The voices of Tax Policy Center's researchers and staff
While the Presidential candidates are campaigning on grandiose and often radical reforms to the current tax system, they are missing out on a simple commonsense reform that would make tax filing easier for millions of Americans.
The idea: the IRS could send pre-filled forms to taxpayers with relatively simple returns, such as those who take the standard deduction and only receive income from wages and salaries. Taxpayers would be given the opportunity to contest the information provided by the IRS and participation would be entirely optional; taxpayers could still file under the old system if they preferred. Such a plan would save taxpayers tens of billions of dollars in time, tax preparer costs, and aggravation. It would also be worth millions more to the IRS which would no longer have to correct the errors those taxpayers make. Everybody wins, except perhaps accountants and producers of tax preparation software.
In 1996, GAO found that roughly 50 million taxpayers would be able to file these returns. It figured they could save as many as 155 million hours of paperwork, equivalent to the time spent on 75,000 full-time jobs. Subsequent studies, including one by the Treasury Department and another by TPC’s William Gale and Treasury’s Janet Holtzblatt, have estimated the number of potential beneficiaries in a wide range between 8 million to 60 million depending on the structure of the reform.
This system is already in use at the state level.
Return-free filing has received little attention in the campaign so far. Presidential candidates Barack Obama and John Edwards have endorsed the notion of a return-free filing system, but have not pushed it very actively or prominently in their campaigns.
Of all the endorsements given to this plan, perhaps the loudest was hidden in a government report: in listing potential drawbacks to a return-free system, GAO noted that if such a system were implemented, “the tax preparation industry could be adversely affected.” Indeed.
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