
US Senator Warren Introduces Bill to Simplify Tax Filing - abawany
http://www.warren.senate.gov/taxday/
======
bpodgursky
This would just paper over the fact that the US tax code is an abomination of
deductions and credits. It would not simplify any of the magic math; it would
just make most people think they are getting the right credits.

Would it actually give people all the deductions and credits they could get
through a detailed analysis? I highly doubt it. TurboTax doesn't ask 1000
questions for fun; most of them matter because of the insanity of our tax
code.

It would probably put turbo-tax out of business though, this is true. The
default, free, option is going to win against a paid product.

All this will accomplish is making sure that tax preparation is back where it
was two decades ago -- where the Actually Wealthy hire a person to do their
taxes and get the right deductions, and everyone else gets stuck with an
opaque bill which they can't afford to assess for accuracy. This is a far more
regressive system than what we have now.

Don't accuse me of being a TurboTax shill. I have nothing to do with them,
besides doing many hours of complex taxes which would have cost far more in-
person than with TurboTax (and no, I'm not under any circumstances blindly
entrusting the IRS with correctly calculating ISO AMT nonsense.)

~~~
schwabacher
"All this will accomplish is making sure that tax preparation is back where it
was two decades ago -- where the Actually Wealthy hire a person to do their
taxes and get the right deductions, and everyone else gets stuck with an
opaque bill which they can't afford to assess for accuracy. This is a far more
regressive system than what we have now."

This is where it is now - plus the non wealthy end up paying TurboTax $200.
This bill would save them the $200.

~~~
bpodgursky
A lot of fairly high income people pay for TurboTax. Billionaires of course
have tax preparers -- but TurboTax moves the bar a LOT higher.

> This bill would save them the $200.

First, most people pay turbotax $50-100. $200 would be deluxe + 3 states,
which is highly uncommon.

And it's highly likely it would cost them MORE than $200 in credits they are
not automatically given by the IRS. The IRS does not know what you donated to
charity, properties you own which get credits for, educational tax credits
etc.

It will spit out a number with a refund, sure. But this change will take more
from the lower-income and middle-income proportionately than from the wealthy.

~~~
toomuchtodo
> The IRS does not know what you donated to charity, properties you own which
> get credits for, educational tax credits etc.

But it could if provided with the data.

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harryh
As a data point for anyone curious about what a fairly complex, but really not
insane, tax return looks like, my taxes were fairly complicated this year:

    
    
      - 3 jobs (2 for me cause I changed mid-year, 1 for my wife)
      - Some investment earnings (both cap gains & dividends)
      - I was part of the Google class action settlement
      - Some random 1099s
      - Itemized deductions mainly just cause I live in a high tax state (NY)
    

My federal tax return is 87 pages (not counting a list of all capital
transactions). IMHO, complexity that could possibly be eliminated can be found
in these items (in no particular order):

    
    
      - The deductibility of state taxes (still kinda weird to me how this works)
      - Foreign tax credits (Probably actually necessary, but tricky)
      - The AMT
      - Forms 8959/8960 (Can't this be built into the rates?)
      - Self Employment Tax (an artifact of the deceptive way SS & Medicare taxes work)
      - The worksheet for calculating capital gains tax seems a bit crazy
    

Overall, at least from my perspective, no individual item is all that crazy.
It's just the weight of a bunch of little things that all add up to something
that feels overly complicated.

~~~
zeveb
> The deductibility of state taxes (still kinda weird to me how this works)

Well, the idea is that the federal government is only taxing your income, and
money that your state has taken away doesn't is your income. It's not a bad
idea, but the problem is that it means that no-or-low-income-tax states end up
subsidising high-income-tax states. Moreover, there's no easy way to itemise
other forms of state taxes, e.g. sales or property taxes.

It really should be done away with.

~~~
harryh
Ya, I get the reasoning. And I agree with your analysis about the negative
consequences.

But the part I actually think is weird/complex is the way it ties tax returns
together from adjacent years.

For my 2015 federal return I don't deduct my state taxes on my 2015 income, I
deduct state taxes I paid in 2015. Those can be two different things. I just
find that a bit weird.

------
kaffeinecoma
I dread tax time every year. I'm self-employed, so I don't exactly expect it
to be easy, but I generally end up spending 3-4 full days working on my
return. Not including the meticulous record keeping I amortize over the year
with a simple spreadsheet.

Every time I think I've finally got it figured out, there's always some weird
new situation that throws a wrench in things. Common things like
buying/selling a house, moving to a new state or locality, death of a parent,
etc. I honestly don't know how most people ever manage to do it correctly,
much less optimally.

This year it was 2 different banks that got IRA reporting wrong. Last year,
Turbotax "interview mode" would not let me enter some crucial figure
correctly. Previous year it was clients not sending 1099s (and agonizing over
whether to just report manually or wait for the form). Two years before that
it was a RITA (local tax authority) screwup.

I tried hiring a local CPA to take away some of the pain, but he ended up
making a $5K mistake, and it took hours of my time to correct. I've had a good
accountant in the past, so I know they can make a huge difference, but they
are very hard to find.

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matt_wulfeck
I received a letter from the IRS asking for some money because my 1099 didn't
match what my brokerage submitted...

If you have the data already then why am I also calculating it by hand and
sending it? Why don't you just tell me what I owe you!?

