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The State is not your friend, ctd According to this report by Techcrunch, the technology publication, a bi-partisan agreement in Congress (usually a bad sign) means that a tech solution enabling taxpayers to prepare their annual returns for no charge has been blocked. The tax preparations industry, which is huge, has objected.
Sometimes the sheer brazenness of lobbying in the political systems of the world befuddles even a long-term observer of such things such as me. We should not be surprised, really. There is a large industry of people who help others navigate the reefs and shoals of taxes, and one suspects many of them fear things such as simpler, lower and flatter taxes because if people can file a return on a single sheet of A4 paper, or its internet equivalent, then much of this sector is, to put it in non-technical terms, fucked.
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I belong to such a sector.
In one sense, you’re right. There are some ridiculously complicated government requirements that could be made easy, at great benefit to voters and taxpayers.
On the flip side, my experience of these government-run DIY initiatives is that they may make it ‘possible’ to do it yourself, and ‘easy’ to do it yourself, but most people lack the necessary underlying professional knowledge to do a proper job. So a lot of them end up with a potentially disastrous outcomes. And then, when it’s time to fix the mess, their new friends in government are nowhere to be seen.
But I’m still here. Ready to deal with the entirely-foreseeable consequences of yet another government ‘solution’ to a non-problem.
So things aren’t necessarily quite so black and white.
Caveat emptor.
In the UK the costs of paying an accountant to sort out your tax returns are not tax-deductible. Unless you’re an MP, of course. Yes, they gave themselves an exemption. What a lovely set of rulers we have.
“There is a large industry of people who help others navigate the reefs and shoals of taxes,….”
I had one ships captain explain to me, about navigating around “tricky” Caribbean islands….
It’s more important to know exactly where you’re NOT, than exactly where you ARE.
Apparently, several Brit, ex-pat, tax refugee, “yachties” agreed.
This could be about the loss of democracy.
In New Zealand, a business acquaintance (an IT and management consultant) of mine told me that in 2008/9 he had been involved in a project initiated within several government NZ departments (including the IRD – Inland Revenue Department) to automate the hopelessly slow, costly, inefficient and largely manual business processes for the collection of tax returns for individual taxpayers and SMBs (Small-to-Medium-Businesses). However, the rather sizeable projected cost for the project was apparently rejected for funding in the Cabinet budget of the then new, incoming Keyes’ National government – so the project was shelved. Apparently, the overall objectives of the shelved project were considered so important that they were to be folded into the objectives for an ongoing cross-department transformation project at the NZ IRD.
Fast forward to 2019 and a great deal of taxwork can now be done online with the NZ IRD – it’s almost painless. They’ve come a long way, though perhaps a bit late to the party. Ruddy impressive, I reckon. I think this – a relative agility in getting difficult and important things done – is something that small Western democracies can probably benefit from, because they are generally not so bogged-down by top-heavy bureaucracies and corruption. Small and manageable.
For example, one can observe this in the recent economic histories of Finland and New Zealand, which, by the ’80s, had both independently developed and arrived at an efficient, computerised and integrated national Payments System (for cheque-clearing) with a 24-hour clearing window, when larger countries were still struggling to manage 3, 4 or 5-day windows. This was no mean feat.
There’s another example – from NZ’s recent political history – where proportional representation in the voting system was proposed and put to a referendum. The referendum said “Yes” and chose MMP, so MMP was implemented. A couple of years later there was a referendum to see whether the voters wanted to continue with MMP, and they voted “Yes” (the experiment had worked – electoral processes had become much more balanced and relatively more sane and accountable government had arguably resulted). Again, this was no mean feat.
Contrast this however with the UK, where the voters apparently voted “the wrong way” in a referendum and now the Mother of Parliaments appears to be no longer bowing to the peoples’ will to leave the EU (Brexit) and seems to be hell-bent on forcing the country to become a Federal State of an unelected EU government, or something, in a “New World Order”.
And across the ditch in the democracy of the USA, the loser presidential candidate apparently abuses large swathes of her opponent’s supporters as being “a basket of deplorables” and (ironically) her supporters agree with her in a deplorable fashion and seem to be now hell-bent on unilaterally and systematically attacking the 45th President and the Administration on all possible fronts, regardless of the democratic vote.
