How Crony Capitalism Makes Tax Season Hell
15th February 2022
For most Americans, tax season is accompanied by a soundtrack of wailing and gnashing of teeth. According to Pew Research Center, 56 percent of Americans hate or dislike doing their taxes, and 31 percent of those respondents say the process is too complicated. Filing your taxes is expensive, in both time and money: ProPublica reported in 2019 that “Americans spend an estimated 1.7 billion hours and $31 billion doing their taxes each year.”
When you’re elbow-deep in documents and receipts, poring over tiny boxes filled with numbers and second-guessing whether you did, in fact, get married last year, you might ask yourself: does it really have to be this hard?
The answer is no. Many other countries, like Germany, Japan, New Zealand and the United Kingdom, have “exact-withholding” systems. For the most part, the government alerts taxpayers of their estimated income for the previous year and how much was withheld in taxes. Most taxpayers’ part in the process begins and ends with checking the government’s math and disputing any discrepancies.
You might ask: what’s stopping the United States from adopting this system? After all, the IRS already has the vast majority of taxpayers’ information on file. The agency’s duties could easily be expanded to simply sending most Americans a refund or a bill, depending on their income and taxes already paid.
There’s a simple explanation: tax prep companies such as H&R Block and Intuit spend millions of dollars each year lobbying Congress to keep the current system in place. And they have good reason to do so: according to IBISWorld, tax prep services is an $11 billion industry in the US. No wonder both firms were able to afford lucrative $6.5 million ad slots during this weekend’s Super Bowl broadcast.