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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

#231

Post by dboreham »

baudehlo wrote: post #196
ksdale wrote: post #161

Earlier quoted context omitted.

While I completely agree that the incentives seem absurd on their face, a counterpoint I have is that while I worked in a CPA office for several years, I came to realize that a lot of people really have no idea how much they pay in taxes. Many people seem genuinely grateful to have received a refund, not realizing that it was money previously removed from their paychecks. I have no idea what the correct policy would…

Most people in the U.K. (the only other place I have experience with) never file a tax return. It's just assumed that the government is doing the right thing. Taxes are taken at source for all things, and if you have things outside of the norm you can tell your employer about it and they'll take care of it. Filing taxes was pretty alien to me. I'm used to it now, but it seems there are simpler ways.

I'm familiar with the UK system too. It is possible to get closer to it in the US than most people realize. For example you can calculate the correct tax to withhold and instruct your employer's payroll people to do so. Most people seem to not know this or nor care and as a result end up over withholding and the resulting "refund". It is perfectly possible to end up with roughly correct tax withheld although you do of course still need to complete the 1040 form. But software can do that.

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

#232

Post by MaysonL »

toomuchtodo wrote: post #169
joshuaheard wrote: post #151

Earlier quoted context omitted.

I think it's also akin to the withholding tax. If people had to write a check every year, there would be outrage to the amount people are actually paying. Instead, they are grateful for the government "giving" them a tax refund!

I don't think so. 45% of Americans pay zero income tax, even accounting for withholding.

Unless you realize that Social Security and Medicare taxes are actually income taxes: they go up directly the more you make.

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

#233

Post by MaysonL »

toomuchtodo wrote: post #215
whack wrote: post #212

Earlier quoted context omitted.

> "This statement, however, is obviously untrue since, if one cares to move one's eyes slightly down the page at the Tax Policy Center web site, one will find that 73.1 percent of all tax units (in 2015) do pay either federal income taxes or federal payroll taxes. In other words, plenty of people who don't pay the "income tax" pay taxes on income via the payroll tax. That income tax is assessed at a flat and regressi…

Income tax is not payroll tax! Income tax -> Federal income tax (discretionary spending) Payroll tax -> Social security and Medicare (non-discretionary spending) Everyone pays into entitlements via payroll tax. Not everyone pays into discretionary spending (everything except social security and medicare).

Which is why the government borrows the SS and Medicare tax payments to use on other stuff and puts IOUs in the SS and Medicare trust funds.

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

#234

Post by frogpelt »

paulddraper wrote: post #223
barrkel wrote: post #125

Earlier quoted context omitted.

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.

I guess I don't know what regressive means anymore. It doesn't mean the poor pay more. It doesn't mean the poor pay more proportionally to income...

A flat tax is called regressive because it drastically reduces discretionary income for the poor.

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

#235

Post by pbh101 »

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…

>since taxpayers might end up paying taxes already on the books that they might have previously unintentionally evaded.

To take the charitable explanation of this position: studies have shown that prices go up when the payer gets more separated from the actual payment process: credit cards, automated tollbooths, and further open-road tolling have all been shown to significantly (statistically) correlate to higher prices. Automated billing is another great example of this.

As much as I want a simpler tax code and system (while I lived in Amsterdam I could literally calculate my own taxes in a spreadsheet. It was simple... but very expensive), given this data I don't think it unreasonable to think that putting lessening the cognitive burden of the payment process will lead to higher taxes.

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

#236

Post by ouid »

rayiner wrote: post #46
chiefofgxbxl wrote: post #24

Just for thought: suppose the tax system became so simplified that only goods X, Y,and Z were taxed at rates a,b,c. You pay aX+bY+cZ in taxes per year. It would be easy for voters to campaign their politicians to lower tax rates and easily verify. Obviously in the real world there aren't 3 levers to adjust: there are probably thousands or tens of thousands. Apart from the lobbying, politicians may themselves desire t…

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…

Taxes do not exist to raise money. If the government needs money, they can just print it.

Taxes perform many functions. One of those functions is to limit federal spending, another one of those functions is to discourage certain behaviors, making too much money, burning too much carbon, leaving too much money to your descendants, drinking too much alcohol.

Simplifying the tax code is a dumb goal, fight against changes to the tax code that you don't like, but don't assume that the system itself is wrong.

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

#237

Post by dboreham »

smt88 wrote: post #83
narag wrote: post #71

Earlier quoted context omitted.

They prefer regressive taxes, like sales tax I don't buy that. Yes, I know it seems logical, but in practice it's not so clear cut. With deductions, rich people end up paying very little for income tax. With sales tax (or VAT) the person spending more pays more, and it's more difficult to escape. This issue is very unintuitive and numbers tend to hide reality. Let me put an example on how numbers can fool us. In my c…

> With deductions, rich people end up paying very little for income tax You're utterly wrong. The wealthiest 0.001% paid 17.6% of their income in taxes in 2012[1]. That's not "very little" -- it's likely in the tens of millions per person . The top 1% paid even more than that. Some corporations will avoid income tax altogether, as will some small-business owners, but individuals still pay substantial amounts of incom…

As a small business owner I'd love to know how to avoid paying any income tax! Perhaps you didn't mean that?

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

#238

Post by quadrangle »

hermitdev wrote: post #211
quadrangle wrote: post #182

Earlier quoted context omitted.

Yeah, zero FEDERAL income tax but most of those pay for SS, Medicare, and state taxes. Those in a lump sum vs withholdings would still be a different experience.

The number of US citizens that pay federal income tax is closer to 35%. All forms of income tax ought be abolished. A consumption tax of around 18% would provide the same federal revenue. It would simplify tax reporting (i.e. reduce expenditures on tax reporting), and increase the tax base (people living on trust funds would pay in at a higher rater). Look into the "Fair Tax" for a well reasoned proposal for such a t…

Are you counting non-earners like kids and retired folks in that 35%?

Federal "revenue" is a mistaken concept. The federal government just deletes money via taxation in order to offset the created money from spending. The government doesn't need or have any dollars, they are the source of the fiat currency in itself.

The entire point of any tax or spend decisions is to further some political objective. For example, we tax everyone in order to assure the fiat currency has value. We also tax to discourse certain behaviors. We tax to have some impact on who has how many dollars in order to address social issues.

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

#239

Post by Tloewald »

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…

Actually I think Grover Norquist's position is that making the tax easier to pay would make it less easy to notice it rising and less unpopular. It's a horrible position but not quite so bizarre.

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

#240

Post by avmich »

pbh101 wrote: post #235
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…

>since taxpayers might end up paying taxes already on the books that they might have previously unintentionally evaded. To take the charitable explanation of this position: studies have shown that prices go up when the payer gets more separated from the actual payment process: credit cards, automated tollbooths, and further open-road tolling have all been shown to significantly (statistically) correlate to higher pri…

On the other hand, simpler taxes would lead to less expensive tax filing process. You don't need to buy an updated software, pay a professional or spend some hours - if not days - of your life doing something like that.

Are you sure people should keep this inconvenience as a reminder of government expenses?

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