Do you consider it an incentive problem for cloud providers to send you a bill instead of asking you to submit what you believe you should owe? We have societally solved these problems my making them auditable. People don’t necessarily trust the bill, and have means of disputing it. If you think the government’s tool is overcharging, you are welcome to file your own taxes and deal with the possibility of getting audited.

Wait, do people not keep track of their own usage to compare it to their AWS bill? I just use free tiers for personal projects, but I guess I assumed that there would be some log reviews at some point if you were using it for running an actual business.

Anyway, I guess that means my answer is "yes".

>If you think the government’s tool is overcharging, you are welcome to file your own taxes and deal with the possibility of getting audited.

"Pay what we say you owe or we'll nuke your finances with an audit". Yes this is exactly my problem.

> "Pay what we say you owe or we'll nuke your finances with an audit". Yes this is exactly my problem.

You might be misunderstanding in what an audit entails.

There’s no direct “nuking” of finances due to an audit.

In the vast majority of cases an audit is nothing more than “you claimed this on your return, can you please provide the documentation that supports it?”

More specifically, I believe most audits are about claiming child tax credit and them wanting documentation to support the claim.

If your finances get nuked that means you lied on your return, with very few exceptions.

Main exception that comes to mind is claiming expenses that are up for debate.

Also circling back to your earlier comment. Yes the tax code is needlessly complicated, Intuit et al. are the ones who caused that and are actively lobbying against simplifying it because their paid services would become obsolete if the tax code was nice and simple.

> Is the free-filing system designed to maximize your return?

The solution to this is for the government to publish the source code in the public domain. Then anyone who can do better can fork it and sell it, which will make that market more competitive when it's cheaper to enter because the government has already done 80% of the work, but there will only be a market for this if the government isn't maximizing your return. "Better return than the free system or your money back" would be a great way to get customers, and they'd be viable with fewer customers when they're only paying the incremental cost of doing what the government failed to.

And then the government system would be embarrassed if private forks could frequently beat them, which improves their incentives.

Oh, nice, this is a fun idea. If submitting taxes were essentially an open API endpoint and the front end was an open source government-sponsored UX. Love that.

The US Digital Corps has the technical chops to do that well if the politics could work out.

To the Intuit folks reading this because your boss told you to keep an eye on the sentiment on Hacker News…don’t worry you can _totally_ have your own fork and since you’re the best you would have nothing to worry about. Since you care so much about the American tax payer, I look forward to your enthusiastic support of more transparent tax filing.

You don't need the code even - though the code, as being already paid for by the taxpayers, should be available to them anyway - the rules are public, the data should be available to the public, so you can just reimplement the rules and see if you get the same answer. They key here to make the data a) available b) portable c) every decision the system takes be documented and having the audit trail.

You do need the code because if the public system gets it right for (or is otherwise used by) 90% of the taxpayers, a private system for the remaining taxpayers would have to cover its costs with only 10% of the revenue. Releasing the code reduces their costs because they don't have to duplicate the parts the government already got right, they only have to fix what it got wrong.

"The rules" in this case is the tax code, which is thousands of pages and written in lawyer. You can imagine how converting that into computer code is a non-trivial undertaking notwithstanding that it's public information.

> a private system for the remaining taxpayers would have to cover its costs with only 10% of the revenue.

Is it that hard? Americans filed about 260M returns last year. 10% of it is 26M. Let's say you get only 10% of those - since you're not the only person on the market - to pay you $100 (if you save a significant amount on taxes, paying $100 for it would make sense, won't it?) - that's $260M, or about as much as the government says their whole system, for all 100% of taxpayers, would cost. If you can do better job than the government on the efficiency (not a very high bar), and you only have to support 1/10 of the volume the government does, I think these numbers look ok for you.

> You can imagine how converting that into computer code is a non-trivial undertaking notwithstanding that it's public information.

It is. But there are multiple businesses who already have been doing it for years, so it looks like a solvable problem.

> Let's say you get only 10% of those - since you're not the only person on the market - to pay you $100 (if you save a significant amount on taxes, paying $100 for it would make sense, won't it?) - that's $260M, or about as much as the government says their whole system, for all 100% of taxpayers, would cost.

TurboTax is ~$39. Also, the cost of developing the system doesn't depend on how many people use it, and those are only the development costs, not anything else a business has to pay, like marketing, billing or interest on capital.

