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IRS launches paperless processing initiative

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Re: IRS launches paperless processing initiative

#41
post #21

Earlier quoted context omitted.

The regressive aspect of it is offset by the large standard deduction.

That still won't solve the issue. The reason for progressive taxation is that there simply isn't a tax rate that allows you to both sufficiently fund the government and doesn't punish low income earners. The gulf between what the lowest and highest earners make is simply so vast that you can't do it without progressive taxation.

> The reason for progressive taxation is that there simply isn't a tax rate that allows you to both sufficiently fund the government and doesn't punish low income earners.

Sure there is. After eliminating deductions and special treatment (including, e.g., for capital gains), do a flat income tax at the current maximum marginal rate with a standard exemption at the level that results in the same median total tax rate as currently.

You'll more than make up on the high end the revenue you’ll lose on the low end. Of course, all actual flat tax proposals are designed to be massive tax cuts, especially for the rich, which is why they tend to feature a flat rate that's similar to the marginal rate for one of the lower brackets. Do that and you can't pay for much government.

Re: IRS launches paperless processing initiative

#42
post #17

How about this: let’s go to a single flat rate for everyone and everything (say 20%) and eliminate all deductions except for a standard deduction (say whatever is the poverty line, eg $25000 or so). This would be for corporations and individuals. Now your taxes can be filed on a postcard. And the IRS can preprint it and send it to you, with an online code or something to click “ok” on a web site and be done. The gove…

Sounds great, except a flat tax rate is extremely regressive so you either tank the amount of tax revenue the government collects, or you punish low income earners far more than wealthy individuals.

Wealthy individuals already pay a far lower rate of tax on their income from investments than employees do on earned income.

For a single filer in 2023 the standard deduction is $13,850. After that income is taxed differently.

Income tax rates for single filer earned income (excludes social security tax of 6.2% each for employee and employer up to $160,200):

10% $0 to $11,000

12% $11,000 to $44,725

22% $44,725 to $95,375

24% $95,375 to $182,100

32% $182,100 to $231,250

35% $231,250 to $578,125

37% $578,125 or more

Long term capital gains tax rates paid on most investment income (excludes 3.8% NIIT of 3.8% for those with income over $200,000):

0% $0 to $41,675

15% $41,676 to $459,750

20% $459,750 or more

It's perfectly possible for a flat tax to be far more progressive than the tax system today, though its rate would be far higher than 20%.

The highest effective marginal tax rates are often faced by those on lower incomes as the various transfer programs (earned income tax credit, medicare, healthcare subsidies, etc.) have uncoordinated phase outs. In 2012 it was particularly egregious and effective marginal rates approached 100% for those earning around $20,000. https://johnhcochrane.blogspot.com/2012/11/taxes-and-cliffs....

Personally I think it would make more sense for everyone to pay a flat tax of say 50% paired with a basic income for all (including children) and publicly funded healthcare.

Re: IRS launches paperless processing initiative

#43
post #35

Earlier quoted context omitted.

So you are claiming that not wanting to do one thing means you are forced to do some other thing? It is a choice, nothing is "forced". More importantly, you don't have to "pay a bribe to a rent-seeking company" (talk about gross misrepresentation!), the IRS offers free online filing to everyone (and I'm not talking about the "Free file alliance" with tax software vendors, but a direct service from the IRS). https://w…

Free Fillable Forms is run by "On-Line Taxes, Inc", not the IRS. It's not a direct service.

Thank you for the detail. It must be a sub-contractor to the IRS. The front page of the Free File Fillable Forms User Guide, however, is 100% branded as an IRS service, the online help is through the IRS web site[0], and the service is normally accessed initiallhy via the IRS web site, so you would only know about On-Line Taxes Inc. if you spent time reading, for example, the terms of service. For practical purposes, the taxpayer will see this as an IRS service, not a 3rd party. This is opposed to the Free File Alliance, where the taxpayer is only given a list of participating vendors and then is on their own.

[0]https://www.irs.gov/e-file-providers/free-file-fillable-form...

