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After the debt deal: A tax reform idea

The debt deal punts on tax reform. That's unfortunate. But when lawmakers finally get to it, this idea can garner bipartisan support and save the government serious money: Have the IRS fill out tax returns for millions of taxpayers. It's a proven concept in Scandinavia -- and California.

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The great debt debacle in Washington is over – for now. One idea that was punted for later consideration is tax reform. This is stupefying because the elimination of all corporate and individual “loopholes” from the tax code would free up about $1 trillion each year to either reduce tax rates or debt – or both.

The issue was too politically hot to handle, yet talk of tax reform doesn’t always have to spark a beltway bonfire. Here is an idea that should find common ground and one that immediately yields to common sense: Simplify the process of preparing tax returns by shifting the burden from the individual taxpayer to the government itself.

Why and How?

Often the Internal Revenue Service has all the information it needs to do the same thing that taxpayers toil over every April, except it can complete the task much more efficiently and accurately. Wages and salaries (the W-2) and interest and dividend income (the 1099) are tabulated on forms that employers and financial institutions feed directly into IRS computers.

Why require taxpayers to reinvent the 1040 wheel by spending time gathering documents and struggling to master the tax man’s gobbledygook in the tax forms and instructions? Particularly when, as is often the case, taxpayers incorrectly fill out their returns and are contacted by the IRS telling them how they erred and how much more (or less) they owe.

Or why force 60 percent of taxpayers to hire professional tax-return preparers, many of whom have their clerks take the taxpayer’s information, feed it into software that spits out the tax return, and then send a bill for anywhere from $100 to $1,000?


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