Wednesday, February 20, 2019

Inherent problems with filing taxes online

Many Americans like to file their taxes online. They think it's easier, quicker, more convenient and a good investment of whatever it costs, if it costs them anything at all. Some might even argue it pays for itself if it helps them “get more money back.”

In the short term, there is little basis for arguing with this point of view. All of those things may be true.

In the longer term view, what else happens? What does this convenience enable that could be damaging?

1. People are not forced to face the complexity of the tax code, at least not nearly to the degree that paper forms require. This makes them less likely to ask why the complexity is there in the first place. Why should people “get more money back” if it should never have been taken in the first place, or if the government should not be rewarding and incentivizing certain behavior in the first place?

2. People are not forced to understand the tax code. When there's little paper trail behind what they or anyone else pay in taxes, this lack of transparency makes it much easier to place and implement policy mischief.

For instance, if you make between 138 and 249 percent of the federal poverty level, ACA deems that you did not make enough money in order to qualify for an affordability exemption to the individual “shared responsibility” mandate penalty tax. (138 percent is the Medicaid expansion level, and 249 percent is where one crosses the 8.05 percent affordability threshold.) The assumption is “premium tax credits” would have covered everything beyond what you should have been able to afford, so no exemption for you. An extra $695, please.

Yes, tax reform eliminated this penalty, but we still get to wait another year for that to take effect.

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