As a Christmas present to Americans, the New York Times ran a story titled “Affordable Care Act’s Tax Effects Now Loom for Filers” about how “millions of [American taxpayers] will have to grapple with new tax forms and calculations [related to Obamacare subsidies and penalties] that may generate unexpected results.” Apparently if your income in 2014 was not the same as it was in 2012 there is going to be some additional paperwork.
Is this the time for the U.S. to move to a system already in place in some other countries? The government gets all kinds of reports on what Americans are paid by employers, banks, and mutual funds. Why can’t the government figure the correct taxes for most people and just send us the bill?
Health insurers are essentially government agencies at this point. Citizens are required by law to buy their products. No health insurer can operate without (state) government approval. A central planning government committee decides what the product is going to be. Other than paying higher-than-civil service salaries, how is that different from any other government agency? Thus if insurers are government agencies and the IRS is a government agency, why isn’t it the insurer’s job to tell the IRS who were the customers in the preceding tax year? Why do we have to get paper certificates and submit proof to one government agency (the IRS) that we bought something from another government agency (the insurer)?
Why can’t we have an IRS web site where we see what we owe, tell them about any new children or other household changes, type in any extra deductions, e.g., for charitable donations or business expenses (and if it is a capital asset, let the IRS figure depreciation too!), and be done with it?
I’m aware that this is an old idea and that various people have lobbied against it (example story). But this is the first year of Obamacare and the tax system taking on this bizarre new angle of subsidy clawbacks So perhaps this is the time when everyone can finally agree that government should take our money but leave us our sanity.
[The headline argument against the concept seems to be that the government might send out an erroneous bill and people would just pay it, so we’re all going to be better off if we laboriously gather up our paperwork and pay bookkeepers, accountants, and Intuit (for TurboTax). And then, in those cases where the government does actually calculate a different number, pay whatever bill they send us and exchange letters back and forth. It would be a good argument if time were free and accountants were free. But if we have to spend days of our time and hundreds or thousands of our dollars each year to guard against the possibility of an IRS arithmetic error, we can’t come out ahead unless the IRS would be making some truly spectacular mistakes.]
Al Gore had a scarier suggestion during his first term as Vice President. He said employers should just pool their payroll with the federal government, the government would make the correct deductions and then send each citizen their appropriate check.
But six-pack-Joe, with xBox will not give up his freedom and let the government take over his life.
Seriously, if any such idea gets even discussed by our law makers, expect to see rioting across the country even though most US Citizens give up more more of their freedom than they realize. For example, the government already has websites that look into and link your income data: https://fafsa.ed.gov/ to name one.
I suspect the private industry of tax accountants is cheaper and more efficient than a government office would be. Intuit does a reasonable job of getting each year’s TurboTax out on time. Would you really want to trust that task to the folks who brought us Healthcare.gov?
[I’m reminded of a story that ran in a personal finance magazine years ago. They took the finances of a moderately well-off individual (e.g., a physician with investments & rental properties) and handed the same paperwork to a dozen or so different tax accountants. The result? A dozen different tax bills; no two were the same.]
Admittedly from 27 years ago, but I was reminded of this bit from a 1988 Dave Barry column:
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“A General Accounting Office study . . . found that IRS employees whose job it is to take questions by telephone are giving wrong answers even more often than a year ago, when their accuracy rate was just 79 percent. Informal spot-checks of the 4,500 IRS ‘assistors’ found that the (tax law) changes enacted in 1986 are so far-reaching that one-third to one-half of the answers are wrong.”
Of course this is a typical example of Negative Journalism, comparable to the way the press is always trying to link Attorney General Edwin Meese to one crime or another, without ever pointing out that there are literally dozens of crimes committed every year that the attorney general probably had nothing to do with, as far as we know. Because simple arithmetic tells us that if the IRS taxpayer-assistance personnel are, in fact, giving the wrong answer half the time, that means they also are giving the RIGHT answer a whopping half the time, which is a darned sight better than President Reagan does at press conferences when pesky negative reporters ask him tricky questions such as what the foreign policy is.
I know you’re probably thinking: “Wait a minute. If they’re giving out wrong answers, why should I even bother with the IRS taxpayer-assistance program? Why shouldn’t I answer my own questions via some random method such as flipping a coin?”
