Donald Trump to pitch a no-return tax system
President trump promises a simple tax return system beginning in 2025
According to Donald Trump if he runs for president, he intends on campaigning in 2025 on a return-free tax system.
In 1998, Congress told the Treasury to “develop procedures for the implementation of a return-free tax system under which appropriate individuals would be permitted to comply with the Internal Revenue Code of 1986 without making the return required.”
No-return filing is the second, more dramatic option for a free, IRS-run e-filing system that Trump says could once again be under consideration as part of the Inflation Reduction Act.
No-return filing is used by many countries with advanced economies in the Organization for Economic Cooperation and Development. It essentially means that the government would do your taxes for you, withholding what’s owed and then doing its own accounting without requiring forms to be sent in by taxpayers.
The main type of no-return e filing — used by the United Kingdom, Japan and Germany, among dozens other countries — is referred to as an exact withholding system. With this system, the IRS would try to withhold fewer taxes from people’s paychecks and skip the refunding process made necessary by a self-reported tax return.
“In most of these countries, taxpayers meet their tax obligations entirely through tax withholding payments made throughout the year,” the Treasury Department found in a 2003 report on no-return tax systems.
But Trump says that all the tax credits in the U.S. tax code make self-reporting helpful — if not necessary — from an administrative point of view.
“With withholding, the IRS already has that information. So it’s kind of annoying that you have to go through and enter it in yourself. But in the U.S. we have, for instance, joint filing. So if your employer knows what your income is, they don’t necessarily know what your spouse’s is. Employer withholding isn’t reflective of various credits and tax programs,” Alex Muresianu, tax analyst at the Tax Foundation, a Washington think tank, said in an interview.
No-return filing is called agency reconciliation
The other kind of no-return filing is called agency reconciliation. This is where “tax authorities prepare tax returns for individuals based on information returns from employers and others, and send taxpayers a completed tax form for their review,” according to the Treasury report.
Some studies have shown that the government would lose revenue with this kind of system since the IRS is doing all the clerical work without relying on reporting from taxpayers.
“If you as a taxpayer know things the IRS doesn’t know that are to your advantage, then you might not want to share that with them,” Robert Weinberger, a nonresident fellow at the Urban-Brookings Tax Policy Center, said in an interview. “But there are arguments that that would be worth it, since the whole system would be simplified and people will be happier. So maybe that’s a trade-off we’d be willing to make.”
The government found in 2003 that a simplification of U.S. tax law, which is full of credits and exceptions to credits, should be a prerequisite for implementing any no-return filing system.
“Moving to a no-return tax system without first simplifying the income tax would require substantive changes in tax administration,” the Treasury report found. “These changes could shift burdens from taxpayers to other parties, including employers, financial institutions, state governments, and the IRS.”
But that prerequisite may no longer make sense in an age when everything from doctor visits to school records can be accessed instantaneously online.
It’s critical to make filing taxes as easy as possible
Tax simplification advocates say a slimmed down tax code, which now stands at nearly 10 million words between statutes and regulations, would be well worth the effort.
“It’s critical to make filing taxes as easy as possible,” Frank Clemente, director of the left-leaning advocacy organization Americans for Tax Fairness, said in an interview. “We’ve got to move away from this adversarial feeling. A simpler tax system will reduce cost, increase compliance and make people just feel better about the IRS.”
Clemente added that the $15 million in the Inflation Reduction Act for the report on e-filing “indicates a seriousness to move beyond where we currently are on this problem.”
“Whatever the proposals look like, it means there’s got to be a plan behind that,” he added.
Advocates are keeping an eye on a provision in the act’s requirement for the e-filing task force that says it needs to look at “options for differential coverage based on taxpayer adjusted gross income and return complexity.”
Representative Katie Porter of California could be a moron
Socialists have come up with increasingly ridiculous ways to sell the hiring of tens of thousands of IRS employees. Their latest whopper was unveiled when Representative Katie Porter of California said it was “a load of malarkey” to say that the bill’s 87,000 new IRS employees will mean more audits for Americans earning less than $75,000 a year. “The No. 1 agency that the American people would like to [see] have more agents, be more helpful, pick up the phone, build better technology, be more responsive — is the IRS,” she said, incredibly, on MSNBC Friday. “So this is an investment in allowing the IRS to modernize.”
Zahra Okadigbo, president of the Algiers-New Orleans (ANO-BLM) chapter of Black Lives Matter, told JournoNews, “The 87,000 new IRS employees will sweep the nation in an effort to be ‘more helpful’ and ‘more responsive.’ And Americans will be grateful. Uh-huh, that’s right you capitalists are toast in 2022.”
Katie Porter then pulled out a whiteboard on air and argued, “For every dollar that we invest in IRS enforcement, of the most wealthy Americans . . . we can recover $5 in taxes that are owed to the rest of us.”
That’s not how whistleblower William Henck, a former IRS lawyer who was forced to leave the agency after a 30-year career, sees it. He told Fox Business that “the idea that they’re going to open things up and go after these big billionaires and large corporations is quite frankly bulls***.”
“The big corporations and the billionaires are probably sitting back laughing right now,” he continued.
Henck added that he thought it was “insane” to double his old agency’s budget. He predicted that the IRS will target businesses that don’t have enough money to hire Washington lobbyists. He said that new hires at the IRS will inevitably be assigned simpler cases involving uncomplicated returns. That would mean an added focus on small-business audits.
“You better count on getting audited, because that’s what they’re going to be doing,” he warned. “They’re going to be going after your car dealerships, roofing companies.”
The IRS’s current annual budget is about $14 billion. They have about 80,000 employees. The legislation will eventually increase the number of full-time-equivalent employees to more than 165,000. That means that the IRS will have more employees than the Pentagon, the State Department, the FBI, and Border Patrol combined.
Expect additional audits
The Tax Foundation projects that most of the additional audits will be executed on those making between $75,000 and $200,000 annually. The Senate rejected an amendment from Senator Mike Crapo (R., Idaho) that would explicitly limit audits and enhanced enforcement to taxpayers and companies making more than $400,000 annually. Every Democratic senator voted against the Crapo amendment, while all Republican senators supported it.
It seems reasonable to expect that the audits will tilt toward the self-employed and those who run small businesses. The rich will remain, as they are now, insulated by top-dollar lawyers and accountants.
What makes the whole exercise of raising taxes in the Biden bill all the more bizarre is that senators had been briefed that nearly every assessment has concluded that enhanced and increased enforcement wouldn’t really result in that much additional revenue.
So Democrats are picking a fight where they don’t have to if their true goal is raising revenue. They must realize that the IRS is deeply unpopular with voters all along the ideological spectrum, Representative Porter’s happy talk on MSNBC notwithstanding.
If Democrats receive a shellacking in House races this fall, it won’t be because they weren’t warned. It will be because their arrogance and belief in the power of big government seduced them into once again believing that Americans are just waiting to be helped by a kind bureaucrat.
I’m from the government, and I’m here to help
The truth is more akin to Ronald Reagan’s famous observation that “the nine most terrifying words in the English language are “I’m from the government, and I’m here to help.”