As our annual tax forms arrive in the mail, most of us are programmed to put them in a safe place, get the remaining holiday bills paid off, forget about taxes until winter ends, then get everything ready just in time for the April 15 deadline.
This is a dispiriting ritual that doesn’t need to happen. The basic tax system we abide by now has been in place since 1955, when computers were still the stuff of science fiction and virtually all government paperwork was processed by hand. These days, of course, it’s faster, easier and safer to move financial information digitally, which could allow the Internal Revenue Service to automatically prepare tax returns for most Americans based on data the agency already has, eliminating the need for tax forms or deadlines. For political and societal reasons, however, it’s unlikely to happen.
After the 16th Amendment passed in 1913, establishing the national income tax, Congress selected March 1 as the deadline for paying taxes due from the year before. The original income tax applied only to the affluent, who had to pay a 1% tax on income of $3,000 or more for individuals (about $71,000 today), or $4,000 for married couples (about $94,000 today). There was an additional surtax on higher incomes, but most people paid no income tax, so there wasn’t much public concern about when Tax Day fell.
Still, even at the beginning, tax filers — including several members of Congress -- complained about the process being a complicated game of hide-and-seek between the government and taxpayers. As one legislator complained, "I write a law. You drill a hole in it. I plug the hole. You drill a hole in my plug."
The government found it needed a bit of extra time to process paperwork, so Congress pushed the tax deadline back to March 15 in 1918. In 1955 Congress changed it to April 15 for the same reason, though by then, the income tax had morphed from a limited levy on the wealthy to a mass tax that had helped pay for World War II and many other things. So there was a lot more work for government tax processors to handle. If you’re disinclined to trust the government, you might believe that Congress changed the deadline so Washington could hold onto tax refunds longer—though by the same logic, those who owe taxes as of April 15 enjoy the same benefit.
Since 1955, computers obviously have transformed the way we process all kinds of information, including the electronic filing of tax returns, which began in 1986. Despite massive advances in computing since then, however, the basic structure of tax filing hasn’t changed in nearly 60 years.
Innovation is certainly possible. “It’s technically feasible for the IRS to send a precompleted tax return to the vast majority of taxpayers every year,” says Joseph Thorndike, a historian with Tax Analysts who also teaches tax policy at Northwestern University Law School. Since most people have fairly simple taxes based largely on wage income, the IRS could compute standard deductions and taxes owed using data it already gets from employers and banks, then send a prepared return the taxpayer could amend as necessary.
For most taxpayers, this would be a considerable improvement over the current system. The IRS would do the paperwork instead of the taxpayer, with no real need to scramble to meet deadlines. Taxpayers with more complicated finances could still compute their own taxes, and anybody choosing not to amend their prepared return would simply owe what the form said they owe. “This would be super easy to do,” says Thorndike. “A lot of this filing process is needlessly complex right now.”
Go ahead — hyperventilate for a moment over the idea of the IRS preparing your tax return. While the technology for this type of system has been available for 20 years or more, public acceptance is obviously lacking. Trust in government has sunk to record lows, with the botched launch of Obamacare further tarnishing the government’s reputation for competence. The IRS is somewhat different, since it already holds huge databases with information on every U.S. taxpayer, yet the IRS itself has been embroiled in scandal recently. And revelations about the National Security Agency’s eavesdropping dragnet have made Americans leerier than ever about sharing information with the government.
So while academics tout the virtues of a precompleted tax return — sometimes dubbed the “simple return” — there’s been no serious effort by anybody in Congress to change the filing system or alter the deadline. Congress can’t even muster a serious plan to simplify the tax code, which virtually all analysts agree has become a mercilessly complex burden that costs ordinary people far more time and money than it should.
So Tax Day is here to stay, at least for the foreseeable future. If you’re looking for a bright side,Thorndike has one. “It’s the one day we all come together to do something that’s sort of a shared penance,” he says. “We all sit down and say, ‘OK, this is what the government is costing me.’ I kind of like it, even though it causes some amount of misery.” Well, that makes one of us.
Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success . Follow him on Twitter: @rickjnewman .
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