Tax season is inherently stressful for Americans across the country because of the extensive complexity and compliance requirements of the tax code.
Senator Bernie Sanders (I — Vt.), Senator Elizabeth Warren (D — Mass.), and Representative Alexandria Ocasio-Cortez (D — N.Y.) want to solve this problem by giving the IRS the power to file your taxes for you. This massive expansion of government would be a disaster if implemented in the U.S as noted in a new report from the Bipartisan Policy Center.
Return-free tax filing would require a dramatic overhaul of the tax code that could increase taxes on middle and low-income families all across the U.S.
Under this system, the IRS would also have a perverse incentive to overcharge taxpayers and withhold information as the agency would calculate how much you owe in taxes, and then give you the opportunity to contest.
As noted by the BPC report, countries that use return-free filing have tax codes vastly different than the U.S. For instance, these countries:
- Apply something close to a flat marginal tax rate on most taxpayers
- Tax individuals as opposed to households or couples
- Little to no taxes on capital gains
- Few deductions, exemptions, and exclusions
In order to make return-free filing work in the U.S., Congress would have to repeal widely-used deductions and credits like the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC).
Both provisions are inherently complex and taxpayers would be required to provide detailed information to the IRS in order for them to properly administer the provisions.
Return-free filing has been tried in California, and it was an abject failure. Only 3 percent of taxpayers used the system, and its total participants topped out at 90,000 filers. Giving the government the power to file taxes is also broadly unpopular with taxpayers.
Return-free filing is also wildly unpopular. A recent poll shows that:
- 60 percent of taxpayers oppose letting the government file their taxes
- 72 percent of taxpayers thought the IRS would make mistakes when calculating tax returns.
- 82 percent of taxpayers said they would feel comfortable rejecting the IRS-prepared return and preparing their own return.
- 64 percent of taxpayers believed that the IRS did not have the necessary personal and financial information to calculate an accurate return.
- 68 percent of taxpayers said that they would not trust the government to produce “accurate and fair” tax returns.
Despite what Democrats are saying, giving the government the power to file your taxes would raise taxes on the middle class, has failed spectacularly in California, and is broadly unpopular. Congress should reject any attempt to move towards a return-free filing system.