The IRS has a big opportunity to fix the way Americans file taxes

“Right now, if you’re an American who wants to file your taxes without paying any additional fees to a private company or preparer, you have three options (besides limited “simple return” promotions by the big companies).

You can role-play as someone living in the 1970s and print out the 1040 tax form, along with any associated schedules or forms for tax credits and deductions for which you may be eligible, and compute it all by hand, meticulously collating physical copies of your W-2 and 1099 income statements and any other documentation you need.

Your second option is only slightly less tedious: You can use Free File Fillable Forms, a free service implemented by Intuit that simply copies the physical IRS tax forms and makes them “fillable” so you can type in the numbers. It’ll even do some basic math for you. But you still have to manually enter everything, you can’t import PDFs of your W-2 or other statements, and it’s easy to get confused about exactly which forms you’re expected or required to fill out. I’m an IRS-certified tax preparer, and I gave up using the website this year out of frustration.

Your final option is only available if you make $72,000 a year or less. In that case, you’re eligible for a free return on private tax software through the IRS Free File program. But careful: You might get a ton of spam from whatever company you choose trying to upsell you and get you to pay for fancier options. One investigation found that 14 million Americans were charged by companies for Free File returns that should have cost nothing.

The IRS also funds community tax organizations that can file returns for low-income people, but I can say from experience as a volunteer tax preparer that these groups are underfunded and overworked.

This is an unacceptable state of affairs. Americans should not have to choose between these obviously inadequate and half-baked free options for tax filing and paying a private company. Paying taxes is a legal requirement, and it should be possible to easily do it for free. And it just isn’t possible right now; it’s no wonder that over 91 percent of individual returns filed in 2019 were filed through a paid preparer or a private online service. The current system almost forces you to pay for the privilege of paying your taxes.”

“For years, the government leaned on those two companies to provide free tax services to Americans in need. But the basic problem with relying on private sector companies that provide paid tax services to provide free ones is that they will always have an incentive to make the free service worse and to make the paid one more attractive. That’s been the story the past couple of decades.”

” The IRS desperately needs to put together an easier-to-use, simpler way for people to file their taxes and access benefits free of charge. Accomplishing that, of course, is easier said than done. The IRS has been underfunded for decades and does not have sufficient in-house technical expertise to build a free file system on its own.”

Tax the land

“One of the most straightforward solutions a land tax offers is to America’s housing crisis. That crisis is caused, in part, by the failure to appropriately use valuable in-demand land for its best purpose. Millions of people want to live in New York City, Los Angeles, Washington, DC, or Seattle, but local tax regimes actually punish people for investing in their property. When people improve their property — either by adding a new room or building an entirely new structure like a multi-story apartment building, they’ll pay higher property taxes.

But this isn’t just a big-city problem. In small towns, vacant lots contribute to decline — and if there’s no valuable structure on a property, its delinquent landlords likely only pay a nominal property tax. This both lowers tax revenue and hurts neighborhood quality for everyone else.

Here’s where a land value tax can come into play.

Taxing land value means separating out what land is worth without any of the improvements sitting on it (like homes or industrial plants). Most Americans are familiar with property taxes that tax the value of their homes and the land they sit on as one. As New York University economist Arpit Gupta explains, part of what makes land taxes so attractive is that “there should be no economic inefficiency” if you are able to tax “true land rents.”

A land tax can’t disincentivize anything — land will continue to exist regardless of any taxation scheme.

“Land doesn’t move,” University of Illinois economist David Albouy explained. “It doesn’t disappear — so you can lower taxes on things that do go away.””

“Taxing land reduces the profit that comes from just owning a piece of property. Instead, you are incentivized to put that land to work. Let’s take a plot of land near Times Square. That land is so valuable, basically anything you do with it will turn a massive profit so no need to develop it for its most valuable use.

However, if a land tax were to be levied, the owner of that land would need to make sure that the property on that land was actually profitable since the government is taxing away some or all of the land rents that could be charged.”

“beyond the political issues, there are also technical concerns: Firstly, valuing land separately from the improvements to it is not so simple, though proponents argue it can be done. Secondly, implementing a land tax right now, while fair in the medium and long term, could feel drastically unfair in the short term to property owners who paid a premium for their lots because of the value of the land only to see it depreciate in value as a new tax gets implemented.

So why is this meme becoming so popular (at least among some online communities)? Lars Doucet, a prominent land value tax proponent, explains that a big part of the reason is that for a long time the automobile made sprawling suburban development possible. That meant people could still access valuable labor markets even if they couldn’t afford to live near their jobs (as long as they were willing to suffer long commutes, that is).

“Now we’ve run out of suburbs,” Doucet argued. “We can’t push any further through expansion.”

Remote work is a new development, which could buy us some more time, since it could allow many people to live even further away from city centers, but as rents skyrocket, people are desperately searching for radical solutions to America’s housing crisis.”

Who Will Pay for the Roads?

“For decades, federal highway spending was covered completely by federal gas tax revenue. Fuel taxes are not exactly a user fee, but they do at least charge people who drive for the roads they drive on.

An even more market-oriented solution would involve giving private companies a larger role in building and maintaining highways and city streets while shifting the costs of those projects onto motorists, truckers, and other road users through tolls.

Since 2008, however, a gap between gas tax revenue and mounting federal transportation spending has required a $157 billion infusion from the general fund. Even before the 2021 infrastructure bill was passed, the Congressional Budget Office was projecting that the gap would grow.

The infrastructure package did include a few modest reforms. It created a pilot program to study a mileage-based user fee, and it expanded private activity bonds, which help private companies raise capital for infrastructure projects. But the overall trend is toward more freeloading freeways.”

Can you believe the price of gas? States move quickly to help drivers

“Tymon said there’s no guarantee that savings from cutting gas taxes would be passed on to consumers, whereas other relief mechanisms would have more control.

“If you do suspend the gas tax, you’re stopping a critical source of revenue that’s used to invest in transportation infrastructure,” he said. “It doesn’t seem like it’s a good precedent to set.”

Environmentalists are worried that a tax rebate could be a perverse incentive for gasoline-guzzling cars to hit the road more in an age of worsening climate change.”

California Escalates Its War on the Marijuana Black Market

“Having utterly failed to end the marijuana black market in California, lawmakers have decided to backslide into the drug war by increasing fines on those who operate outside of the state’s very costly and tightly regulated legal cannabis system.

California will begin 2022 not just by increasing taxes on legal marijuana cultivation but also by introducing new fines against anybody “aiding and abetting” any unlicensed dealers in the state.”

“California’s implementation of recreational cannabis regulations, authorized by the passage of Proposition 64 in 2016, has been a massive mess. The ballot initiative allowed for municipalities to decide whether to allow cultivation and dispensaries, and two-thirds of them still refuse to do so despite the public vote. The state levies high cultivation and excise taxes that are escalated further by local sales taxes in any municipality that does allow for dispensaries to open up shop.

The result has been price and availability issues so severe that experts estimate that between two-thirds and three-quarters of all marijuana purchases take place through unlicensed dealers, which means that the state isn’t getting its share of the revenue. The problem is so severe that the editorial board at the Los Angeles Times recently acknowledged that high taxes for goods fuel black markets.”