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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

#391

Earlier quoted context omitted.

> taxes already on the books that they might have previously unintentionally evaded. I agree with Grover Norquist. It might be counter intuitive but I would rather leave it to Turbo-tax to figure out the details than signing the form sent to me by IRS. Let IRS do the extra work of catching me if they think I am filing fraudulent taxes. Grover Norquist's view might be counter-intuitive but I a agree with him.

Ok, is anything in this proposal preventing you from using Turbo-tax, your accountant, or just doing it yourself by hand? No one is forcing you to use the IRS pre-filled form. What is the problem? Let the "idiots" pay extra taxes if they want and smart guys like you can spend extra time and money doing your taxes the old way.

Well, the problem with what happens what government has pre-filled on the form differs from my interpretation!

As a matter of principle I am even opposed to tax deductions at source. Each individual must sign a check at the end of the year/month and pay taxes. This makes sure he feels the pinch.

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

#392
post #337

I did some work for the IRS several years ago to explore the same idea. There are many benefits, including simplicity and accuracy of filing (closing the $500B tax gap), as well as better fraud protection (another $25B). Protectionism of the tax return industry is common, but not the primary reason. Instead, the biggest pushback is from taxpayer advocacy groups. The issue is this: for many Americans, particularly low…

If you receive a huge tax refund from the IRS, that means you set up your initial deductions improperly. If your sole income is 1 main full time job, it's really not hard to estimate your taxes to the point of having a refund under $500. That way you don't government use you as a bank for 0% interest and have more money throughout the year. To preempt some of the responses - no, let's not denigrate poor people for th…

You're not wrong, but we're leaving the world of "logic" here and moving into "politics and optics". Most people can't wrap their heads around, "What do you mean I won't be getting $1,200 in March!? $100 per month? Who wants that!"

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

#393
post #337

I did some work for the IRS several years ago to explore the same idea. There are many benefits, including simplicity and accuracy of filing (closing the $500B tax gap), as well as better fraud protection (another $25B). Protectionism of the tax return industry is common, but not the primary reason. Instead, the biggest pushback is from taxpayer advocacy groups. The issue is this: for many Americans, particularly low…

If it makes filing easier and automatic, wouldn't the returns be submitted earlier, thus negating part of that 1-2 month delay?

The reverse, actually. Here's the trick:

Tax filing opened this year on January 23, 2017. This is the first day you can submit your return to the IRS. The IRS aims to process refunds for 90% of returns in 21 days.

In order to pre-fill a tax return (and, incidentally, to validate that your tax return is correct), the IRS needs information. You're familiar with the acronyms: W-2, 1099, etc. These are called Information Returns (IRs). Depending on the type of IR, these are due to the IRS (from your employer or bank, e.g.) by January 31, February 28, or March 31. I didn't get my 1099-INT from my bank until late-February, for example.

Now, do the math.

The IRS cannot pre-fill a return until March 31 at the absolute earliest. That ignores further processing, mailing, approval, etc. time. But for those taxpayers who filed on January 23, most had their refunds processed by February 15.

So pre-filling tax returns delays the process by 2 months.

There's a very "strange" circular logic here, too. In today's system, you shouldn't file your tax return until you have all your IRs. But you might know that you're not expecting anything in February or March, so you can file "early". But the IRS doesn't know that. They only know that you don't have that associated income when they don't receive anything by the deadline.

Incidentally, this is how fraud happens. I file a fraudulent return on 1/23. The IRS doesn't have the information to validate whether I'm lying or not: they won't receive that information for another 2 months. So the run some basic risk algorithms, then shrug and assume I'm telling the truth and pay me my refund (probably in the form of an untraceable debit card). This happens all the time, usually in the form of filing returns in the names of other people, often dead people or Puerto Rico residents (due to some arcane rules relating to income tax immunity given that PR is a territory).

(People make "mistakes" all the time. Small amounts are waived, and the IRS sends collection letters to the rest. The collection rate of those letters is very, very good. Though I have some good stories about government [in]efficiency. Those letters are not "audits", by the way, but friendly reminders. Audits are really rare, despite our fears.)

The other answer is "move up the deadlines". Make employers and banks file everything by January 15 or something. Good luck with going up against every single large employer and financial institution in the States!

And now you know... the rest of the story.

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

#394

Earlier quoted context omitted.

I'm nearing the point of being completely convinced nothing is actually improvable anymore in the US. If you touch anything, even the most broken or inhumane thing, you'll find someone defending it until the death either because of vested interests or ignorance.

I wouldn't stress too hard. US politics has always been like this. Slavery and then later civil rights are the two biggest examples. As long as there are those who keep up the Good Fight change does happen.

