What if paying taxes were as easy as paying your credit card statement? That would be ... well, much easier!
And it would be the future if Congress took up Sens. Ron Wyden and Judd Gregg's new tax reform plan, which in addition to dramatically changing the tax code by eliminating subsidies and tripling the standard deduction, would also give the IRS the ability the send taxpayers a one-page statement to review and sign -- just like you get in the mail from your credit card company.
Last week I spoke with Roberton Williams about this plan. Today, I checked in with William Gale at the Brookings Institution, who's been ringing the tax-simplification bell for years. Here's the first part of our interview, on why you should learn to love the IRS:
If Wyden-Gregg became law, it would make paying taxes incredibly easy. Most taxpayers would receive a simple one-page tax statement from the IRS to review and sign. That's it. What do you think of this idea?
I'm a big proponent of this idea. Imagine if we paid credit card bills like we pay taxes. At the end of the month we collect all our receipts and send an estimate to the credit card companies. And they say, "No you forgot all this," and we haggle. But no, instead they manage to collect all the relevant information and say, "Heres your bill. You can dispute this, but in the absence of dispute, this is your bill." That's the idea here.
Most people have very simple tax situations, and the IRS has access to all your income information. You have labor income. You have interest income. You have dividend income. You have pension income. The important stuff like the child tax credit can easily be folded into the calculation because the IRS already knows marital status, number of children and so forth. If the credit card companies can do this every month for whatever population has credit cards, why not develop a system where the IRS can do this once a year? The IRS couldn't do it for everybody now. But we could hire people from the credit card system and can get a million people on this plan in the first year, and five million the second year...
So who hates this idea? Who will the enemies be?
The guys who hate all taxes, the Grover Norquists of the world, don't like it because it makes filing taxes taxes easier, and they want taxes to be painful. They want you to remember your tax burden every time you breath.
And of course the Intuits of the world [like H&R Block] are gonna dislike the idea. If we had a tax system that made any sense in the world, they wouldn't have their current business. But they're smart companies. They'd figure something out.
(Photo: Wikimedia Commons)