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Can someone please steel-man the American system of making individual citizens responsible for filing their taxes in a hopelessly complex tax code, then punishing them for making mistakes? From where I stand, it all just feels like racketeering by H&R Block et al. to extort fees year after year.
From a revenue maximizing perspective: It's essentially the same as using coupons and discounts for price discrimination at a grocery store. You capture additional transactions from customers willing to put in the work/inconvenience of shopping from the discount rack or using coupons, and broadly speaking these are mostly transactions that otherwise wouldn't have occurred because those customers would not have been getting enough consumer surplus from the transaction at the original price. You offer different prices to people with different willingness to pay by placing slight inconveniences in the way, people who really want to pay less will go through the inconveniences while people who don't care about paying more won't. With taxes, people who really don't want to pay those taxes (or people sufficiently sophisticated that their objections to having to pay those taxes would actually matter to the system) avoid paying those taxes in various ways, through complex deductions and schemes to funnel money one way or the other. People who don't really care about their tax bill (or people who are low-class enough that their complaints won't matter to anyone but their bartender) just pay the taxes because they don't care enough to figure out all the ways to avoid them.
From a freedom maximizing perspective: At the time it was put in place, this method minimized the degree to which the IRS surveilled individual Americans. This is mostly negligible today, when privacy has been so thoroughly compromised under law and custom that it feels irrelevant. But at the time this was an important consideration.
Intertia: But mostly, I think the best steelman is that changing the system would have unpredictable effects on the economy. Between two thirds and three quarters of Americans get a tax refund. The average refund (I couldn't find the median where I looked) is around $3,000. This is essentially a forced savings program by the IRS, in which Americans are forced to save a small amount from each paycheck and then given the money back in a lump sum later. This might have systemically important functions at this point which lead to significant switching costs nationally. For example, it's pretty well known that the best time to sell a cheap used car is around tax refund season, as lots of poor people who otherwise spend as fast as they get it suddenly have a pile of cash and need a car. People also often spend that money on home repairs or security deposits to move houses. Though they also often, of course, blow it on vacations or poor decisions. While the system that leads to a tax refund might be inefficient in and of itself, at this point if we got rid of this system we don't know what impact it might have. Poor people might stop being able to buy used cars, as they go back to saving nothing. Cheap flights to Florida from northern cities might dry up as middle class folks stop getting a tax return in the colder months and eyeing up tickets. Plus, regardless of the total taxes paid, once you get rid of the refund, people won't notice the extra few bucks every week, but they will notice the lack of a big lump sum every year, and will feel worse about it. The tax filing system is a way to trick children into feeling like they're paying less.
I am going to reply to this post but I wonder if you people have some misapprehension what it is like in countries with pre-filled forms.
In countries where the tax authority pre-fills your forms, they still have tax refunds if employer withheld too much (and back taxes, if your income changed in other direction). You still get a document that shows how much money the state collected from you and what is your confirmed final tax. You usually get clear instructions when and how you can get credits/deductibles and what to change in your form to claim then.
Only difference that there is no need to pay for a 3rd party software do the latter part.
How do those countries handle cases of "odd jobs" and stuff like that? If you're a farmer that makes money by, I dunno, selling grain, how does the government know how much was sold? Or if you sell goods/services direct to consumers? I suppose the tip income is somewhat US-specific and doesn't matter quite as much any more, but there are a bunch of less-easily-trackable income sources that would seem to make this a bit hard in the general case.
In case of Russia, they don't. That's why they introduced a new "self-employed" status a few years ago with much lower taxes on income to incentivize people to report their cake baking and pipe fixing and dunce tutoring. (It's different with the farmers since they don't really sell grain to individuals and mill that buy it from them provide the record of buying it.) But the self-employed are small fish and it's not worth it to personally hunt down every single one of them.
The next set of carrot and stick that will be used to ensure compliance is probably government-run crypto. It's easy to inject it into the economy: social security of every kind. All transactions using them will be 100% transparent to the government.
I assume this is a typo for "dance", but I find it rather amusing.
ETA: This dumb brought to you by not being fully awake.
It's not a typo.
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