Sure, as long as you don't mind waiting a century or two. Meanwhile, in other nations they fix things far faster.

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

#395

Earlier quoted context omitted.

One of the aspects of The Fair Tax, which is basically a flat tax, is the idea of a "prebate" - a sum of money (between $4-7K if I recall) that is paid to each taxpayer every year to help cover the basics like bread and milk.

I mean, great, but now you're back to tax brackets... May as well stick with the graduated system.

I encourage you to read up on The Fair Tax. There are no brackets. There would be a single sales tax rate on all retail purchases. Nothing else. No deductions, no loopholes.

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

#396

Earlier quoted context omitted.

I mean, great, but now you're back to tax brackets... May as well stick with the graduated system.

I encourage you to read up on The Fair Tax. There are no brackets. There would be a single sales tax rate on all retail purchases. Nothing else. No deductions, no loopholes.

I understand the concept but can't get behind it because it disproportionately taxes the poor (as a portion of their income). Taxing consumption gives the more wealthy a break since spending doesn't rise 1:1 with income.

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

#397

Earlier quoted context omitted.

>The Social Security system is funded by the current active population, and the beneficiaries are the inactives of past generations. You start looking at it hard and the pyramid shape begins to appear. I'm young enough that I plan my retirement assuming 0 money from Social Security despite the vast amounts I pay in. I see it as wealth redistribution from the young to the old who are already better off.

Can you provide stats about these old people who are already better off? Because most of them are just kept out of poverty by social security. Just curious where you get your belief from since the data shows otherwise. http://www.cbpp.org/research/social-security/social-security... "Social Security Keeps 22 Million Americans Out of Poverty: A State-By-State Analysis" "Social Security Lifts 15 Million Elderly American…

https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf

62 million receiving social security.

Using your numbers, that means 40 million aren't in poverty receiving it, while there are 7 million non-elderly receiving it who are kept out of poverty.

My claim, if I make it a bit more wordy is that the elderly receiving social security have more wealth on average than those paying into it. To be a bit more exact, I was referencing those young enough to not be receiving it anytime soon. I didn't exactly give an age range, but we can go to the following site and see some interesting findings.

https://dqydj.com/net-worth-by-age-calculator-for-the-united...

For example, $10k for a 25-29 year old was about the 50 percentile. For someone 65+, it is the 12 percentile. You can try a number of data points and see that the trend is that the older have more wealth.

>Because most of them are just kept out of poverty by social security.

Most? Even with the worst numbers, it is only around 2/5 of the elderly who receive it.

Social security is a large regressive tax. It is generally paid by younger people who have less wealth and goes to older people who have more wealth.

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

#398

Earlier quoted context omitted.

Don't cryptocurrencies break that model? They are financial assets in the economy that are not created or presently controlled by governments.

It depends on your definition of money. From my point of view, cryptocurrencies are financial assets but not money. They are not an IOU ( https://en.wikipedia.org/wiki/IOU ). Government money is a IOU because you are promised that it (and only it) will be accepted as a payment by the state. Anyway, state money can never be totally replaced at least that the government accept payment taxes in the new currency. And why…

Agreed. Acceptance for tax payment is what imbues money with value.

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

#399

Earlier quoted context omitted.

Oh dear oh dear. Private banks create money. If only it were state lead.

Sure, but there is money and there is money. Banks create an asset in their balance, but they create a liability at the same time. Only governments spending create net financial assets in the economy (that is not the same that real assets, of course). https://fernandonogueiracosta.files.wordpress.com/2011/08/cu... (If it's too long, see 'vertical transactions')

Will read this but not sure I'll agree. Banks create money and it is fungible with state tax payment money

http://www.bankofengland.co.uk/research/Pages/workingpapers/...

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

#400
post #304

Earlier quoted context omitted.

There's this thing called the economy, full of private entities, all transacting throughout the year, creating wealth, expanding the money supply, generating a bit of inflation, and so on. Yes, the fiscal multiplier is important, but simple problems like corruption (regulatory capture and federal/state/county/municipality contracts to clients) and (very) unequal accumulation of wealth leading to serious power inequal…

Expanding the money supply and controlling inflation are precisely the things the Fed does (with monetary policy, the fiscal multiplier is only part of it). Re: corruption and concentration of wealth, I see no reason why government should have a monopoly on that. The 2007 crisis, and Enron before it, and countless other scandals, are evidence of the former being rampant in capitalism. The observation that without exo…

The Fed however responds to the markets in the form of bank loan origination, defaults, returns and general market productivity. So it's a delicate balance that the Fed is trying to play with money supply and interest rates to accelerate or brake the economy.
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