A "Way Forward" On Tax Reform

Amity Shlaes of Bloomberg News chastised John Edwards today for his proposal to make it easier for many Americans to file their taxes…

A mark of ``F'' goes to John Edwards, who offered his plan (on April 7th) in a pod cast. Edwards suggested that the 50 million families with relatively simple returns be permitted to pass the responsibility of managing those returns to the IRS.

Then the taxpayers would never even have to talk to the IRS, fill out a form, or meet an accountant.

This seems clever. The Democrat Edwards is trying to supplant Republicans in their traditional role of pandering to taxpayer hatred of tax authorities. The plan also has another kind of appeal. Edwards is playing Steve Jobs and trying to make Hillary Clinton look like a cog from IBM.

…

But the Edwards plan is pernicious because it makes the whole tax process seem all-the-more inevitable. If taxpayers never confront what they owe on a W-2 form, they will never think about what they could have done with that money in terms of investment or invention. The system gives new meaning to the word ``passive.'' Under the Edwards plan, Americans would be so accustomed to the government hand in their pocket they would never even consider the budgetary consequences of, say, Medicare.

When you can figure out what Hillary Clinton, IBM, Steve Jobs and Medicare have to do with filing your taxes, I’d appreciate it if you would let me know, because I have no idea.

Of course, Shlaes just assumes that many people in this country who would be amenable to Form 1 (the centerpiece of the Edwards proposal as noted here) are simply too dumb or lazy to ever seek to file their returns any other way should their circumstances change, and Edwards is also trying to look out for taxpayers who would be burdened with undo paperwork for comparatively simple returns (i.e., low income earners or students out of college; I don’t know if student loan payments can be deducted or by how much or what formula, but for someone just entering the work force, I can’t think of too much more to deal with on a return than that besides wages, interest and standard tax withholding).

Besides, if someone were to receive the Form 1 from the IRS with the tax liability already determined, that person could still compute their tax liability to verify the information on the form.

Speaking for myself, I’ve prepared our taxes on our own and I’ve sought the help of a preparer. And though I think Edwards has a good idea, this would necessitate a much more powerful role and higher funding appropriations for the IRS to prepare “simple” returns in the manner Edwards proposes (even for “simple” returns, the web site Edwards envisions would have to be updated as needed for changes in the tax code; I don’t believe, though, that that’s a “show stopper” under any stretch of the imagination).

But Shlaes and those in the financial services industry in general will no doubt continue to howl over Edwards’ proposal because it would eventually result in money out of their pockets in tax preparation fees and financial reporting; hence the false characterization of Edwards’ plan as “pernicious.”

And speaking of taxes, before you hear of anyone demonizing illegal/undocumented/whatever workers for a variety of reasons, keep in mind that many of them are highly conscientious when it comes to paying taxes (so they embrace the Internal Revenue Service but do all they can to get away from Immigration and Customs Enforcement – and if I were in their shoes, I’d do the very same thing).

And this story notes that most Californians favor a path to citizenship for illegal aliens (this may be the only issue where Dubya has the foggiest clue concerning the right answer…maybe).

Update: I'd forgotten this from a few days ago, but luckily, Flavia Colgan at Citizen Hunter didn't here, and that would be the encouragement from the Edwards campaign for everyone to reduce our "carbon footprints" (more info here).