Wednesday, April 25, 2007

Tax preparation blues

I’m not a supporter of John Edwards, being that he’s a Democrat doesn’t help, but I’m always willing to listen when people have a good idea.  Even if it doesn’t pan out to be a good idea when all thought out and debated, this tax preparation idea has merit.

      The process by which we Americans figure out our federal taxes is ridiculous. So many tens of millions, maybe even hundreds of millions, of hours spent struggling with those 1040 forms. Maybe a billion dollars in fees paid to tax return preparers and makers of tax software.

      And for so many taxpayers, (filling out your tax forms is) an absurd waste of time. The government already has all the information it needs -- from employers, mortgage companies, state governments, and banks -- to have the perfect picture of tens of millions of people's tax situations. Those people struggle to fill out their return forms, but in the end they don't tell the Internal Revenue Service anything that the IRS doesn' t already know.

      (John Edwards) thinks the IRS ought to prepare a draft tax return for you every year, at least if you're a person whose taxes have historically been relatively simple. If, let's say, all you ever show on your tax return is wage income, bank interest, a personal exemption for yourself, and a standard deduction, Edwards thinks the government should routinely prepare your tax return and send it to you. I would bet that in the case of 30 or 40 percent of taxpayers, the return so prepared would be completely correct. In that case, the taxpayer could just sign it, and send it back. Everyone else could throw away the IRS's version and do it themselves, the way they do now.

People spend a lot of time criticizing everything coming out of certain politician’s mouths just because of their political bent, but we should still be listening.  Not every idea out of the Bush administration is a bad one.  And not every idea coming out of the mouth of Edwards contains toxic sludge either. 

The one down side I see with this, and in this information age of automated tax preparation it’s a small one, is that the IRS will have to increase staff, i.e. increased IRS budget, in order to create the returns for everyone.  But I can’t help agreeing with BoJack that as far as income, and standard deductions that you’ve claimed on your W-2 are already a known.  Heck other information, like your mortgage, is downloadable from the bank, as TurboTax downloads it automatically for you when you’re doing taxes on-line.

1 comment:

Bubba said...

How 'bout something really radical: flat tax. Then, we can just do away with the IRS completely. That will really save us time eh?