Tax A requires a $1,000 compliance cost per taxpayer, in addition to the actual tax owed. Tax B requires only a $10 compliance tax per taxpayer, in addition to the actual tax owed. All else being equal, which is the better tax?
I like the idea of only being required to file a return if you disagree with the initial figures provided by the government based upon all of the information provided to them.
That has a much lower compliance cost than our current system.
How would the initial figures be calculated? What is the administration costs of making such a calculation?
Basically, they would use the information gathered from W-2’s, previous tax return, and other similar information to fill out the initial return. The IRS sends you the info to review. If agreed, do nothing except sign the return and send it back.
If disagreed, fill out a return and send it in.
The costs should be next to nothing.
Many other countries already follow this system.
So it costs me, a business owner, over $25k a year to comply with the income tax. I’ve read studies that say the average compliance cost is $3k / year / taxpayer. Determining the actual taxable income is not easy, especially for business owners. And that W2 info you mentioned has to come from us as well.
On the other hand, both sales taxes and property taxes have significantly lower compliance costs than income taxes.