So this possibly belated realisation that “The State is not your friend”, because the sensible, necessary and overdue improvements to the tax-gathering business processes are being blocked by apparent corruption – is it really NEWS. or just so much fake news to enlist yet more outrage whilst distracting from the REAL problems? Watch the pea.
Merika seems to be so screwed by now that I didn’t think anyone could be surprised any more by any apparent decline or what is happening or does happen. Citizens should just accept their fates in what the country has become and/or is becoming – like (say) Venezuela, Syria or whichever of the other “sh*thole” countries as referred to by the President.
It almost pains me to say it, but I’ve used
https://www.irs.gov/e-file-providers/before-starting-free-file-fillable-forms
for about ten years.
The problem isn’t who makes software to make taxes easier to file, the problem is that the taxes are so damn complicated to file in the first place.
There is an irony in all this. Lobbyists are buying off politicians to keep from making a simple and free tax submission process that is necessary because different lobbyists have made such a mess of the tax code in the first place.
The solution is simple — repeal the 16th amendment and create a national retail sales tax. (Of course if you live in Britain you have a national retail sales tax AND an income tax….)
And with a national sales tax, a VAT will follow as the day the night.
This works only if the main purpose of the tax code is to collect tax money.
But it’s just as important to be able to coerce and guide people’s activities and purchases as it is to collect revenue.
Our FedGov has no general police power, but it does have the power to tax. So, while it can’t order us to buy health insurance, it can tax us if we don’t buy it. (See National Federation of Independent Business v. Sebelius.) It can’t order us to buy electric cars, but it can give us tax credits if we do. It can’t order us to have kids, but it can give us tax credits if we do.
Essentially, the complicated tax policy in our country IS the replacement for the nonexistent federal police power.
@Fraser Orr: I apologise if I seemed to understate the complexity/difficulty of the tax system in the US or anywhere else, but that wasn’t the intention. As a lapsed bean counter specialising in taxation, property taxation and process engineering in these areas, I am reasonably familiar with the complexities, having worked as a consultant in these areas on both sides of the fence – i.e., as adviser in the government/revenue-gathering side and/or as adviser in commercial accounting practice, in the UK, NZ, Australia, for a couple of US-based international corporations in Europe, and in Thailand – the latter where I was fortunate enough to be engaged on a fascinating and useful World Bank project as the process re-engineering lead consultant in a project to design and implement systems that would automate existing business processes operated by a major revenue-gathering department within the Royal Thai Government and that was highly important for the development of the Thai national economy.
I feel sure that you are quite correct in that:
This was certainly true in the NZ case, where the cost of compliance (the work/cost associated with making a formal tax return) was perceived to be inefficient and excessive – on the taxpayer’s side – and equally on the tax-gatherer’s side. So they remediated the situation by automating the communications interface between taxpayer accounting systems and Inland Revenue tax data-collection systems. This put a lot of people out of work on both sides – people who had been doing what was essentially unproductive overhead work that had been unavoidable pre-automation. Neither side has complained though, because it is clearly in the national interest (taxpayer interest) to minimise taxpayer compliance costs and the operational costs of the government tax-gatherer.
If I understand it correctly, in the American case:
If it had been in (say) NZ, or any other half-decent democracy, then the representatives of the TPI (Tax Preparations Industry) would probably be given a pretty swift kick up the backside and told to go away in the appropriate customarily offensive vernacular, accompanied by the appropriate customarily offensive hand gesture. But no, it is in the US, where the citizens would seem to have been dopey enough to allow corporations to concoct an apparently corrupt and corrupting system where they can gain the status of a legal entity that has rights that are superior to a citizen’s – e.g., including engaging in overt, acceptable bribery/corruption and revolving doors and which operates under the euphemism of “political lobbying” (yeah, right). I knew a senior member of the EPA (we had been schoolmates) who I hear made around a million by going through the revolving door from the EPA to lobby on behalf of the industrial giant that he had been working against in the EPA for large-scale industrial chemical pollution infringements. There was no shame in it. Nice work if you can get it.
This is why I wrote:
It was much the same in Thailand, where I met the corruption head-on. It had eroded the (admittedly fragile) democratic processes in that country and it was getting worse. The work I was doing there would make their government departmental business processes more transparent and significantly reduce the potential/opportunity for the customary under-the-table corrupt practices, and I was warned by my World Bank/Thai counterpart that I would be hated by and perceived as a threat to the livelihood of an estimated 50% of the managers I had to deal with. The trouble was, though they knew me and were all smiles and friendly on the surface, I never knew which group each of them fell into.
