We all remember the old children’s fairy tale about the goose that laid the golden egg. In American politics today the goose has become very particular about where it lays its golden eggs. Politicians of all stripes try to lure the fantasy bird to their campaign coffers.
In Texas, the guv has a campaign chest filled with golden eggs to the tune of $45 million, but like many Republicans he seems to prefer dark eggs instead of the golden, gleaming kind. Maybe that’s because a sizable number of his golden eggs are covered with Texas oil. While the campaign coffers of many politicians are bulging, the biggest golden egg was laid in the form of the incredibly inequitable tax system in which we live.
Who, you may ask, can afford such a wonderful bird? Well, it isn’t most of us poor folks, but those who sit on the pinnacle of accumulated wealth.
In fiscal year 2010, the Internal Revenue Service completed 4,325 criminal investigations, but by 2021, that number dropped to 2,766, which was higher than the performance goal set by Congress. The agency estimates corporations alone are underpaying $125 billion in taxes every year because they know the odds of getting audited are so low.
Because of my suspicious nature, I suspect far more than 2,766 taxpayers committed criminal tax evasion in 2020. And I would be willing to bet you a dime against the dollar that the $75 billion the criminal investigators did recover last year is just the tip of the iceberg.
While everybody agrees that our tax system is not only too complicated and too tedious, it seems to always be slanted toward protecting the rich among us.
For generations, Congress has promised an easy way that lobbyists don’t get paid for creating ease for the working poor. Laws have even been passed to create a system that would make the overall tax system easier with the assistance of the IRS. The only problem is that Congress has allowed situations to develop that make it almost impossible for the average citizen to reach the IRS for help.
In 1985, President Ronald Reagan promised a “return-free” tax system in which half of all Americans would never fill out a tax return again. Under the framework, taxpayers with simple returns would automatically receive a refund or a letter detailing any tax owed. Taxpayers with more complicated returns would use the system in place today.
In 2006, President Barack Obama’s chief economist, Austan Goolsbee, suggested a “simple return,” in which taxpayers would receive already completed tax forms for their review or correction. Goolsbee estimated his system would save taxpayers more than $2 billion a year in tax preparation fees. As you realize by now, those two suggested reforms were never implemented. At least 30 countries permit return-free filing.
Furthermore, 95 percent of American taxpayers receive at least one of more than 30 types of information returns that let the government know their exact income. These information returns give the government everything it needs to fill out most taxpayers’ returns.
The U.S. system is 10 times more expensive than tax systems in 36 other countries with robust economies. But those costs vanish in a return-free system, as would the 2.6 billion hours Americans spend on tax preparation each year.
About two decades ago, Congress directed the IRS to provide low-income taxpayers with free tax preparation. The agency responded in 2002 with “Free File,” a public-private partnership between the government and the tax-preparation industry. As part of the deal, the IRS agreed not to compete with the private sector in the free tax preparation market.
In 2007, the House of Representatives rejected legislation to provide free government tax preparation for all taxpayers. And in 2019, Congress tried to legally bar the IRS from ever providing free online tax preparation services.
The public part of Free File consists of the IRS herding taxpayers to commercial tax -preparation websites. The private part consists of those commercial entities diverting taxpayers toward costly alternatives.
According to the treasury inspector general for tax administration, which oversees IRS activities, private partners use computer code to hide the free websites and take unsuspecting taxpayers to paid sites. Should a taxpayer discover a free preparation alternative, the private preparers impose various restrictions such as income or the use of various forms as an excuse to kick taxpayers back to paid preparation.
Consequently, of the more than 100 million taxpayers eligible for free help, 35 percent end up paying for tax preparation and 60 percent never even visit the free websites. Instead of 70 percent of Americans receiving free tax preparation, commercial companies whittled that percentage down to 3 percent.
Tax preparation companies lobby Congress to keep tax preparation costly and complicated. ProPublica reported in 2019 on Indeed and Intuit’s 20-year fight to prevent the government from making tax filing simple and free for most citizens.
The laws are in place to provide easy tax payments, but somebody has used their golden eggs to stifle the process. I wonder how many of those eggs were dark?