Tag Archives: return free

Debating Return-Free Taxes: Rep. Jim Cooper Responds

Last week, I made the case against return-free taxes in an op-ed in The Hill. Under such a system, the IRS would prepare your taxes for you.

Rep. Jim Cooper, a Democrat from Tennessee, is the sponsor of a bill that would institute a return-free program. He responded to my criticisms in a letter to the editor that ran yesterday. He explains his position, and for some reason also throws an ad hominem my way. I’ve met Rep. Cooper and have worked with him and his staff on several occasions. We disagree on this issue, but overall I have a positive opinion of him. He is more philosophical and better-read than the average Congressman, but he doesn’t seem to quite understand my position. Rep. Cooper argues:

Arguments that a Simple Return is a regressive tax on the poor assume the government will take advantage of those who file basic returns by consistently erring in its own interest and hoping filers don’t notice. There are no facts to support this claim.

Actually, there are. I share one of them in my article:

That is exactly the case in the U.K., which uses a return-free system. The government has a 15 percent error rate, overwhelmingly in the government’s favor. In 2009, British taxpayers were overcharged the equivalent of $370 million. Those lucky enough to underpay still didn’t get a good deal. They are held liable for the government’s mistakes. Today, 1.4 million people are on the hook for an average of $2,200 each — a month’s pay for many people.

Here is Rep. Cooper’s closing flourish:

A powerful lobbying interest made up of accounting, advisory, and software firms wants to defeat this bill. Those companies are cashing in on taxpayers’ $2 billion annual misery. No wonder they don’t want a simpler system.

I can’t speak for powerful lobbying interests since I’m neither powerful nor a lobbyist. Nor do I have a personal stake in the bill. But even if I did, that would have nothing to do with whether the arguments I make are right or wrong. That depends on their actual merits. That Rep. Cooper dodges those merits means that he must believe his own arguments are weak. Why else the need to go personal?

There is also the fact that I do, in fact, favor a simpler tax system. Here’s the closing line from my article:

There are much better ways to reduce the 26-hour burden Americans face every year. The obvious solution is to simplify the 70,000-page tax code.

It’s possible to have even a progressive, multi-tiered income tax that takes up only a few pages. Real tax reform would eliminate almost all deductions, tax breaks, and other special favors. They encourage endless rent-seeking, and waste millions of man-hours that could be spent doing something productive instead.

A return-free system would do precisely nothing to simplify the tax code. It would merely keep that complexity out of sight, and out of mind. That makes reform harder, not easier. Rep. Cooper is proposing to treat a symptom. I encourage him to go after the root problem instead.

A Backdoor Tax on the Poor

For some time now, the IRS has been flirting with what’s called a return-free system. Instead of you having to sit down and fill out your 1040, the IRS would fill it out for you and tell you how much you owe.

It’s being touted as a time-saver. But it would also raise taxes on the poor. No matter how much personal information the IRS collects on someone, it is almost certain to miss deductions that person qualifies for.

There is also the tiny little conflict of interest that occurs when one’s tax collector is also one’s tax preparer. In an op-ed in The Hill, I explain why people of all political stripes should oppose a return-free program:

A return-free tax system has something for everyone to hate. Progressives should be up in arms over its disproportionately hurting the poor. So should privacy advocates; the IRS does quite enough snooping as it is. And conservatives should oppose return-free because, even though tax rates would remain unchanged, it is still a tax increase.

There are much better ways to reduce the 26-hour burden Americans face every year. The obvious solution is to simplify the 70,000-page tax code.

Read the whole thing here.