That’s what I was going to do, but I thought I had better first check with the IRS, so I called the toll-free number. Really. Here’s how it went:
ME: Is it legal to answer your own tax questions by flipping a coin?
IRS ASSISTOR (laughing): No, not really.
Of course, based on the odds, there’s a solid chance that this answer is wrong, and the coin flip is legal.
Phil,
It is possible to make taxes simple. When I was living in Austria it was a simple flat tax. In fact, you can know exactly how much you’d be paying in taxes. There is an online calculator here: http://onlinerechner.haude.at/bmf/brutto-netto-rechner.html
Simply put in your monthly gross income into the Einkommen-Monatlich-Brutto field, enter the number of kids you have in the Kinder field, and then hit “Berechnen” and you see under the Jährlich column what your total gross per year is and the “netto” or after-tax income. “SV” is social security and healthcare costs, “LSt” is the federal and state income tax, all in one. Boom! Your done!
If you are the employer, you can also see your side of the costs for that salary by clicking on “Dienstgeber”. Btw, in Austria people are paid 14 months, one extra month bonus in December and one extra in June for the holidays – perhaps to train people to live on a monthly stipend and only blow all the money during the holidays, never really understood why, but it was a nice to look forward to psychologically…
The income tax is a progressive tax, eg. someone making 1000 gross monthly is paying 15% tax, at 2200 monthly 27% tax rates, etc. For someone like a young business professional, married with 2 kids, making 6500 euros gross a month, the tax rate is about 40% . Sounds a bit high, but to be honest, California’s (and Taxachussett’s) taxes are comparable when you put together all the city/state/personal property and federal taxes together, and according to my father it’s more like 45% in some states. At least the Finanzamt in Austria is just straight forward about what you owe.
I’m now in Germany, which surprisingly, is completely different – taxes are not so simple and it’s tending towards the US system with lots of deductions, exceptions, additional forms, etc… so I would say, if the US tax system should model itself on something, it should be the Austrian way (and perhaps also copy quality of living as well ! ).
I suspect we will never see this happen, because there are just too many special interests that want an exception made for them. Turbo-tax has all sorts of questions from self interest groups, eg. farmers, entrepreneurs, gamblers, etc, etc..
Healthcare is rather simple too. There are 3 or 4 Krankenkasse (state owned, non-profit health insurance companies) and you can buy private plans to supplement the regular health insurance plans (eg. get your own personal hospital room, etc). Going to the doctor or hospital is a rather relaxed experienced compared to the USA. No forms to fill out when you visit the doctor’s office about pre-existing conditions, no one asking you how you will pay for treatment, just hand your e-card to the nurse/secretary. My doctor consultations never felt rushed. I never had to wait more than 2 weeks for an MRI or CAT scan. My wife once fell on the bus, was worried she might have fractured something – went to the local hospital, got an x-ray in 30 mins, all good and done. I was in the hospital for three days one time, and being an American, I naturally worried to death how much it would cost. When I got out, I asked the nurse, when will I get the bill and how much will it cost? She looked at me like I was nuts and said “It will be just 10 euros per day, you will get the bill in a week”.
Medicines also handled easily – just a 5 euro co-pay.
I’m a libertarian at heart, but I have seen the light in some respects. Why is healthcare tied so closely to employment? If I really wanted to be free, I should be able to buy health insurance just like I buy car insurance. Then I can decide if I want to work part-time, full-time, or no-time. Why should my employer decide what kind of access to healthcare I should get (Hobby Lobby) ? Or why should I impose on my employer to buy me healthcare that I prefer? This is not freedom for anyone.
>> Other than paying higher-than-civil service salaries, how is that different from any other government agency?
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Ouch. I may or may not be employed by one of those quasi-government health insurance companies. You forgot to mention “with fewer total employees, providing better (well marginally) service, and no pension.”
We live in an age when unemployment is the central political index.
Job creation is critical and government has responded with:
1. A large and expanding tax preparation industry.
2. A blossoming industry of Health care “navigators”.
3. A huge homeland security workforce.
Hundreds of thousands of employed workers contribute nothing and owe their livelihood to useless mumbo-jumbo.
However, never doubt that the number and scope of government funded “service” workers will continue to multiply. These are the good old days.