If the veils were pulled off Americans’ eyes, then they might perhaps be able to see this “political lobbying” for exactly what it really is – unacceptable graft – but, from experience at any rate, I don’t think that’s likely to happen. They are already so conditioned and screwed. A depressingly large number of them don’t seem to be able to engage in independent critical thinking and they seem to regurgitate opinions that have been programmed into them by school and/or the MSM. Nothing original. Lights on, but nobody home. For all intents and purposes they could be – might as well be – NPCs.
I’m always mystified why public sector workers, and others who are paid out of the tax income, are taxed, this is just giving someone money and taking some of it back again. Why not give tax-free salaries (reduced accordingly as if they were taxed), surely this would save millions and improve productivity? The usual excuse is to provide some sort of equivalent relative income to the private sector, but seeing as many public sector employees have benefits not found elsewhere (such as generous pensions) then this is not a fair comparison anyway.
@Julie near Chicago: I don’t quite follow where you say:
I mean – So what? A VAT (Value-Added Tax) would be just that – i.e., an incremental tax, based on the increase in value of a product or service at each stage of the sale/purchase or production/distribution cycle.
As such, it could/would replace sales and purchase taxes. The introduction of a VAT generally leads to greater equitability and more accurate targeting of taxes. It has also shown itself to be a relatively efficient and cost-effective approach and simple to account for.
@Runcie Balspune: It’s probably that sort of convoluted thinking that got us all into this mess in the first place! 🙂
I always voted to give dwarfish people a tax refund because they take up less space compared to the bigger/taller/fatter people who take up more and who should thus be taxed more.
Runcie B — “Why not give [public sector workers] tax-free salaries …”
Another approach would be to outlaw non-cash payments to all workers (public sector & private sector). Instead of getting employer-provided health insurance (for example), the worker would get cash and buy his own insurance. Instead of public sector workers getting the promise of a taxpayer-provided pension in the future, they would get cash today to invest (or not) for their own retirement. No executive stock options either — although perhaps executives should be paid partly in stock in place of cash. A lot of non-cash payments are driven by arcane provisions in the tax code which should be wiped clean.
But the big change it would be good to see would be the elimination of tax withholding/PAYE. Pay the worker every penny he has earned with the sweat of his brow, and then make him write a check to the government every month for his taxes. Make taxes real to the payer!
And thereby making you file a return every month, rather than every year? No thanks.
The NZ tax form is a sheet of paper long, and not hard to follow. Even when you have shares (with tax imputation) etc, it’s done by a person easily enough. But then there are almost no exemptions. It’s a myriad of exemptions that make calculating tax difficult and keeps people in work, not how the forms are filed.
@bobby b
This works only if the main purpose of the tax code is to collect tax money. But it’s just as important to be able to coerce and guide people’s activities and purchases as it is to collect revenue.
Right, and this may well be your point, that is a reason to eliminate the income tax, not a reason to keep it. In fact, it is probably the most important reason to do so.
Another perfectly viable alternative would be to make withholding illegal. Make people actually write a check/cheque for their taxes. I run a small business, so have to do so every month. It is utterly horrifying. I think most people just have no realization of the MASSIVE amounts of money they are paying in tax.
If I had my way you’d have to pay it in stacks of five dollar bills.
So they don’t vote themselves endless tax free salary increases at the cost of everyone else paying more tax.
Price signals effectively.
“As a lapsed bean counter specialising in taxation, property taxation and process engineering in these areas, I am reasonably familiar with the complexities, having worked as a consultant in these areas on both sides of the fence – i.e., as adviser in the government/revenue-gathering side and/or as adviser in commercial accounting practice, in the UK, NZ, Australia, for a couple of US-based international corporations in Europe, and in Thailand – the latter where I was fortunate enough to be engaged on a fascinating and useful World Bank project as the process re-engineering lead consultant in a project to design and implement systems that would automate existing business processes operated by a major revenue-gathering department within the Royal Thai Government and that was highly important for the development of the Thai national economy.”
For one in favour of simplicity, that’s the longest sentence used to justify such a stance….
