• Taxing Tales
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  • The Cost of Incarceration
  • Last Monday was the deadline for filing tax returns in the United States. (Or for procrastinators, last Monday was the last day to file for an extension.) The process can be painful, both administratively and financially. (Especially when you are called upon not only to assist your adult children with their 1040s, but to help them locate the basic documents needed for the task. Good thing we love them.)

    I finished my April labors last weekend, and I certainly hope my time and my remittance will prove well-spent. But the more I think about our government's revenue collection system and the U.S. federal budget, the more I worry. Here are some cold, hard facts about our nation's fiscal process and prospects:

      • Americans spend an estimated 6 billion hours and $12 billion annually to complete their returns. About half of filers use a preparation service, even though many have relatively simple tax situations. By contrast, many other developed countries do the annual tax computations centrally, based on income data collected by the government. Treasury departments in countries including Japan and the Netherlands send completed returns to taxpayers for a final check, which usually takes minutes.

        Additional investment in technology by the Internal Revenue Service (IRS) could allow the U.S. to follow suit. A recent report highlighted the antiquated nature of its core systems. But IRS funding is not a popular item in Congress. In addition, there is an entire industry based on tax compliance that is quite happy with the current system.

      • The IRS has approximated that about 16% of income taxes owed go uncollected every year. This deprives the Treasury of $400 billion to $500 billion annually, an amount that would halve the annual budget deficit. An estimated 60% of income from farming and sole proprietorships goes unreported.

        Rather than seeking to collect liabilities more aggressively, the IRS has been forced to pull back. Its overall budget has fallen by 17% since 2010. A little investment in this area would easily pay for itself.