What Scandinavia Can Teach Us About Taxes

While I am on something of a tax kick (and apparently a Vox.com one), the website has another article that questions the very notion that average citizens should have to worry about these details to begin with.

The IRS knows what you make. It knows if you typically take the standard deduction. For a lot of Americans, the IRS could just fill out their taxes for them. It would save billions of dollars in tax preparation fees and hundreds of millions of hours spent filling out tax forms.

This isn’t some wild idea: it was piloted in California, where citizens loved it — 97 percent of those who used it said they would do so again. It’s how taxes work in Denmark, Sweden, and Spain. “No other industrialized country asks its citizens to jump through as many hoops to calculate their taxes as ours,” writes Farhad Manjoo at the New York Times.

This idea has considerable traction across the political spectrum, though it faces powerful opposition:

Intuit, the maker of TurboTax, is a particularly powerful opponent. Such a system “minimizes the taxpayers’ voice and control over the tax process by reducing their role in filing their taxes and getting their own money back,” David Williams, the company’s chief tax officer, told the Times.

But that excuse doesn’t hold much water. Under these automatic systems, no one has to let the IRS fill out their taxes for them. They can continue to do it by hand or by TurboTax, or hire an accountant. Intuit knows, however, that many fewer Americans would do their own taxes under this scenario, and that would be a big hit to Intuit’s bottom line.

Some anti-tax conservatives also hate the idea of the IRS filling out sample returns. Grover Norquist, president of Americans for Tax Reform, warns, “Conservatives, in particular, should see this ploy for what it clearly is: a money-grab by the government.” The easier and more efficient the tax system is, the more money it will raise, and the less public anger there will be for anti-tax conservatives to harness.

For much more on this subject, ProPublica’s investigation of Intuit’s lobbying against automatic tax filing is the best look at why a policy with so much bipartisan support can’t seem to pass Congress, and the Sunlight Foundation has even more lobbying numbers here. Wonks will want to spend some time with economist Austan Goolsbee’s white paper on how automatic filing could work in practice. And you can read Intuit’s case against California’s Ready Return system here.

It seems there is no issue in American politics, however broadly supported or commonsensical, that does not face well-monied and powerful lobbyists. I wonder if the Scandinavian nations had to deal with this?

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