;-P
@The Pedant-General:
Yes, it is, isn’t it!? I thought so too! I’m usually in favour of simplicity, but I was feeling a tad mischievous and the subject seemed a bit dull, so I decided to switch to “windbag mode” for a bit of light relief and to poke the borax at the North American chattering classes who seem to have an odd habit of perpetrating their chatter and pursuing fulfillment through (for example) repeatedly helplessly/impotently whinging about things or getting outraged without – heaven forfend! – ever actually analysing or addressing the causal problem(s). I suspect that there is method in that insofar as, if the causal problem(s) was(were) addressed, then eventually there might come a time when there would be nothing left to whinge about and a terrifying and intolerable silence would descend and all those mindlessly dreary and superficial American TV talk-show hosts would be at risk of unemployment.
Anyway, I reckon that I might have rather surpassed myself with that bit of writing. It was a non-trivial exercise, because one has to try to hold together the torrent of words with correct grammar and punctuation, so as they seem to make some kind of sense – not that they actually have to make any sense, of course, but, though the audience might not notice, as a purist, I’d prefer it if the words did make sense. Of course, if I had been in “lawyer mode”, then I would have followed my legal training, omitting the punctuation altogether so as to keep it in the correct style and make it as ambiguous as possible and bugger the sense, with lots of running “and’s” and “but’s” sprinkled throughout like hundreds and thousands.
Do you think you liked it?
We sometimes aim to please. 😉
Yep. Exactly. If we could switch to a sales-tax-only model, we could cut the federal government’s exercise of its constitutionally-allowed power over us in our day-to-day affairs by 60%.
The constitutionally-derived power that the federal government has over all of us isn’t huge, but government has learned to leverage what power it has. Limited by the Commerce Clause and several other provisions, it has learned that the coercive powers of selective taxation can make up for a lot.
I’m always mystified why public sector workers, and others who are paid out of the tax income, are taxed
The benefit is that then (theoretically) they would not all endlessly vote for higher taxes to fund their departments as their own salaries would also be decreasing. This hasn’t exactly been effective but imagine removing any self-interest from them at all for limiting taxes…
It is possible to repeal an income tax once it is enacted – for example it was done in South Dakota.
But it can only be done with a really hard line on GOVERNMENT SPENDING – otherwise such things as a national sales tax would be crippling high.
As for the absurdly complicated and “graduated” income tax system in the United States and other countries (including the United Kingdom) – Perry is quite correct about it.
Even if a country has an income tax it does NOT have to be this utter mess – the utter mess is the result of endless special interests, and it is also the result of politicians playing games. Not even corruption – more “I can use the tax code to reward behaviour that I like, and punish behaviour I do not like” (a fatal concept).
Sorry – it was J.P. not Perry.
Paul Marks
But it can only be done with a really hard line on GOVERNMENT SPENDING – otherwise such things as a national sales tax would be crippling high.
Of course I am in favor of controlling government spending (by which I mean reducing it to about 5% of its current value), but I am not sure I agree with that. I don’t know what the PSBR is in the UK right now but here in the USA the government spends about 50% more than they take in tax revenues, so there doesn’t seem to currently be a link between the two. My ideal would be to set the NRST at 10% because it is a Schelling point and would make it a lot harder to change or fiddle with. (But I remember when the VAT in the UK was 15% and that didn’t last, did it?)
Of course part of that is hard because the US has to service a debt of well over 100 trillion dollars (assuming you include the debt owed to social security and medicare participants, something that most people don’t both to do.) So that debt service is overwhelmingly huge. (I suggest the US sell off as many assets as possible to reduce that debt, but I doubt they will do that any more than they will follow any of my other advice.)
Even if a country has an income tax it does NOT have to be this utter mess
Again I don’t agree. If you build it they will come. The existence of an exploitable structure inevitably leads to its exploitation. It is like leaving a plate full of candy in a room full of kindergarteners and being SHOCKED when you come back to find some of it gone.
“Special interests” are, generally speaking, companies that have a fiduciary duty to their shareholders to maximize profits any way possible within the bounds of the law and their corporate charters. If they can spend some money on scummy politicians to make that happen then, in a sense, they have a duty to do so. The problem is not that “special interests” BUY influence and advantage, it is that influence and advantage are FOR SALE in the first place.
And the reality is if there are structures that politicians can exploit to their advantage they will inevitably do so. These people would, after all, sell their own grandmothers if they thought it would advantage them.