Sen. Elizabeth Warren, a Democratic candidate for president, has proposed a simple solution to the annual agony and deadline drudgery of filing income-tax returns: Let the Internal Revenue Service do it all.
The fact that the idea failed in both congressional chambers is clear demonstration that money speaks louder than good ideas in Washington, D.C.
With the tax filing deadline now in the rearview mirror for 2019, most Americans happily put the whole ordeal out of their minds, until next year. Warren estimates that the average American spends 11 hours and about $200 preparing tax returns. The fix, she suggests, is simple.
The IRS could send each taxpayer a bill once a year. Everyone’s income is reported to the IRS. All those W-2s, 1099s, investment dividend forms and K-1s are copies of those already submitted to the IRS. That makes having to fill out the tax returns like a redundant game of “gotcha.”
Itemized deductions for most middle-class taxpayers were replaced by a single standard deduction by the 2017 changes in the tax law. For those who make enough charitable donations or have high enough medical bills, a simplified online process could be completed before the refund checks or tax bills are issued.
A second Warren proposal would also mean a simplified tax form for corporations that report huge profits to investors.
Instead of the loopholes that allowed at least 20 Fortune 500 companies to pay nothing in 2018, according to the Institute on Taxation and Economic Policy, companies would pay a flat 7 percent rate on anything in excess of $100 million reported.
Britain, Germany and Sweden provide pre-filled tax forms. Taxpayers who desire could still do their own returns, though it’s doubtful that the government would make any more errors than financial institutions and banks do each month.
Instead of passing Warren’s Tax Filing Simplification Act and her “real corporate profits tax,” the House of Representatives has advanced a bill that would specifically prevent the IRS from doing tax preparation for taxpayers.
ProPublica reported that Intuit and H&R Block spent something over $6 million lobbying Congress last year, trying to protect an $11 billion tax preparation industry.
So far in this battle, money talks. Instead, representatives and senators should listen to Warren. Taxpayers shouldn’t have to pay both taxes and a tax preparer if it’s no longer necessary.