Understanding Tax Filing Differences: US vs. Other Countries
Filing taxes presents vastly contrasting experiences for Jens Peter de Pedro, who has navigated both the Swedish and American tax systems. In Sweden, de Pedro receives a pre-completed tax return from the government, offering effortless filing options via mail, app, phone, or text.
In stark contrast, the US tax season poses a significant challenge, consuming hours of preparation and expenses for even the most basic federal tax form. The US tax code's staggering length contributes to its complexity, with approximately one-fifth of eligible Americans missing out on a valuable tax credit due to the system's complexities.
Why the US Tax System is Exceptionally Complicated
Unlike the UK's Pay As You Earn system, the US tax system relies on self-reporting. The married filing jointly tax status further complicates matters, as spouses' earnings are combined to determine tax brackets.
Factors Contributing to Complexity
The US tax code incorporates numerous social policy measures, providing assistance through tax credits for various programs and expenses, such as healthcare and retirement savings. These benefits add further layers of complexity to the system.
Special Interest Influence
Politicians and special interest groups have pushed for tax breaks to incentivize specific behaviors, creating "sacred cows" that are difficult to eliminate, such as the mortgage interest deduction.
Global Challenges with Freelance Taxation
Simplifying tax filing for freelance or gig work has proven challenging worldwide. In both Sweden and the UK, self-employed individuals typically rely on accountants to navigate the tax process.
Steps Towards Simplification in the US
The Tax Cuts and Jobs Act (TCJA) implemented measures to simplify tax filing, including raising the standard deduction and eliminating certain itemized deductions.
Future Simplification Measures
The US could further simplify its tax code by:
* Pre-populating tax returns with available information
* Allowing the IRS to calculate tax liability
* Requiring companies to submit income reporting forms earlier to the IRS
Conclusion
While the US has made some strides towards simplifying its tax system, it still lags behind many other countries in terms of convenience and ease of filing. To truly modernize the tax process, the government must address the underlying complexity introduced by various factors, including special interest influence and social policy measures embedded in the tax code.