Japan, the United Kingdom, and several other countries have adopted a system known as “precision withholding” that lets taxpayers avoid filing any kind of tax return at all. The tax return, at the end of the day, is an anachronistic legacy of the old days of paper record-keeping when it wouldn’t have been feasible to calculate taxes without outsourcing a huge share of the work to individual families.
These days, in countries that have implemented modern tax systems, the tax agency simply takes exactly the right amount out of every paycheck. If they find that a mistake was made — not accounting for a charitable donation or mortgage interest, for example — they find that mistake in charity and bank records, and they fix it for you. In journalist T.R. Reid’s great new book A Fine Mess, he explains how the Japanese system works:
Japan’s equivalent of the IRS, Kokuzeicho, gathers all the pertinent data for each worker — income, taxable benefits, number of personal exemptions, tax withheld, and so on — and then computes how much the worker owes in tax, down to the last yen. Because Japan uses a system known as “precision withholding,” with the amount changing whenever pay goes up or down, most people withhold the exact amount due.
In early March, Kokuzeicho sends a postcard to every citizen that sets forth all this information: how much you earned, how much tax you owe, how much tax you’ve already paid through withholding. If you’ve paid in more tax than you owe, Kokuzeicho deposits the refund amount in your bank account; if you did not withhold enough, the agency takes the tax that’s due from your bank account. …
As a result, paying income tax is a totally automatic process for about 80 percent of Japanese households, requiring no more work than reading a postcard once a year.
Japan’s top income tax bracket is 45 percent, by the way, and it’s levied on incomes of over $350,000 a year. There is absolutely no need to bundle this kind of radical tax simplification with giant tax cuts. It’s easy to file your taxes in Japan because the Japanese government decided to make it a priority.
That’s a choice that American conservatives have fought against, tooth and nail, with the help of predatory tax services companies like H&R Block and Intuit (the makers of TurboTax). When Sens. Ron Wyden (D-OR) and Dan Coats (R-IN) introduced a fairly timid, intentionally bipartisan tax reform bill in 2011 and included a proposal for return-free filing, anti-tax crusader Grover Norquist blasted it, writing in a letter to the senators that “the clear goal of this measure is to raise taxes in a way that leaves politicians with clean hands.” Norquist wants to make taxes complicated so people hate them, just as Intuit wants them complicated so that people remain dependent on its terrible, unnecessary software.
Back in 2016, Elizabeth Warren (D-MA) proposed a kind of intermediary step to the Japanese system — sponsoring legislation that would direct the IRS to develop its own in-house tax prep software that would make it free and easy for normal people to file their taxes. Hillary Clinton endorsed her plan, as did Bernie Sanders, Al Franken, Tammy Baldwin, and other Senate Democrats. But postcard-touting Republicans haven’t been interested.
Commentary by Matthew Yglesias, a writer at Vox. Follow him on Twitter @mattyglesias.
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