Fended Off the Taxman Another Year

I love TurboTax. I did everything online (rather than buying the box at the store) and got everything done in about an hour (though having all of my real estate paperwork handy helped that quite a bit). The state confirmed receipt of my filing within an hour, and the feds confirmed by the end of the day.

Got a nice, fat refund coming again, and I should see it show up in the bank soon.

I find it strange, though, that the tax system is more or less a forced savings account for me. I’ve never owed the feds moolah at the end of the year, and it’s been many years since I owed the state anything (even then it was like $27 — oh, the pain).

Think about that: there’s an entire industry built around the government saying “Whoops! We charged you too much. Here’s a check.” We’ve got tax lawyers, accountants, income tax agents, and now software developers all existing solely to support the great ugly beast that is the tax code.

Looking at my paperwork, only 42% of my income was taxable, yet after all the deductions (not like I had many) and child credits, I didn’t owe a dime. If I’m reading my paperwork right, the feds paid everything back. How does that make sense? If they were going to do that, I could have had a nice chunk of change extra back in the paycheck every month, and not have to look forward to the feds’ forced savings account.

On the state side, I ended up paying a hair under 3% of what they decided was my taxable income. That’s after they gave back 28% of what they took out of my paychecks. That makes a little more sense, and accordingly, the state has far less hoops to jump through. (Of course, Illinois rapes you on the property tax because of the way it funds schools, but that’s a whole ‘nother can of worms.)

Why not cut back some of the bureaucracy? I dug around for the IRS’s budget and found a statement from IRS Commissioner Mark W. Everson regarding the IRS’s FY 2006 budget, which includes this quote:

Last year, the IRS produced direct enforcement revenues of more than $43 billion from collection, audit and document-matching efforts. This reflects better than a 4-1 return for every dollar invested in the total agency budget. Increased enforcement funding makes good sense and contributes to deficit reduction.

Do the math. If they’re seeing a 4-1 return, that means they’re spending $10 BILLION to get it. And this is a good thing? How do we decide 4-1 is good?

It goes on to say:

The IRS will continue to make productivity gains and work to improve overall service to taxpayers. However, the budget calls for the IRS to do a modest amount of belt-tightening in the area of taxpayer services. We expect to make selected service cuts, including closing some taxpayer walk-in offices. These walk-in sites are relatively expensive and the number of visitors has dropped as use of the IRS Web site has dramatically increased.

Okay, close more offices. Great. But is simplifying the tax code really so foreign a concept? Less code means less paperwork. Less paperwork means fewer hoops to jump through. Fewer hoops means fewer mistakes (and, I would imagine, fewer opportunities for fraud). Fewer mistakes means fewer audits. Fewer audits means fewer auditors (and fewer tax lawyers).

Even if that only bumps the ratio to 5-1, that’s $2 billion more for the government. I’m sure we can all think of better things to spend it on than an army of suits ready to rake you over the coals because you misplaced a slip of paper or forgot to dot an i.

Look, I’m not afraid to pay taxes. I know we need taxes to fund a lot of things we use every day, and I don’t object to that. But the system just sucks. It’s almost as wasteful as pork barrel spending. Even the congresscritters on both sides of the fence agree that yes, the system’s broken.

Until they get off their collective asses, I’ll just content myself to getting an extra paycheck at the beginning of every year.