As our elected representatives begin the difficult but essential task of reforming our tax code, we strongly encourage them to keep tax simplification as the centerpiece of any reform package. Simplification of the tax code is beneficial to taxpayers across the country.
The appeal of simplification starts with empowering every individual and small business to more easily understand their taxes and thereby empowering them to make better financial decisions.
More broadly, there is general consensus that the productivity and efficiency gains of tax simplification would help grow our economy and make our system of voluntary tax compliance more successful, accurate and effective.
At Intuit, we help tens of millions of individuals and families take charge of their personal finances by helping them prepare and file their tax returns quickly, accurately and with greater ease. We also work with millions of small businesses and accountants throughout the year, helping them to organize business finances and meet their compliance obligations.
Based on these insights, we believe there are a lot of good reasons to make tax simplification our highest priority in tax reform. Here are just six:
- Help working families. There is a mistaken belief that lower-income individuals and families have simpler tax returns. All too often, nothing could be further from the truth. Low-income families often have multiple sources of income and a significant amount of income volatility over the course of a year. Unlike many W-2 wage earners, their incomes vary from month to month and require a significant amount of personal recordkeeping.
- Assist small business. Tax code complexity impedes small business creation, survival and growth. Tax simplification can remove those obstacles and spur entrepreneurship and reduce the regulatory burden on small business.
- Spur the economy. Simplifying the code will make it easier for individuals to participate in the sharing or on-demand economy. These sole-entrepreneur businesses allow individuals to take control of their professional lives, but understanding their tax compliance is complicated. A simplified tax code can reduce the barriers and burdens of tax compliance for these small businesses so they can focus on growing – creating wealth and jobs.
- Fight tax fraud. For too long, the complexity of our tax code has enabled criminals to impersonate legitimate taxpayers and gain access to their tax refunds. It also led to innocent taxpayer mistakes, causing many people to receive smaller tax refunds than they lawfully deserved.
- Improve tax compliance. Voluntary tax compliance is vitally important to our system of self-government. Yet some Americans – whether out of fear, frustration or lack of confidence – choose not to file a tax return at all. A simpler tax code could eliminate some of these common reasons for failing to file.
- Achieve greater accuracy and fairness. Complexity causes inadvertent errors, shortchanging those who overpay and subjecting those who underpay to potential penalties and interest payments. Simplification can reduce errors, while at the same time strengthening the system by minimizing improper payments. It also improves the perception that everyone is paying their fair share because there are fewer loopholes.
No one set out to create an incomprehensible tax code – it just happened, little by little, over a period of decades through thousands of additions and changes throughout several administrations and with bipartisan support.
By including tax simplification as part of any tax reform effort, Congress and the Administration have an opportunity to make a meaningful difference in the lives of every taxpayer.