100M by earning interest on the fortune he earned from his mother, which of those behaviors do we want to encourage?

What's the difference between inventing the product himself and investing in a founder who otherwise would have had to get a regular job? Remember -- he could have spent the principal on yachts, cars, and jets instead; that's the behavior we want to disincentivize.

Re: Stanford Professor Loses Political Battle To Simplify Tax Filing Process

#122

Post by a3n »

kenning wrote: post #56
rayiner wrote: post #46

Earlier quoted context omitted.

That's exactly why we have a proliferation of taxes and tax breaks instead of a simple tax system. Perform a thought experiment. Say we just have a straight 35% income tax. Now, say you need to raise additional revenues. Do you (1) raise the single tax; or (2) impose a new tax on some specific part of the economy? Option (1) gets everybody mad at you. Option (2) gets only a tiny number of people mad at you. Same thin…

Yeah but a flat tax would be extremely regressive. If you had a simple equation like tax% = x/4 + 10, where x is your tax percentile, politicians could loudly say that they wish to increase or decrease the slope of the line and people would know that increasing slope would mean a more progressive tax.

> Yeah but a flat tax would be extremely regressive.

Not really, because everyone who can afford to pay another human being to figure out how to not pay taxes, would now be actually paying N%, reducing the pressure on the rest of us. That they still would have lots of money left over, after paying their taxes, as opposed to most of the rest of us who spend close to every dollar, would not bother me at all.

And if you like: 0% up to N$/year, 10% up to M$/year, 20, 30, 35.

Re: Stanford Professor Loses Political Battle To Simplify Tax Filing Process

#123

Post by lsaferite »

smt88 wrote: post #75
lsaferite wrote: post #33

Earlier quoted context omitted.

Honest question, why is it batshit-crazy?

One reason is that it's impossible to enforce. If sales tax were that high, it would give retailers a huge incentive to under-report sales on the billions (trillions?) of transactions in the US each year. The same way it's hard to catch drug dealers for tax evasion, it's hard to catch retailers who want to avoid charging/paying sales tax. With the income tax, you have employers reporting and a far small surface area…

You think it's harder to enforce tax collection on businesses than individuals? With a significantly lower number of business you can audit their books more often. Additionally you can more easily monitor their bank account activity to detect tax evasion. Sure, cash-only businesses could try and avoid taxes, but they have a lot more to lose than a single individual that under-reports their income.

Not sure how you think individuals are the easy ones to enforce.

Also, in this world the tax code is tiny in comparison and loopholes are removed (mostly?).

Re: Stanford Professor Loses Political Battle To Simplify Tax Filing Process

#124

Post by barrkel »

rhino369 wrote: post #93
kenning wrote: post #56

Earlier quoted context omitted.

Yeah but a flat tax would be extremely regressive. If you had a simple equation like tax% = x/4 + 10, where x is your tax percentile, politicians could loudly say that they wish to increase or decrease the slope of the line and people would know that increasing slope would mean a more progressive tax.

It wouldn't be regressive, it just wouldn't be progressive either.

A flat tax hurts people with lower income more, because they have less disposable income to begin with - a lower proportion of their income is discretionary.

Re: Stanford Professor Loses Political Battle To Simplify Tax Filing Process

#125

Post by barrkel »

paulddraper wrote: post #119
kenning wrote: post #56

Earlier quoted context omitted.

Yeah but a flat tax would be extremely regressive. If you had a simple equation like tax% = x/4 + 10, where x is your tax percentile, politicians could loudly say that they wish to increase or decrease the slope of the line and people would know that increasing slope would mean a more progressive tax.

I think you are confusing flat tax (proportional) with poll tax (constant).

No, I don't think he is at all. Linearly proportional taxes are regressive both because of the declining marginal utility of income, and the lower proportion of income that's discretionary at the bottom end of the income distribution.

Re: Stanford Professor Loses Political Battle To Simplify Tax Filing Process

#126

Post by ams6110 »

lsaferite wrote: post #31
ams6110 wrote: post #21

Earlier quoted context omitted.

Taxing consumption would rapidly explode into a vast array of categories and rates for different types of consumption, luxury taxes, etc. Food, maybe no tax. But maybe there's some tax if it's ready-to-eat. Or based on sugar content. Automobiles maybe taxed rather heavily, but the first $5000 is exempt so poor people can buy cheap cars, etc. It would become just as complicated as the current code.

Flat rate tax. Across the board rebate on a set level of spending. Mischief managed.

As long as we have elected officials making the tax laws, good luck.

Re: Stanford Professor Loses Political Battle To Simplify Tax Filing Process

#127

Post by ghouse »

ams6110 wrote: post #117
cestith wrote: post #102

Earlier quoted context omitted.

