The voices of Tax Policy Center's researchers and staff
I still haven’t finished my taxes, probably because it is the civic duty I hate the most. It isn’t the paying that bothers me. It is the process.
I hate that I have to give a private company $49.95 to help me perform a basic act of citizenship. I hate that I must sit in front of a computer for hours mindlessly typing in numbers. I hate that the Tax Code is an incomprehensible black box. The software asks for a number. I type it in. It appears on a form, and I, more or less, assume it is right. Mostly, I hate that the Tax Code is so damn complicated.
Just for fun, I asked the senior staff here at TPC how they did their taxes, and what their pet peeves are. It turns out that the Code is an exercise in total frustration even for some of the smartest tax lawyers and economists on the planet.
Most of us have thrown in the towel and use commercial software. One colleague even uses a paid preparer. Dan Halperin and Jeff Rohaly still do their returns by hand. It just goes to prove, I suppose, that tax prep is a snap as long as you are A) a Harvard law professor or B) a master tax modeler.
Len Burman, who uses commercial software, says his views on complexity are “not suitable for reprinting in a family-oriented blog.”
Eric Toder, who has had a long career at both the Treasury Department and the IRS, also uses commercial software. His least favorite situations: the immensely time-consuming reporting for a Schedule C, figuring estimated taxes, and everyone’s fave, the AMT.
As for me, I was driven to software by two forms: the foreign tax credit and, no surprise, the AMT. No matter how hard I try, I cannot make sense of either one.
In 2005, University of Michigan economist Joel Slemrod estimated that tax compliance cost individuals $85 billion annually. Two-thirds of that was for the time it took to keep records.
Eric and coauthors came up with the same depressing result. They figured the average taxpayer in 2000 spent 26.4 hours preparing a return. I don’t know about you, but taking the equivilant of a-day-year to do this seems, shall we say, wrong. Plus, we spend an average of $150 out pocket. At $20-an-hour for our labor, that’s almost $800 in time and money, or roughly the same as President Obama’s tax rebates. So that’s where the stimulus is going.
There once was a time when I was terrified about making a mistake on my return. But I came to learn that when it comes to taxes, there are no right answers. I once asked a big accounting firm to design a couple of sample returns and calculate the tax liability for each. I then gave the data to 3 preparers and ran it through 3 commercial programs. You won’t be surprised to learn I got 14 different results.
So, we spend a day a year preparing returns and, in the end, have no idea whether we got it right or not. Is it any wonder why Americans hate taxes?
Posts and Comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.