How we could simplify the American tax filing process


Because of Emancipation Day, a somewhat obscure holiday celebrated in Washington, DC, Americans have until Tuesday, April 18, to file taxes — three days later than the typical April 15 deadline.

If you're still working on yours, you're probably not alone: Americans will spend more than 6 billion hours preparing their taxes, which includes digging up W-2s, sifting through receipts and filling out any number of forms. The amount we spend to get it done by firms or by ourselves with software is also significantly high.

Other countries like Japan and the Netherlands have streamlined the process, so what's stopping the US?

“It’s only the United States that makes it this hard,” says T.R. Reid, author of the book “A Fine Mess: A Global Quest for a Simpler, Fairer, and More Efficient Tax System.”

He continues: “We spend billions of hours, $10 billion on tax preparation, and people on a beautiful April weekend, when you ought to be out playing golf or playing soccer, you’re slaving over IRS forms. It doesn’t have to be that way. In other countries, it takes 10, 15 minutes to pay your taxes, and it costs nothing.”

Some have suggested that the United States adopt a flat tax, which taxes every person at the same rate, regardless of income bracket. Though at least 12 countries have tried such a system, Reid says that many nations have abandoned the flat tax.

“It brings in less money — that’s the problem,” he says. “You can’t set that single rate high enough to bring in the revenue you need, but low enough for ordinary working families to pay. It turns out that you have to charge the rich more to bring in the revenue you need, or you have to raise other taxes.”

Hungary has a 15 percent flat rate tax, Reid says, but the country had to introduce a 27 percent sales tax — the highest such tax in the world — to make up the difference.

When it comes to simplifying the US tax process, Reid says that companies like H&R Block and tax software companies have lobbied Congress to maintain the status quo.

“The deal is we do more work, and they make more money,” he says.

In Japan, officials have simplified and consolidated the tax process.

“The IRS there sends you a postcard in early March. It says, ‘We think you earned this much. We withheld this much. We owe you a small refund, and we’ll put it in your bank on April 1,’” Reid says. “There’s no tax return — if the numbers look right, you just file that card away and you’re done. About 80 percent of Japanese workers never file a tax return. In other countries, IRS agents have baseball caps and T-shirts, they have bands and slogans, and they brag about it and they’re very respected people. But Americans hate paying tax, and therefore we take it out on those poor IRS agents.”

This story originally aired on The Takeaway

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