Re: IRS launches paperless processing initiative

#44
post #32

Earlier quoted context omitted.

So you are claiming that not wanting to do one thing means you are forced to do some other thing? It is a choice, nothing is "forced". More importantly, you don't have to "pay a bribe to a rent-seeking company" (talk about gross misrepresentation!), the IRS offers free online filing to everyone (and I'm not talking about the "Free file alliance" with tax software vendors, but a direct service from the IRS). https://w…

> the IRS offers free online filing to everyone Not to dual-status individuals for example. Those individuals must mail/fax their return to IRS.

You are correct. For the tiny fraction of taxpayers who experience this once or twice in a lifetime event (dual status), they must paper file their split-year returns. I am sure there are some other extremely uncommon forms that are not supported as well.

Re: IRS launches paperless processing initiative

#45
post #38

Earlier quoted context omitted.

Hearsay from my friend who lives abroad and who was attending a Democrats abroad function and they kicked him out of the meeting after he suggested that they pass a rule that anybody who could be eligible to be elected to the board of directors should be able to pass a basic tax audit. There was support in the audience but the organizers immediately banned him. There are stories of the IRS being used as a political w…

There are stories of alien abductions floating around online as well.

You're right my story is completely implausible

Re: IRS launches paperless processing initiative

#46
post #17

How about this: let’s go to a single flat rate for everyone and everything (say 20%) and eliminate all deductions except for a standard deduction (say whatever is the poverty line, eg $25000 or so). This would be for corporations and individuals. Now your taxes can be filed on a postcard. And the IRS can preprint it and send it to you, with an online code or something to click “ok” on a web site and be done. The gove…

The marginal tax brackets are not what makes our tax system complicated. You can write them on a single page.

It's all the deductions and exemptions and carve outs. It's important to have higher rates on higher income earners to put pressure against income in equality.

Re: IRS launches paperless processing initiative

#47

Earlier quoted context omitted.

The article is primarily about processing documents other than actual income tax returns. Does the U.K. have a completely digital (paperless) way of communicating with taxpayers and resolving issues after the tax return is filed? The U.S. has had "online tax returns" (e-file) since the 1990s. Paid tax preparers are mandated to efile, it is only the minority of DIY taxpayers who insist on paper filing their income tax…

>it is only the minority of DIY taxpayers who insist on paper filing their income tax returns This is a gross misrepresentation of the situation. Being forced to chop down and bleach trees if you don’t want to pay a bribe to a rent seeking company that lobbies directly against your interests is not “insisting on paper filing” at all.

FreeTaxUSA let's you file federal taxes completely for free. (They have paid add-ons and services of course. But the service is Actually free, unlike TurboTax 'free edition')

Re: IRS launches paperless processing initiative

#48

Earlier quoted context omitted.

Sounds great, except a flat tax rate is extremely regressive so you either tank the amount of tax revenue the government collects, or you punish low income earners far more than wealthy individuals.

Wealthy individuals already pay a far lower rate of tax on their income from investments than employees do on earned income. For a single filer in 2023 the standard deduction is $13,850. After that income is taxed differently. Income tax rates for single filer earned income (excludes social security tax of 6.2% each for employee and employer up to $160,200): 10% $0 to $11,000 12% $11,000 to $44,725 22% $44,725 to $95…

I’d be paying over 65% in California. I would quit my job the next day.

Re: IRS launches paperless processing initiative

#49
post #38

Earlier quoted context omitted.

There are stories of alien abductions floating around online as well.

You're right my story is completely implausible

That's not my point. My point is that "there's stories of X floating around on the Internet" is basically the opposite of evidence.

Re: IRS launches paperless processing initiative

#50
post #17

How about this: let’s go to a single flat rate for everyone and everything (say 20%) and eliminate all deductions except for a standard deduction (say whatever is the poverty line, eg $25000 or so). This would be for corporations and individuals. Now your taxes can be filed on a postcard. And the IRS can preprint it and send it to you, with an online code or something to click “ok” on a web site and be done. The gove…

Or how about the fed gets its money from the states and the states figure out taxes.
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