by Joe Miller
I hate filing taxes. Don’t get me wrong – I don’t mind paying taxes. Caroline and I are fortunate enough to earn a comfortable living and the government funds – either directly or through subsidies – the infrastructure that allows that to happen.
I’m happy to give a chunk of my pay to fund those things, and, frankly, I’d be willing to pay still more if it meant funding those programs more generously.
No, what I hate is the actual filing of tax forms. It’s a Sunday afternoon every spring filled with equal parts stress and tedium and the worry that people literally go to jail for getting things wrong.
It turns out that lots of government programs are like this.
Every year, Americans spend 12 billion hours on government paperwork to do things like enroll in Medicare, get a driver’s license or permits to open businesses and collect unemployment.
That works out to about $430 billion per year in uncompensated labor costs.
Those eye-popping numbers are at the heart of “The Atlantic” staff writer Annie Lowrey’s new book, “The Time Tax: How Government Wastes Our Time – And How to Fix It.”
As Lowrey explains, “I started thinking about these pervasive administrative hassles as a time tax: a levy of paperwork, effort, delay and aggravation imposed on Americans in exchange for rights and benefits that are putatively theirs.”
Tax preparation is an especially insidious form of time tax because it’s entirely unnecessary.
The average American spends 13 hours doing their taxes and pays tax preparation companies $200 to file their taxes.
The IRS already has all the information that it needs to calculate tax bills for just about everyone. In fact, the IRS created a program to do exactly that. It was called Direct File, and the program calculated your taxes, told you exactly how much you owed and did it all for free.
The program was estimated to save taxpayers $23 billion in tax prep fees – and millions of hours of uncompensated time – over the next decade.
Congress killed funding for the program following a $7 million lobbying campaign by Intuit and H&R Block – the two largest tax preparation companies. Most of that $23 billion potential savings will flow directly into their pockets.
Economists refer to this dynamic as “concentrated interests, disbursed costs.”
Killing a program like IRS Direct File will cost the average American about $200. But it will net Intuit (maker of TurboTax) a healthy percentage of $23 billion.
You can see the problem: $200 isn’t enough to get anyone sufficiently fired up to head up to DC and lobby Congress. You’d spend more than that on one night in a DC hotel!
But it’s absolutely worth spending $3.5 million to lobby Congress when the return is measured in billions.
Extra hurdles in the tax code are especially annoying because the government has hidden a lot of spending programs inside the tax code.
Did you know, for example, that the federal government is expected to spend $81 billion next year subsidizing home purchases? Did you know we also spend $128 billion paying people for having children?
It’s true! We just don’t call them spending programs. We call the first one the mortgage interest deduction and we call the second one the child tax credit.
Both programs work by reducing the amount that qualified individuals pay out in taxes, thereby reducing government revenue.
That’s functionally equivalent to collecting the revenue, then issuing checks to everyone with a child and everyone paying interest on their mortgage. In fact, the Congressional Budget Office calls these programs tax expenditures and treats them like any other spending program.
Cornell political scientist Suzanne Mettler calls these types of indirect spending programs, “the submerged state” and argues that millions of people who benefit from (often quite large) taxpayer-funded programs don’t realize that they are even receiving government subsidies.
But there’s an even deeper problem. Distributing those programs through the tax code means that you have to file your taxes properly in order to receive all the benefits to which you are entitled.
That doesn’t always happen. The Earned Income Tax Credit, for example, is a subsidy for low-income workers. It’s one of the more effective anti-poverty programs the government funds.
But the IRS also estimates that around 20% of the people who qualify for the credit don’t claim it – usually because they don’t realize they qualify.
The submerged state and the time tax are two sides of the same coin, burying an important anti-poverty program in one of the hundreds of similar-looking lines in an overly complex tax return form.
In the meantime, Intuit is off spending $12 million on Super Bowl ads that shamelessly remind us that “all people are tax people.”
Yes, we’re well aware that we’re all tax people.
We shouldn’t have to be.
