Tax season is approaching, and assuming the federal government doesn't collapse before April, most of us are going to spend some bitter, frustrating hours trying to figure out what we owe (or are owed). It's going to be much worse this year for a lot of people, ironically due to the Trump tax cuts.
This raises an under-noticed political issue: policy straightforwardness. It's not exactly an easy thing to sell, but I'd wager a lot of money that any politician would gain tremendous political credibility from cleaning out the gunk in American government.
So what's the problem with the tax season this year? Taxes are down, but withholdings are also down, in some cases by more than the tax decrease:
The average refund among early filers was down 8.4 percent, according to the Internal Revenue Service. The smaller checks, in some cases, stem from the loss of certain deductions. For others, it’s because less money is being withheld from their paychecks. The I.R.S., in trying to more closely match the amount held out of paychecks with the amount that taxpayers will owe, changed its withholding tables. [The New York Times]
This may have even been intentional on the part of the Trump administration, which reportedly pressured the IRS to reduce tax withholdings so as to boost people's paychecks before the 2018 midterms — and now the bill is coming due. Whoops!
But this goofy story also provides a window into the monumental complexity of the U.S. tax code — especially in how much it burdens individuals. The Times reports that even accountants are enrolling in continuing education classes just to figure out how the new 20 percent deduction for some LLCs and self-employed people works. "We weren’t expecting to get 180 pages of regulations on the 18th of January, 10 days to the opening of filing season," one told reporter Tara Siegel Bernard.
This complexity of the tax system is logically separate from the issue of tax levels. In his classic essay "Kludgeocracy," Steve Teles writes " The American tax code is almost certainly the most complicated in the Western world, both on the individual and the corporate side," adding that as of 2012 it places a burden of about $163 billion on American individuals and businesses.
As a conceptual matter, it would certainly be possible to make a tax code in which each person paid the same amount they pay now, but without requiring everyone to figure out all the incredibly complicated policy cruft that has built up over the years. Get rid of all the various child tax benefits, and replace them with one refundable tax credit. Consolidate all the Byzantine retirement tax benefits into one simple account. If we must keep all the ridiculous health/dependent care/college tax-advantaged savings accounts, combine them all into a single Roth-style account with clear instructions about what is eligible. (Practically there would be some winners and losers, but it should be possible to get close.)
More importantly, have the IRS emulate countries like Japan and just fill out people's taxes for them (where possible, which would be most of the time), and send completed returns at the end of the year. For the vast majority of regular wage earners, it should be quite easy to ensure that withholdings exactly match tax owed, making it unnecessary to fuss around with refunds or payments. There's a huge source of national anxiety and worry gone forever.
The federal government is absolutely lousy with this kind of gunk. Education, agriculture, health care, energy, intelligence — you name a policy area, and there are likely a bunch of overlapping agencies and programs covering it, frequently with conflicting objectives and purposes. Streamlining and rationalizing those things wouldn't be so broadly beneficial to the average citizen, but it would make life vastly easier for anyone who has direct dealings with the government (save those who have monetized the rot).
There are no doubt hundreds of smaller-scale ideas for how government could make life simpler and easier. Here's another one: The U.S. should set up a federal standard and money exchange system for highway toll passes so that they are all interchangeable. Hey presto, an E-ZPass (or a TxTag, etc.) will get you all the way across the country. You could do the same thing for public transit passes, so a DC Metro SmartTrip would work in Philadelphia or New York, and so on.
This isn't quite the big ticket ideas that get tons of media attention. But very successful countries always spend a good bit of time keeping their government bureaucracies in top form. It's long since time America did a national policy housecleaning.