~~~
joezydeco
That's Intuit again, lobbying to keep the US from developing a system like
this. There are countries in Europe that already do it.

[http://www.theatlantic.com/business/archive/2016/03/the-10-s...](http://www.theatlantic.com/business/archive/2016/03/the-10-second-
tax-return/475899/)

------
MattSteelblade
Intuit's lobbyists will ensure this doesn't come to fruition.

~~~
ahoy
Legislation can get past powerful lobbyists if there's enough public momentum.
It happened with Tobacco.

I'm not terribly hopeful that this particular bill will pass, but I'm glad to
see Warren bringing the issue up.

~~~
afarrell
This is because most lobbyists can only offer campaign donations, and then
only implicitly. That isn't what politicians really want; They want votes. If
they have campaign money, they might be able to use advertising and organizing
to turn that into votes, but it is no sure thing.

A few lobbying groups, like AARP and the NRA actually _can_ bring votes to a
candidate and that is where the real power is. They have a list of people who
care about their pet issue and can send them mail saying "candidate X proposed
HR.1337 which does foo; Candidate X fights for your rights."

Until recently, the only organization with a large list of people who were
frustrated with turbotax was Intuit. However, Twitter, Facebook, and Reddit
now both have records of large numbers of people griping about taxes. Why has
Facebook not yet exposed an API that let you advertise to people who are
frustrated with a given concept? It seems like a great way to find folks that
have a certain pain point.

------
nodesocket
Current tax code is completely antiquated and way more complicated than it
should be.

While of course the more money you make the more you pay, generally the
effective tax rate is signanfncitly lower for higher net worth individuals.
This is due to loopholes, business expenses, and various writeoffs.

For example, I just did my taxes and my effective rate was 18% (I am not
wealthy, but above the average income level).

~~~
erentz
Would love a how to on this if you feel like sharing more.

~~~
nodesocket
A few things. Careful planning of selling stocks that are in the red and in
the green to minimize the amount of capital gains paid.

I have a LLC for my startup and can write off quite a bit of business expenses
to offset the business income.

~~~
zanny
This is the trick. You have your own LLC and writeoff everything as business
expense. My dad is a contract construction worker, and writes off his
vehicles, his gas, his phone, his tools, and all manner of insurance costs for
work as business expenses and pays a really low effective tax rate as well.

~~~
nodesocket
A few big gotchas with LLC though.

Every year you have to pay a flat $800 to the state of California. Sucks if
your business is not making that much, $800 can be a significant cost.

Self employment tax hurts bad. Basically this is Medicare and social security.
Can be a huge amount owed seperate and in addition to income taxes.

~~~
dublinben
Why would you incorporate your LLC in California? You can get an LLC in other
states for under $100/year.

~~~
gamblor956
And if you are physically present in California, you _still_ have to pay
California taxes for the LLC's income, so you accomplish nothing except
exposing yourself to liability in another jurisdiction.

~~~
dublinben
There's a reason why most companies incorporate in states like Delaware, and
additional liability isn't it.

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sdegutis
Of course it won't pass. With enough money, you can pay lawyers to either make
things legal, convince a court that what you're doing is legal, or hide your
illegal activities. I'm not sure whether TurboTax and the like are doing #1 or
#2, but they're the ones making sure simple tax filing never passes, which
would put them out of business.

~~~
awakeasleep
If the government could take on Standard Oil it probably has a chance at
Intuit.

~~~
ancap
You say that as if government action against Standard Oil was some noble act.
Standard Oil helped facilitate great improvements to the average Americans
standard of living.

~~~
jonathankoren
And do you believe that monopolies offer choice, and drive down prices as
well?

via
[https://en.wikipedia.org/wiki/Standard_Oil#Monopoly_charges_...](https://en.wikipedia.org/wiki/Standard_Oil#Monopoly_charges_and_anti-
trust_legislation)

"In 1904, Standard controlled 91 percent of production and 85 percent of final
sales."

