Why do 56 percent of Americans dislike or even hate doing their taxes? A recent Pew Research poll found that it’s not for any of the reasons anti-tax activists like Grover Norquist would like you to believe. As Pew explains:
Among those who dislike or hate doing their taxes, most cite the hassles of the process or the amount of time it takes: 31% say it is complicated, requires too much paperwork or they are afraid of making mistakes, while 24% say it is inconvenient and time-consuming. A much smaller share (12%) says they dislike doing their taxes because of how the government uses tax money. Just 5% of those who dislike or hate doing their income taxes say it is because they pay too much in taxes.
So what if it weren’t a time-consuming hassle? You have probably heard that a “flat tax” or “fair tax” is the solution, but we do not need to turn our progressive tax system upside-down (PDF) to simplify tax collection.
The real solution to the hassle problem is called “return-free filing.” It doesn’t just reduce your work to fill out a postcard, it eliminates it altogether.
Under one version of a return-free filing system, the IRS would send each taxpayer their own tax return, already filled out and with their taxes owed calculated. The taxpayer can either approve it, or choose to fill out their own return.
Even with our complicated system of tax breaks, experts estimate that as many as 54 percent of taxpayers would no longer need to go through the trouble of filling out their own tax return under a return-free filing system. According to one estimate, moving to this system could save Americans over $2 billion in tax prep costs and 225 million hours in tax prep time each year.
A return-free tax system is more than just theoretical. The reality is that thirty-six countries (PDF) like Germany, Japan and the United Kingdom already use a return-free filing system to greater or lesser extents. In fact, you do not have to look any further than California, which uses this approach in its ReadyReturn program. According to a study of ReadyReturn (subscription required), participants in the program spent about 80 percent less time filing and had an error rate of a tenth of the level of comparable taxpayers.
The benefits of return-free filing have been lauded by members of both major political parties. For example, the comprehensive tax reform plan co-sponsored by Democratic Senator Ron Wyden and Republican Senator Dan Coats in 2011 includes a return-free filing system dubbed “Easyfile,” and both President Barack Obama and former President Ronald Reagan have sung the praises of return-free filing.
While return-free filing gets accolades from across the political spectrum, it has some powerful opponents thwarting its implementation in the U.S. An exceptional article from ProPublica explains that the most prominent opponents of this system are tax preparation companies like H&R Block and Intuit (the maker of TurboTax), which stand to lose a lot of money if taxpayers no longer need help preparing tax returns. In the past five years, these companies have spent $20 million lobbying Congress to ignore the benefits to taxpayers of return-free filing.
There are debates, however, as to whether the act of filling out tax returns “promotes civic reflection,” making us somehow more engaged in our government, perhaps more critical as well, in the same way that jury duty reminds us we are all participants in democracy.
And while Duke University Law Professor Lawrence Zelenak has been a proponent of this argument, in his recent book he suggests that “the fiscal-citizenship-promoting character of the return-filing process might well be even more pronounced” under a return-free filing system. Echoing the Pew findings, he suggests that eliminating the “negative feeling engendered by grappling with complexity or by paying a surrogate” might allow Americans to focus more clearly on the larger picture and benefits of government.
While there is no shortage of critical tax reforms we should implement to improve our tax system, moving toward a return-free tax system would be an important step toward bolstering “the bond between taxation and citizenship” as Zelenak put it in a recent New York Times editorial, and making “filing Form 1040 an act of civic pride rather than a bureaucratic hassle.”