The GOP is promising a simpler tax code for Millennials. Will it help?(Read article summary)
House Republicans released a plan for a simplified tax code on Friday, breaking with decades of tax legislation in hopes of appealing to tax-shy Millennials.
Some say the most-feared letters for Americans across the political spectrum are "IRS," but polls show one group finds the nation's Internal Revenue Service especially onerous – Millennials.
House Republicans announced a proposal to reform the tax code on Friday, promising a shift toward simplifying the maze Americans must navigate to give the government money, a maze the rising generation has viewed with trepidation. It's the final plank in the Republicans' tax reform bill aimed to promote economic growth.
The GOP wants to make paying taxes "so simple that the average American can do their taxes on a postcard, and that the average IRS agent can understand it," Speaker of the House Paul Ryan (R) of Wisconsin said during the roll-out event Friday.
No one, with the possible exception of accountants and tax dodgers, thinks the complexity of US tax code is cause for celebration, but 20-somethings wrestling with education credits and first-job tax woes are particularly sensitive to the problem.
A whopping 80 percent of Americans aged 18 to 34 worry about making a mistake – whether overpaying or missing benefits – in their taxes, compared to 60 percent of adults over 55, a Nerdwallet/Harris Poll found in February. They also turn to friends and family for support in doing taxes, rather than appealing to an accountant or the IRS itself.
As a group, Millennials have the added disadvantage of heavy participation in the so-called gig economy, a maze of freelancing, service-sharing, and Uber-driving that rarely produces a standard W-2.
Although the tax plan does not touch the gig economy, it makes the form for tax filing simpler by removing itemized reductions that Millennials likely don't use, says Alex Hendrie of Americans for Tax Reform, a Washington-based nonprofit opposed to tax increases.
"It makes that piece of paper somewhat easier to read," Mr. Hendrie tells The Christian Science Monitor.
The plan has already been questioned for a vague attitude toward details, and it still faces many speeches, debates, and a general election season before it will come before a vote, but successfully simplifying taxes would represent a shift from decades of tax legislation. Today's tax code is 2.4 million words long and growing, nearly six times the length of the 1955 tax code. Navigating the complexity costs the US economy $4.09 billon, with Americans spending 8.9 billion hours this year filing taxes, according to analysis by the Tax Foundation, an independent tax policy think tank in Washington.
"Tax law, it almost feels, like, intentionally complicated," Erik Duemig, a 26-year-old business owner who had his own run-in with the IRS after making a mistake on tax filing, told Bloomberg. "It just tires you out so you just pay more than you need to."
The Republicans' plan wants to change that as well, promising an IRS that focuses more on customer service, as many Millennials in particular complain the agency's reluctance to embrace the digital world – an effort to prevent identity theft – makes contact difficult.
"We really encourage people to [seek help] online first," IRS spokesman Eric Smith told Bloomberg in March, acknowledging that "it can be awhile."
The plan aims to reduce complexity by consolidating tax brackets from seven to three and reducing family tax benefits from five to two, The Hill's Naomi Jagoda reported. The blueprint also eliminates the alternative minimum tax, the estate tax, and itemized deductions for everything except mortgage and charitable contributions.
Although the other, less simple details of the plan still face extensive challenge in the House Ways and Means Committee, it aims to produce a comparable revenue stream once economic variability figures in.
The tax reform blueprint is the sixth and final segment of an agenda Speaker of the House Paul Ryan is calling "a better way," a plan House Republicans designed to show the American people what they will do in 2017 if re-elected.