The Internal Revenue Service (IRS) loves you, but apparently does not love the tax preparation software industry. It wants to ease your mind about compliance with the tax code and make April 15 as stress-free as possible.
Sound too good to be true? Of course it is. The real goal is to extract more tax dollars out of your pocket without having to pass a tax increase, even if the software industry is trampled in the process.
The revenue establishment is convinced that there is a $345 billion “tax gap” between what people actually owe or should be paying and what the IRS actually collects.
Does the revenue establishment hold the tax code’s inherent complexity and Congress’ failure to reform the tax code responsible for the shortfall? Guess again.
The IRS blames you, and specifically it blames those who help you comply with the tax code—tax preparation companies and especially the tax preparation software that has become almost a necessity for taxpayers.
The IRS solution is a “return-free” system where the IRS would calculate your tax obligation and simply ask for your signature. In one fell swoop the IRS could increase revenues by biasing your tax obligation in favor of higher revenue, shift the responsibility to you to prove that the government made an error in preparing your taxes, and all while eliminating its declared enemy: the tax preparation industry.
The return-free system (and thus the virtual elimination of voluntary tax compliance) is the ultimate goal of the revenue establishment. Before assisting in the destruction of the U.S. economy, Austan Goolsbee described the benefits of a return-free system in a 2006 op-ed in The New York Times. President Obama has endorsed return-free, which was discussed by the so-called “super committee” recently tasked with finding ways to raise more revenue for the government.
Not only will the return-free system result in your paying higher taxes, it will require that substantially more of your personal financial information be disclosed to the IRS.
Our voluntary tax compliance system is an asset, not a liability. The liability is our absurd tax code, which contains multiple and conflicting definitions of income, saddling the U.S. economy with an incredible compliance burden resulting in deadweight losses to the economy and our global competitiveness.
If there is a tax gap, the fault lies at the feet of Congress for not overhauling our tax code into something that is functional and competitive in the 21st century. Fix that, and keep your hands off my TurboTax.