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Tax simplification is an issue Democrats can take for ourselves

by Eric Ferguson on May 29, 2016 · 1 comment

I’m starting to wonder if politics really does have rules, or merely guidelines where exceptions are rare, very rare … but not non-existent. One of the rules, or rarely to be departed from guidelines, is never argue from inside the other side’s frames. Avoid using their preferred words and phrases, because they chose those for how they evoke preferred framing in the listener.


Thus the caution about saying the phrase, “tax simplification”. Republicans like to use that. Frank Luntz advised using it to sell tax cuts when he wrote his messaging memo for Republican candidates in 2006, which Democratic persons managed to get a hold of, scan, and put into a PDF they called, “The Frank Luntz Rethug Playbook, Unauthorized Edition, How to Scare the American Public into Voting Republican *” Here’s one place to get a copy. Republican candidates commonly promise to simplify the tax code (Jason Lewis, the GOP endorsee in MN-02 for example), which of course means they’re going to make it easier for most of us to file our personal income taxes. Ha! Just kidding! They mean of course removing those pesky bits about rich people pay taxes too. Luntz was pretty blunt about how tax cuts at the top really don’t sell well, even though, at least in pre-Trump times before hating women and minorities became the organizing principle, cutting taxes at the top was more or less the Republican Party’s whole reason for existing.

That might not sell well, but tax simplification, everybody likes that! Whatever they think it means, and to be sure, the tax code is big and scary. Only a small part applies to any one of us, but which part? But if we could simplify the tax code, say make it ten percent smaller, then instead of a big intimidating tax code, we would have … a slightly smaller big intimidating tax code.

Here’s the thing though — that fear of the tax code is real. Most people fear putting a foot wrong and getting in trouble with the IRS. Even most people with simple taxes buy tax preparation software or pay a tax preparer. Taxes take a bunch of time too. When people hear phrases like “tax simplification”, that’s probably what they think will be made simpler, not cutting tax rates at the top.

In fact, in some countries, they have a personal income tax like ours, but with a difference: the government fills in the form and sends it to the taxpayer to confirm it’s correct, in other words, the reverse of what we do. How do tax agencies know what’s correct? Look at your various forms, and you’ll see phrases like, “this information has been reported to the IRS”. Your employer has told the IRS what your wages were. Your bank has reported how much interest they paid you. Your stock broker reported your profits and dividends. That’s how the IRS confirms what you tell them: they already know!

In Denmark, Sweden and Spain, the government sends people a simple form explaining what they owe, and allows them to either accept the calculation, or offer up their own alternative number. California has experimented with a similar trial program that proved wildly popular with its participants.

Sen. Elizabeth Warren has a bill to do the same in the U.S.:

The Warren bill would initially only allow the government filing program for single people with very simple finances. It would allow the treasury secretary to expand the program to other households starting in the 2018 tax year. As Vox notes, a robust government-provided tax preparation program could save households up to $2 billion a year, not to mention a whole lot of time and energy.
Warren would also require the IRS to make free online tax filing available to everyone, whether or not they qualify for the government preparation service. Right now, the IRS makes it extremely difficult for households to file online for free, which is why TurboTax is so popular.

Basically, we wouldn’t need the tax preparation industry anymore. So the opposition to this comes from, try not to be surprised, the tax preparation industry. When trying to understand an economic inefficiency, a good way to think of it is those inefficiencies are somebody’s source of profit. Think of how screwed up our health care is, or the political obstacles to getting more energy efficient — this is smaller in scale, but the same idea. H&R Block and Intuit (the maker of Turbotax) wouldn’t vanish if the government filled in the forms for us, but they would be whole lot smaller.

I don’t want to demonize the people who work in tax preparation. They’re just people with some accounting background helping customers file their tax forms, or software developers who may well prefer to work on an office application or the next generation browser, but Intuit is where they found paying work. Nonetheless, the fact is we need them only because taxes are backward. We have to do a lot of work to tell the IRS what it already knows.

Now here’s where good policy is good politics. Warren is on to something. If you’re a Democrat, think about campaigning this year by telling prospective voters, “We’re going to simplify your taxes, but unlike when the Republicans say it, ‘tax simplification’ doesn’t mean removing some provision you never heard of and which doesn’t apply to you. It means the government has to fill in the forms, not you. You just check that they’re right and if you don’t see any problems, you’re done. Just send in your check or accept your refund. No more buying software you use once. No more hiring an accountant for a simple tax return.”
This could be an issue in the presidential race certainly, but think of how our congressional candidates could run on it. In states with an income tax (like us), our legislative candidates could run on it. This is an instance where we could steal an issue right out from under the Republicans. As much as we say don’t use the other side’s words, in this instance, use the other side’s words!

To completely change the subject, I’m planning to live-blog the DFL state convention Saturday June 4th. My medical issues, the same ones that explain why I’ve posted so little lately, will preclude me from being there in person, but I plan to watch The Uptake’s live stream, assuming they have one like past conventions. You could do the same, so the value I’ll try to add is explaining what’s going on, with my usual bit of wit thrown in; or snark passing for wit, as the case may be. I’ll even try to keep an eye on comments in case there are questions.

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