"The federal Commissioner of Corporations studied Standard's operations from
the period of 1904 to 1906[31] and concluded that ``beyond question... the
dominant position of the Standard Oil Co. in the refining industry was due to
unfair practices—to abuse of the control of pipe-lines, to railroad
discriminations, and to unfair methods of competition in the sale of the
refined petroleum products''"

From the DOJ complaint, "The evidence is, in fact, absolutely conclusive that
the Standard Oil Co. charges altogether excessive prices where it meets no
competition, and particularly where there is little likelihood of competitors
entering the field, and that, on the other hand, where competition is active,
it frequently cuts prices to a point which leaves even the Standard little or
no profit, and which more often leaves no profit to the competitor, whose
costs are ordinarily somewhat higher."

~~~
ancap
You probably didn't read the article because two sections below the one you
linked
([https://en.wikipedia.org/wiki/Standard_Oil#Legacy_and_critic...](https://en.wikipedia.org/wiki/Standard_Oil#Legacy_and_criticism_of_breakup))
states:

> Some economic historians have observed that Standard Oil was in the process
> of losing its monopoly at the time of its breakup in 1911. Although Standard
> had 90 percent of American refining capacity in 1880, by 1911 that had
> shrunk to between 60 and 65 percent, due to the expansion in capacity by
> competitors.

Which would clearly be impossible if Standard Oil was a monopoly. Your quote
from a politician with ulterior motives does not prove a monopoly and even
sounds economically dubious.

~~~
jonathankoren
No I read it. It's irrelevant. If anything, it argues they should have been
broken up earlier. Monopolies are market failures.

------
blue11
I must be missing something, but how exactly would this simplify tax filing?

Presumably this bill would break the grip that TurboTax has on the market by,
say, enabling cheaper and/or free solutions. But using the alternatives would
not be in any way simpler than using TurboTax. And TurboTax is not that
expensive (<$100 for federal+state).

~~~
dmix
You have to consider this from the perspective of the modern US politician
instead of an engineer.

Of course they'd prefer another Health.gov style spending bill to build
another sprawling web service, with the added perk of keeping the friendly
government contractors well fed, instead of something that requires the real
hard work by the politicians. And simplifying such a complex policy as the tax
code would be real hard work.

Instant gratification that can be draws congratulation is always preferred to
risking your political reputation attempting to solve the hard underlying
problems - especially when they are riddled with special interests as the tax
code has become.

~~~
cbhl
> Instant gratification that can be draws congratulation is preferred to
> risking your political reputation attempting to solve the hard underlying
> problems

Certainly this happens to some engineers, too.

~~~
dmix
But we have longer term consequences for our actions both from users and
employers. Using duct-taping to patch up serious problems is rarely punished
in politics.

------
bcheung
I was just reading the text. Looks like it is limited to just the simple cases
(no deductions) where there isn't a lot to figure out already to begin with.

Why not just automatically file unless the tax payer elects to file something
different?

They already have all the wage data submitted to them from employers.

------
pjc50
Does the US not have PAYE? Or is it made inconvenient by the state/federal
split?

The corresponding UK system, "self assessment", is reasonably slick online,
although you have to put in all the information yourself. It's used by about a
sixth of the population: [https://www.gov.uk/government/news/hmrc-sees-
biggest-digital...](https://www.gov.uk/government/news/hmrc-sees-biggest-
digital-self-assessment-ever)

------
lutorm
Sounds like my Swedish taxes. All I have to do, if I agree with the
information already on there, is sign it (electronically, of course.)

------
crb002
Trump plan is best. Set a tax floor of $50-$100k. Exclude millions of
americans from even having to file.

------
rurban
I filed my income taxes in Austria, the US and now in Germany. All of them are
pretty easy to file.

The cited 13 hours is insane, and I never needed a 3rd party to help me. But
the US fax filing system is by far the simpliest. I only needed 2 hrs to file
them every year. In Austria and Germany it needs 5-10 hours, and they have
insane buerocratic hurdles. The US have a very simple PDf to fill out, and an
excellent explanation. In Germany I have now monthly stupid HTML forms to fill
out with manually entering >50 zeros.

So I cannot really understand what's so complicated.

------
forrestthewoods
Because our Federal government is _super_ good at creating easy to use,
functional websites.

TurboTax was able to hook into my investment accounts and automatically pull
all of my data. It worked great. All the IRS needs to do is provide an API to
let a range of software do the same.

Also, use of "average" here is criminally misleading. The "average" person
doesn't spend $200. And the "average" tax return isn't $2000. TurboTax free
edition is perfectly sufficient for a plurality of users.

