Tax Reform: Why not have all income logged with IRS at point of inception?

[Dissipate]

I was thinking...

With the Internet and software technology today it would be relatively simple to have all paycheck (and other income such as income derived from a stock sale) and business transaction data sent directly to the IRS at the time such transactions were generated. The IRS could set up a personalized web site where you could enter your personal tax related data (i.e. how many kids you have), which would be used to calculate your tax bill. Come tax time the IRS would simply send you a bill for the remainder that you owe. This would greatly reduce the stress of taxes and put accountants to better use. Thoughts?

 

[Jaskalas]

The game of cat and mouse is a result of privacy. Your idea will become reality soon enough.

 

[Andrew1990]

Or, we could get rid of taxes all together!


Anarchy in the US of A!!!

 

[Bateluer]

Or, we could get rid of taxes all together!


Anarchy in the US of A!!!

I have a better idea. The OPs idea, while it will probably happen, is horrible for privacy and many people would be furious over it.

Here's my idea. Instead of having employers withhold money from taxes from each paycheck, give workers their entire paycheck without withholding anything. Only list suggestions for what the individual should set aside for taxes. Let the worker do with this money as they wish, wise people will set of some sort of account where it can earn interest.

At tax time, make tax payers write a check to the IRS for their taxes. Will these result in a lot of people being unable to pay their taxes? Most likely. But the next time a politician decides to borrow 1.6 trillion dollars, or spend trillions bailing out failed businesses, or raise taxes in any way, tax payers will fillet them alive.

 

[Double Trouble]

I'd guess that what you're suggesting (OP) will probably become a reality at some point. I can see all sorts of negative aspects to it, but the IRS will like any scheme that helps it collect more without having to add more staff.

Bateleur, that suggestion would indeed result in a massive amount of un-collectible taxes, but I do like the idea of the taxpayer actually having to write a check or actually pay the full taxes so they can get a good understanding of how much they are paying. The more taxes get layered in with other stuff and the less visible they become, the more people become complacent and allow politicians to do stupid things.

 

[Zebo]

Because taxpayers today are mainly the lower-income individuals unable to take their revenue in the form of low-taxed capital gains and non taxed business expenses and they are already clocked and docked by reporting requirements from employers. Those with the gold make the rules.

 

[EagleKeeper]

I have a better idea. The OPs idea, while it will probably happen, is horrible for privacy and many people would be furious over it.

Here's my idea. Instead of having employers withhold money from taxes from each paycheck, give workers their entire paycheck without withholding anything. Only list suggestions for what the individual should set aside for taxes. Let the worker do with this money as they wish, wise people will set of some sort of account where it can earn interest.

At tax time, make tax payers write a check to the IRS for their taxes. Will these result in a lot of people being unable to pay their taxes? Most likely. But the next time a politician decides to borrow 1.6 trillion dollars, or spend trillions bailing out failed businesses, or raise taxes in any way, tax payers will fillet them alive.

This is why withholding was implemented. People were unable to pay the taxes owed because they did not set it aside.

As to the OP ideas - that information is presently and transmitted to the IRS.
Your W2 and 1099 type forms are sent to the IRS and used for cross referencing.

the only difference is that you are responsible for entering the information.
when the process was set up, there was no electronic methods.

The IRS is not equipped to support direct entry - they can not even get their own electronic tracking systems operational.

So you have the Tax S/W people that have stepped up to the plate to allow electronic filing.

Many states now have direct filing - so technically it is possible - but then we are talking about the IRS:hmm:

 

[highland145]

Because taxpayers today are mainly the lower-income individuals ...

My understanding was that nearly 50% of the population doesn't pay any tax or has a negative tax.

 

[highland145]

Here's my idea. Instead of having employers withhold money from taxes from each paycheck, give workers their entire paycheck without withholding anything.

All Americans should have to write a check every month to the IRS, SSA and state like I do. They will be so pissed off after seeing how much goes out that there will be some people voted out of office until some financial reforms are instituted.

 

[ebaycj]

All Americans should have to write a check every month to the IRS, SSA and state like I do. They will be so pissed off after seeing how much goes out that there will be some people voted out of office until some financial reforms are instituted.

As a libertarian-liberal, I would support this as a happy median between withholding 100% and paying once per year. Individuals who become delinquent (maybe 3 months+) would have their wages garnished same as if they didn't pay their child support / alimony / etc...

It will never pass though, why would you throw away easy money if you didn't have to? Both dems and pubs love spending it.

 

[ebaycj]

My understanding was that nearly 50% of the population doesn't pay any tax or has a negative tax.

By "lower income individuals" he meant "people who labor for their dollars, and hence pay income tax".

He was using "lower" to compare that group to those who derive their dollars from capital gains, and thus only pay approximately 15% long-term capital gains tax.

Stop whining.

 

[Thump553]

I have a better idea. The OPs idea, while it will probably happen, is horrible for privacy and many people would be furious over it.

Here's my idea. Instead of having employers withhold money from taxes from each paycheck, give workers their entire paycheck without withholding anything. Only list suggestions for what the individual should set aside for taxes. Let the worker do with this money as they wish, wise people will set of some sort of account where it can earn interest.

At tax time, make tax payers write a check to the IRS for their taxes. Will these result in a lot of people being unable to pay their taxes? Most likely. But the next time a politician decides to borrow 1.6 trillion dollars, or spend trillions bailing out failed businesses, or raise taxes in any way, tax payers will fillet them alive.

