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The Internal Revenue Service has postponed the April 15 tax filing deadline to May 17. If taxpayers need even more time to file federal returns, the agency added, they can request an extension until Oct. 15. “This continues to be a tough time for many people, and the IRS wants to continue to do everything possible to help taxpayers navigate the unusual circumstances related to the pandemic, while also working on important tax administration responsibilities,” said IRS Commissioner Chuck Rettig. The announcement may come as welcome news for many Americans, but it also raises an important question: Why should taxpayers have to navigate the tedious, costly tax filing system at all? THE CASE FOR A ‘SIMPLE RETURN’ In 1985, President Ronald Reagan promised a “return-free” tax system in which half of all Americans would never fill out a tax return again. Under the framework, taxpayers with simple returns would automatically receive a refund or a letter detailing any tax owed. Taxpayers with more complicated returns would use the system in place today. In 2006, President Barack Obama’s chief economist, Austan Goolsbee, premiered the “simple return,” where taxpayers would receive already completed tax forms for their review or correction. Goolsbee estimated his system would save taxpayers more than $2 billion a year in tax preparation fees.
Though never implemented, the two proposals illustrate what we all know: No one enjoys filling out tax forms. So why do we have to?
A COSTLY AND TIME-CONSUMING SYSTEM
Return-free filing is not difficult. At least 30 countries permit return-free filing, including Denmark, Sweden, Spain, and the United Kingdom. 95% of American taxpayers receive more than 30 types of information returns that let the government know their exact income. These information returns give the government everything it needs in order to fill out most taxpayers’ returns. Furthermore, 95% of American taxpayers receive more than 30 types of information returns that let the government know their exact income. These information returns give the government everything it needs in order to fill out most taxpayers’ returns. The U.S. system is 10 times more expensive than tax systems in 36 other countries with robust economies. But those costs vanish in a return-free system, as would the 2.6 billion hours Americans spend on tax preparation each year.
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