I dunno. Most people I know are 1099 / contract workers, and a lot of them get paid cash off the books. The government might have a rough idea of what they make, but it definitely doesn't know down to the penny. I keep very good books, but I have foreign bank accounts, crypto trades, subcontractors I paid over Paypal, people who paid me over Paypal, and there's no one system I'm aware of that could figure out what I actually owe in taxes. It still costs me about $800 a year through an accountant to file my taxes. (Luckily, you can write it off).
Until or unless everything is centralized and cash ceases to exist, I don't know how they'd really do it. In South Korea do waiters live on tips? Because in the US, almost all money made in the restaurant service industry comes from unrecorded cash tips; the actual wages are extremely low. The restaurant will attempt to estimate their workers tips and cover the taxes out of the fixed wages, but... this doesn't even get into all the other cash industries like stripping or moonlighting as a dominatrix. The US's tax attitude seems to be: You're on your honor, and most of the time we won't catch you, but not even Jesus can help if we do.
We should keep a broken tax system because many of your peers are paid illegally? Or because edge cases exist?
I should be a pretty typical middle-class example. Two salaries (me + spouse), a mortgage, limited other deductions. Yet every year I have to wait for various forms that the government already has, enter the values on paper or pay for tax software, hope I don’t fat finger a value, and wait 7-10 years for an audit. Heck, since Trump increased the standard deduction, I’ll probably be taking that soon (mortgage interest is near that threshold now), but still can’t just click a button at irs.gov that says “yup, that’s right, here’s my bank info for refund/payment”
Oh no. I'm just explaining why it's more efficient for the IRS to do it this way. I'd personally like to abolish income tax and only tax sales, with up to 100% tax on luxury goods and no tax on food, etc.
The IRS could generate online forms (or snail mail) with what they know and let us add deductions and other income. They should know salary/wages, they could know investment income (not sure if broker report to the IRS, or just send forms to filers).
Even if the filer has to manually enter deductions, credits, etc, doing it on an IRS site has several benefits... no $50+ fee for H&R/TaxCut/etc, no $500+ for a CPA (for fairly typical tax situations), no worrying about whether online submission processed correctly (because you'd be submitting directly to the IRS instead of relying on a 3rd party to submit for you). Multiply that time/money/stress savings across the population and it's a MASSIVE benefit to society.
No, I mean, the efficiency is partly amplified by keeping people in constant fear. It costs them less and it increases compliance. Like, those fuckers just put a question about crypto on the front page this year and I just decided not to lie on a sworn document, and basically spent 2 months figuring out what the fuck ridiculous chain of events led to me selling some bitcoin in 2021, to be on the right side of 'em. And they probably never would have known. But it's the fear that they might've known, you see, that makes them so efficient.
Well, really it's progressive if it only taxes stuff you don't need to buy. Here's what I think:
Fuel and food, no tax.
School supplies, shoes, clothing, any item under $100, no tax. Over $100, ramp it up.
Diamond rings, 100% tax.
Alcohol and cigarettes, 20-30%.
Used cars, no tax.
New cars, 10% up to 100%. Credits if they're electric or extremely fuel-efficient.
Playstations, high end sneakers, Smart TVs, iPhones, rims, jewelry, expensive furnishings, rugs, anything better than your basic washer/drier: 100% tax.
Books: Free and subsidized by the government, as many as you want, any book ever written.
Healthcare: Free.
College: Free.
Basically under my plan, as long as you get stuff you need for your family, you pay no tax. If you get stuff you want for your pleasure, you pay tax on it.
How's that regressive?
The only real downside I see is the potential for a massive black market in luxury goods, tobacco and alcohol. But legalizing and taxing pot and prostitution should take some of the sting out of that.
Well, that's a very glass-half-empty way of looking at it. I'm saying that high earners have to help subsidize lower earners the more luxuries they accrue in their life. It's not the earning after all that makes the difference between rich and poor; that's why the wealthiest people in America pay no income tax. They're not earning anything, officially. But boy do they spend.
So maybe, I don't know, if you're really concerned about people getting that one luxury in life then there could be an exemption, like if you make under $50k a year you get refunded the VAT on $2k of luxury purchases. Ok? But it has to be small enough to prevent the ultra-wealthy from using it as a loophole.
Until or unless everything is centralized and cash ceases to exist, I don't know how they'd really do it. In South Korea do waiters live on tips? Because in the US, almost all money made in the restaurant service industry comes from unrecorded cash tips; the actual wages are extremely low. The restaurant will attempt to estimate their workers tips and cover the taxes out of the fixed wages, but... this doesn't even get into all the other cash industries like stripping or moonlighting as a dominatrix. The US's tax attitude seems to be: You're on your honor, and most of the time we won't catch you, but not even Jesus can help if we do.