I learned today from a post over at Wizbang about a part of Senator Obama’s campaign platform that I had never heard of: He wants to allow the Internal Revenue Service (IRS) to fill out your tax return for you.
Think about that for a few seconds. It’s almost a good idea.
This is what the Boston Globe had to say about it:
Senator Barack Obama would eliminate millions of hours of such forced labor. The IRS would use its records to generate a so-called simple return for qualifying taxpayers. A filer who disagreed with the agency’s numbers could fill out a standard return. Otherwise, a taxpayer would sign it and send in a check or wait for a refund. This automatic tax return proposal is a winner, no matter who is elected in November.
Well, at first blush it seems like an idea which would save taxpayers from doing something that most of them hate. It seems that this would also save a lot of time and help to get more people to file on-time.
But take a closer look.
Even this editorial mentions the biggest problem with this idea:
Barbara Anderson of Citizens for Limited Taxation raises a practical objection to Obama’s idea: IRS error. A notorious 2001 report by the Government Accountability Office concluded that people who called the agency’s help line were frequently given bad information. But if anything, Obama’s simple returns would be less subject to human error than the existing system.
The editorial fails to inform the reader why the IRS would make fewer mistakes under this system then under the present system; perhaps the change Obama keeps talking about will encompass better training for IRS employees? Who knows? According to the GAO report cited above, when called by a taxpayer with a tax law or account question, the IRS gives a correct answer between 60% and 75% of the time. Add to that the fact that even if the IRS makes a mistake, the taxpayer is liable for any tax, interest, and penalty which is due as a result of the error, and you have a formula for personal financial disaster. If Joe Taxpayer allows the IRS to fill out his return, and then he signs it and files it without more than a cursory glance, and the return is later determined by the IRS to have massive miscalculations, the only person who gets in trouble is the taxpayer.
I don’t know about you, but I don’t think that this is a very good idea at all. It might actually be something to consider if the IRS were held liable for any mistakes they made (maybe make the taxpayer pay the additional tax, but forgive any penalties and interest if paid by a certain date). However, to make taxpayers accountable for the government’s mistakes, especially when it currently looks like approximately 30% of the returns will have mistakes, is ludicrous. Frankly, I’d rather fill out the forms myself.
April 9th, 2008 at 9:11 pm
I do not know of anyone who would allow such important financial information to be handled by an entity who only gets it right six to seven times out of ten.
The senator’s idea has disaster written all over it.
April 10th, 2008 at 10:20 am
This sounds like a great plan! I don’t understand what your problem is with it. If you don’t trust the IRS, you can still do your taxes yourself the old-fashioned way. But I suspect that millions of people will opt for this simplified version.
I think you have a point that if the government does the return for you, you should not be subject to any penalties resulting from their mistakes. But I think that can be easily accommodated in the legislation that would set this up.
And, as the Boston Globe editorial points out… “Obama’s simple returns would be LESS subject to human error than the existing system.”
April 10th, 2008 at 1:06 pm
Mike, my problem is that once taxpayers get into the habit of just waiting for the government to do it for them, chances are they’ll also stop checking the IRS’s numbers and any errors will go uncorrected. Also, it’s just one more thing that the government is trying to control, putting the government well on its way to being a nanny state.
Simply put, IT ISN’T THE GOVERNMENT’S JOB TO DO INDIVIDUALS’ TAX RETURNS.
April 11th, 2008 at 6:19 pm
I haven’t looked at Obama’s proposal, but tax filings are not that simple. Until we eliminate the itemized deductions and adopt the gross income tax system, IRS can’t possibly have all of our personal tax data to complete our tax returns. Examples of information IRS wouldn’t have are medical expenses and charitable contributions. Which brings us to another question: Is Obama proposing to do away with our current system? If so, is this really a better and fairer way to compute taxes? Another point: filing an amended tax return sometimes triggers an audit. So if IRS made a mistake, a taxpayer not only has the burden of proof, he/she also may get audited. Think about that! I’d rather do my own taxes and get it right the first time around!
April 13th, 2008 at 7:00 am
Most people don’t itemize their deductions because they don’t make enough money for it to make a difference. They take the standard deduction.
When my wife and I got married we didn’t have any big medical expenses nor did we make significant charitable donations. We were just scraping by and quickly found that we were better off taking the standard deduction rather than itemizing. Only recently now that we make more money and have lots of childcare expenses does it make enough of a difference.
The government is not going to itemize for you. If you think that itemizing is beneficial to you, then you will not choose to have the government do your taxes. But since most people do take the standard deduction, that won’t matter. The only thing the government needs to know to figure your taxes is how much money you make.
And no, Obama is not proposing that we do away with the current system. They are simply trying to make it easier for people to pay their taxes on time and save money for the government. What’s wrong with that?