How Tax Preparation "Simplification" Will Lead to Tax Hikes

We have previously written about how plans to "simplify" tax preparation - ie have the IRS do most of it for you - will lead to significant tax hikes. Recent research provided even more evidence of this fact.

Amy Finkelstein from MIT recently conducted research on EZ-passes on tollbooths. She found, rather unsurprisingly, that when people don't notice what they are paying in fees, they are likely to pay a lot more. And it is the same with taxes.

Writing in the Wall Street Journal last week, Ryan Seager noted:

About taxation, Louis XIV’s finance minister, Jean-Baptiste Colbert, once said that the art is in “so plucking the goose as to obtain the largest amount of feathers with the least possible amount of hissing.” As April 15 approaches, you the taxpayer may indeed feel like hissing. Taxes are so painfully complex that roughly 60% of Americans pay someone else to prepare their returns, at a cost of hundreds of billions of dollars per year. Still others rely on computer software. The rest pay in headaches and tears.

Does this mean we shouldn’t expand the expand the idea of EZ-Pass to create an “EZ-Tax” system, where the government would use the data it already has on us to fill out our tax forms — as countries such as Denmark, Belgium, Chile, Portugal, Spain, and France are trying — leaving us to simply sign and send money? ... If our goal is to hold onto a little more of our money, remember: Swearing’s been shown to alleviate pain. So, bear down, swear away, and don’t get plucked any more than absolutely necessary.

Because whilst filling in our tax returns might be annoying, it reminds us all of the burden of taxation. Moves to transfer this power to the IRS will only lead to more tax hikes on us all without us even noticing. 

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