~~~
lhc-
Do you have a reference for that? Maybe some evidence of why you consider
these numbers misleading? I worked in the tax business recently and I'd say
both those numbers are actually below average for out customers (who were
mostly poor or middle class).

------
mozumder
Of course, none of the Republicans support this.

~~~
adventured
Several of the Republican Presidential candidates support drastically
simplifying the tax code. Tax code simplification has extremely wide support
among the Republican base.

The lack of support very likely has more to do with who is presenting it and
the approach used.

~~~
jdmichal
This is not about simplifying the tax code. This is about filing returns.

~~~
adventured
The point I was making is that Republicans do support tax simplification, both
at the filing and tax code levels. I'd go so far as to say that every
Republican candidate has at one time or another publicly supported
simplification across the board when it comes to both the code and filing. If
you simplify the tax code - which is desperately needed - the filing
simplification is a logical extension of that. For decades Republican
candidates have been talking about the idea of being able to file your taxes
on a single index card.

Simplifying the filing without simplifying the tax code, is putting a bandaid
on a gushing wound that is getting worse every year.

------
Alupis
What a great PR piece for Warren... but unfortunately this is just smoke and
mirrors.

This does +absolutely nothing+ to simplify the tax _code_ , this is solely
about "simplifying" tax preparation and filing.

It makes it easier to file online for free, and makes it so the IRS can't get
in bed with Intuit, HR Block, etc.

We need _real_ tax reform - not smoke and mirrors.

~~~
davidw
> It makes it easier to file online for free

That's not a bad thing in and of itself.

~~~
Alupis
> > It makes it easier to file online for free

> That's not a bad thing in and of itself.

You're absolutely right.

However, this is being touted as tax [code] reform... which it's definitely
not.

Your tax preparation expenses are already tax deductible, so making it
"cheaper" doesn't really help anyone.

We need a simpler and more fair tax code - but we're not getting any of that
with this bill.

This is a distraction, and good PR for someone potentially poised for a VP
ticket...

------
mrfusion
Just curious would this be considered budget neutral or would it bring in more
taxes? Or less?

~~~
entee
Neutral probably, might affect costs at IRS, but I would imagine relatively
little change in revenue.

The hiccup could be if people were consistently overestimating their taxes,
but it looks as though for the median citizen that's unlikely (most people
don't itemize and take the standard deduction at that income level).

------
malchow
Simplify? The only ones working to simplify the inane and uncompetitive U.S.
tax code, which largely hurts working families and enables the politically
well connected, are those rare and few politicians working toward complete
structural overhaul.

------
nickik
Everything would be so much better if there was just a simple flat-tax. Same
tax for all buissness and people. Same tax for incomes of all kinds.

And before the Progressives start rioting, its easly possible to make it
somewhat progressive. Then we can foreever argue if it should be more or less
progressive.

The amount of time saved by people and more importantly buissnesses is quite
extraordinary. Additionally it would make finding tax cheaters far easier. The
IRS could be much smaller. That also has positive effects on privacy.

The book "The Flat Tax" was released in 1981 and was implmented in some of the
countries that became free after the collapse of the USSR.

I highly recommend this 1h podcast with the auther of the book:
[http://www.econtalk.org/archives/2007/04/rabushka_on_the.htm...](http://www.econtalk.org/archives/2007/04/rabushka_on_the.html)

------
mathiasben
Let's make it even simpler. no deductions for anything whatsoever.

~~~
ancap
I'd like it simpler than that--0% for all incomes less than infinity.

~~~
nodesocket
I'm good with this.

------
tmaly
I would like to see us go back to a variation on the apportionment among the
states.

The variation I would envision would be an apportionment among congressional
districts. This would allow tiny states like RI to still contribute, but maybe
not on the same level as larger states as CA.

Then under this, it would be up to each individual state to decide how it is
going to collect taxes for each of these districts.

Then repeal the 16th amendment and replace it with a new apportionment
amendment.

We would still be stuck with the current state tax code for each of the
respective states that we have now, but we would get rid of the massive
Federal tax code.

------
MikeNomad
Simplify filing? How about going back to not taxing wages, and for those that
would still have to file, simply input the info directly on the IRS website?

------
shmerl
May be they should fix AMT mess as well?

------
emdd
My tax filings are 30-40 pages long, so I'm game for any improvements.

------
MaggieL
Nobody ever simplified anything by giving the government a monopoly on it.

~~~
pzone
It's a natural monopoly because the government automatically receives copies
of your tax information. You couldn't just set up a competitive market for tax
preparation software with the government selling access to everyone's W2s.