Boeing didn't create the Air Force, either. Comcast didn't invent TV, cable TV, or the Internet. MADD didn't invent cars, alcohol, or DUIs. The DEA didn't invent drugs. Ruger didn't invent firearms. GM didn't invent the automobile. The UAW didn't invent factories or employment agreements. I fail to see what being interested in the state of continued being of something has to do with having been the inventor.

The point is that they are a symptom. The problem is the government and their inability to keep anything simple. And in reference to the original topic, taxes for people with one W2 and no other income are not complicated. You can complete a 1040EZ on paper in 5 or 10 minutes.

They were created to treat a symptom, not address the cause. Now that a viable way to eliminate the cause exists, they advocate the keep the root problem.

Re: Stanford Professor Loses Political Battle To Simplify Tax Filing Process

#128

Post by avar »

hundt wrote: post #103

FWIW, here's an email I sent to Prof. Bankman last April: --- I read with interest your letter about the Tax Filing Simplification Act of 2016, and your article "Simple Filing for Average Citizens: The California ReadyReturn." I agree that the tax filing burden on taxpayers is far too high, and I am encouraged that legislators are trying to do something about it. But I am concerned about the details of actually accom…

I've never had to file US taxes so this might be a stupid question, but how exactly are the people in your example worse off with ReadyReturn?

Isn't ReadyReturn just e.g. summing up their reported wages for the return, which they'd need to do accurately anyway if they were filling it in from scratch?

Yes, if you have a pre-filled in tax return nothing that the government doesn't know about & which might be deductible is going to be on there, but that's the situation you were in already, wasn't it? Now you'll have more time to fill that out, instead of doing menial work like manually summing up your monthly payslips to arrive at a yearly total.

Or is ReadyReturn somehow structurally flawed in allowing you to either file for a simplified pre-filled in return with no amendments, or having to do an old-style return from scratch?

When I file my taxes in The Netherlands all the concerns you've raised are addressed through a system where most of the information is pre-filled in. I.e. they know how much I make so that number is on there, but they might not know about a few other deductibles, those are established through a series of questions you answer.

E.g. "do you own a house" -> "what type of mortgage" -> "do you pay a land use fee?" -> that's a deductible (to cite one made-up example).

Most importantly it establishes a workflow where if something is a deductible (unless it's something really obscure, manual returns still exist), it's going to be on the online tax form.

So even if the initial implementation is bad just establishing that process is worthwhile, because there'll be political pressure to make it better next year, and the year after that.

Re: Stanford Professor Loses Political Battle To Simplify Tax Filing Process

#129

Post by cestith »

ams6110 wrote: post #117
cestith wrote: post #102

Earlier quoted context omitted.

Boeing didn't create the Air Force, either. Comcast didn't invent TV, cable TV, or the Internet. MADD didn't invent cars, alcohol, or DUIs. The DEA didn't invent drugs. Ruger didn't invent firearms. GM didn't invent the automobile. The UAW didn't invent factories or employment agreements. I fail to see what being interested in the state of continued being of something has to do with having been the inventor.

The point is that they are a symptom. The problem is the government and their inability to keep anything simple. And in reference to the original topic, taxes for people with one W2 and no other income are not complicated. You can complete a 1040EZ on paper in 5 or 10 minutes.

The 1040EZ doesn't allow one to deduct home mortgage interest. You need a 1098 and a Schedule A and the long-form 1040. That has nothing to do with whether you're filing from a single W2 or multiple 1099 forms.

IIRC you can't deduct relocation expenses, wardrobe for work, books and training materials, or a whole bunch of other stuff on a 1040 EZ.

So sure, as long as you want to overpay your taxes you can file in about 45 seconds.

Re: Stanford Professor Loses Political Battle To Simplify Tax Filing Process

#130

Post by dragonwriter »

avar wrote: post #110

This whole thread is full of comments from people who obviously haven't read the article / listened to the podcast in question[1]. Joseph Bankman proposed ReadyReturn in California, which is the kind of tax return pretty much the entirety of the rest of the western world uses. I.e. instead of an empty return, it's pre-filled in with the details the government knows anyway. This vastly simplifies things for most peopl…

I suspect he failed mostly because he tried to get the legislature to adopt it after the initial budget-centered rollback (which was before recent changes to the budget process which made budget impasses of the type exploited to kill it initially unlikely), rather than using the initiative process. While money certainly effects the initiative process, it's usually a much better way to get something whose benefits are simple and easy to understand to the average person and broadly distributed but where there is entrenched narrow institutional opposition passed in California. It's not cheap, but it would be dirt simple to raise the money necessary to get this on the ballot and get a decent campaign for it. (Intuit/Norquist would still fight it, but convincing voters is different than convincing politicians.)
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