As I recall Ronald Reagan tried this as governor of California and it was an unmitigated disaster that he had to reverse. Unfortunately the vast majority of people lack even rudimentary financial discipline (regardless of their political bent). Along the same lines, why do you think mortgage lenders insist on having property taxes escrowed with them-or charge another 1/8 to 1/4 point more in interest for the "privilege" of not enforcing the escrow and allowing you to pay property taxes yourself (assuming a big equity cushion in the property)? Again, same reason-too many people are incapable of budgeting.

BTW, Uncle Sam doesn't allow this now even for those (like me) that pay all their own taxes directly-we must pay 80-90% of the estimated taxes due during the year in estimated payments or face substantial interest and penalties.

 

[waggy]

im sure it will happen in 10-20 years. right now there is no way the IRS could do that and the cost would be insane.

 

[highland145]

As a libertarian-liberal, I would support this as a happy median between withholding 100% and paying once per year. Individuals who become delinquent (maybe 3 months+) would have their wages garnished same as if they didn't pay their child support / alimony / etc...

With large $$ penalties. My goal is to educate everyone to how much goes out. For example, employees give 6.2% to SSA and 1.45% to medicare (7.65% total) and the employer matches the $$. The self employed, like myself, pay the whole 15.3%. That is a lot of $$ going into misused/poorly run/bankrupt government entities.

 

[highland145]

Stop whining.

Wasn't whining. Guess our set point is different for "lower income".

 

[child of wonder]

How about get rid of the income tax and replace it with something that doesn't require us to budget $22.5B each year for the IRS?

 

[GuitarDaddy]

The only way this could ever work is in a completely cashless society, it's been talked about most of my life but I doubt I will see it in my lifetime. Its one of those things like single payer health insurance that makes logical sense and theoretically solves a lot of problems in our society but conflicts with some of our founding principles like independence and personal freedoms.

Polititians and business leaders will play lip service to "financial transparency" but I guarantee you none of them want or would support true 100% transparency of all financial transactions. The phrase "Cash is King" is as true today as it has ever been, and the day we abolish cash is probably the day pigs fly

 

[Brainonska511]

How about get rid of the income tax and replace it with something that doesn't require us to budget $22.5B each year for the IRS?

Whatever tax you have will require some sort of agency to collect and document how much is brought in, settle discrepancies in the rules, etc, and will cost money to do.

 

[child of wonder]

Whatever tax you have will require some sort of agency to collect and document how much is brought in, settle discrepancies in the rules, etc, and will cost money to do.

Sure, but not to the tune of $22.5B annually.

That's $75 per year from every man, woman, and child in America for the privilege of having the IRS collect income taxes and scrutinize our finances.

 

[Craig234]

Read David Cay Johnston's books for alot of good info on our tax collecting and enforcement.

The poorer people who earn wages do have a near 100% efficiency on taxation - reported by the employer with automated systems to catch any missing taxes.

People who have other typoes of income, buesiness expenses and such - and sometimes those who make tips - have a lot more flexibility for what they report.

The goverrnemtn loses hundreds of billions a year in legitimate taxes to the tax evaders.

 

[bfdd]

I have a better idea. The OPs idea, while it will probably happen, is horrible for privacy and many people would be furious over it.

Here's my idea. Instead of having employers withhold money from taxes from each paycheck, give workers their entire paycheck without withholding anything. Only list suggestions for what the individual should set aside for taxes. Let the worker do with this money as they wish, wise people will set of some sort of account where it can earn interest.

At tax time, make tax payers write a check to the IRS for their taxes. Will these result in a lot of people being unable to pay their taxes? Most likely. But the next time a politician decides to borrow 1.6 trillion dollars, or spend trillions bailing out failed businesses, or raise taxes in any way, tax payers will fillet them alive.

or if you moved to an all sales tax like system they would just be taxed on purchases and could use their entire income to purchase what they want or need. I like the sales tax method better.

 

[hal2kilo]

Because taxpayers today are mainly the lower-income individuals unable to take their revenue in the form of low-taxed capital gains and non taxed business expenses and they are already clocked and docked by reporting requirements from employers. Those with the gold make the rules.

Yea if you only collect a pay check, you're already there. Not much for us slubs.

 

[HumblePie]

or if you moved to an all sales tax like system they would just be taxed on purchases and could use their entire income to purchase what they want or need. I like the sales tax method better.

The problem is that poorer people typically spend up to 100% of their income and richer people don't. Actually, the richer you are, the less you typically spend. This is especially true once the rich have outright bought everything they "need" to get by on.

People with money typically sit on it or let it gain interest and "grow" while people living paycheck to paycheck are spending every dime. Hence the paycheck to paycheck remark.

This is why it's hard doing taxes in this country. Federal taxes are done as a progressive income tax. Local and state taxes are done as a combination of sales, property, and income that varies per state. The system tries to set it up so that those that can bear the financial burden will hopefully pay more in taxes than those that can't. At least that is the idea from our tax "system" as we have it. The problem however is that while that may be the intent, that is not the outcome. Rich people always find "loopholes" so they get away with paying less in taxes than they "should" by the intent of the system.

 

[ScoobMaster]

or if you moved to an all sales tax like system they would just be taxed on purchases and could use their entire income to purchase what they want or need. I like the sales tax method better.

You pretty much have hit upon the base idea of The Fair Tax

Check it out - I think it is a great idea and a MUCH better alternative to our hideous income tax system.

 

[xj0hnx]

The problem is that poorer people typically spend up to 100% of their income and richer people don't. Actually, the richer you are, the less you typically spend. This is especially true once the rich have outright bought everything they "need" to get by on.

People with money typically sit on it or let it gain interest and "grow" while people living paycheck to paycheck are spending every dime. Hence the paycheck to paycheck remark.

Rich people don't eat, buy clothes, gas for their cars, fuel for their jets? It'd probably be a safe bet that "rich" people spend more in a day than "poor" do in a month.