Moreover, suppose a business could actually get away with charging $100 and that would be enough to cover their costs. Why would you want this as opposed to releasing the source code, which reduces their costs and allows them to get by charging $25, while driving the market price down to that level by reducing the barrier to entry?

> It is. But there are multiple businesses who already have been doing it for years, so it looks like a solvable problem.

That was when you don't have a taxpayer-subsidized competitor providing an almost-as-good service for free.

$39 is the cheapest offer (well, beyond free ones). If you want to cover your mortgage, your charity giving, savings, maybe a little stock investments, maybe some side gigs, then you very quickly get to $100. And of course state is extra (my tax return, if I choose to file with Intuit, would be at around $120 with current prices). It's not all people, for sure, but in those 10% that need non-trivial filing, those would be much more frequent that "one salary, nothing else" fold. For the latter - the pre-baked offer would be the way.

BTW, that's the cheapest offer TurboTax now does, where you do all the work. They have full-service offerings now, there it could be 3-4x from that easily. So I don't think their business is much threatened.

> That was when you don't have a taxpayer-subsidized competitor providing an almost-as-good service for free.

They already have the platform and 99% of stuff implemented. The only thing they need to do is year-to-year updates. True, it's some work, but as I just shown, their potential market is in hundreds of millions of dollars. Every year, recurring. I think many VCs would look favorably at such potential - and here we're talking about already established companies with all sunk costs already processed and paid off, needing to spend just on maintenance and recurring updates. I don't think it's as bad as you think it is.

> $39 is the cheapest offer (well, beyond free ones). If you want to cover your mortgage, your charity giving, savings, maybe a little stock investments, maybe some side gigs, then you very quickly get to $100. And of course state is extra (my tax return, if I choose to file with Intuit, would be at around $120 with current prices).

That's the right now pricing, which is basically an attempt at price discrimination or bait and switch -- lots of people have common deductions like that and then they get sucked in with a free offer or $39 only to learn it's going to be more. But those are the kind of things a government system would be likely to handle well, because they actually are common deductions.

Whereas what you'd need from a private system then is that they don't phrase the questions in such a way that it pressures you to be unnecessarily fearful and overpay your taxes, and strike the right balance in the interface between simplicity and complexity so that you actually find every deduction you're entitled to without having to spend many hours looking through forms.

So then the customers are the people who have weird taxes, rather than the ones who have some mildly complex but fairly common deductions they can navigate in the free system. And yet not the people whose taxes are so weird or complicated that they end up going to a private accountant.

That's not necessarily a huge market.

> They already have the platform and 99% of stuff implemented.

By "they" you mean an incumbent. What about anybody new who wants to enter the market once the dynamics are different?

You are right that cheap lower layers are a funnel to guide people into expensive higher layers. But if the business model would be to cater only for 10% hardest cases, you don't need the funnel, since people coming to you already have a $100 need, so to say. You can't start with $100 price tag because people are going to ask - why would I pay $100 for just basic stuff? If you cater to top 10% then they answer is obvious - because your stuff is the most complex 10%!

That's a different approach, for sure, but a viable one nevertheless.

> That's not necessarily a huge market.

It's not huge, but our tax system being a byzantine spaghetti mess it is, it's bigger than you think. I have relatively simple taxes, yet I certainly wouldn't want to do it all by myself and I do shell out over $100 each year to do it right now - so I probably would at least consider using such a system. The rest depends on how well it works, of course.

> What about anybody new who wants to enter the market once the dynamics are different?

That's no different from entering any other established market right now. Yes, incumbents have an advantage, this is always so, always have been so and always will remain so. It's hard to deal with incumbents - and yet it's possible, I myself am an evidence for it - despite Google being a giant of an incumbent, I am a paying client of Kagi, who are a startup in the space. I don't know if they will survive long term, but that's nothing new too.

> But if the business model would be to cater only for 10% hardest cases, you don't need the funnel, since people coming to you already have a $100 need, so to say.

Now consider that the people with a $100 need are going to depend on how good the free system is. If the free system sucks, it's a lot.

But if the free system sucks, lots of people are going to be complaining about it because they don't like paying $100, and then it might improve some. The number of people who need something else goes down from 15% to 8%. Then there are fewer complaints, but the paid system has that many fewer customers.

At some point there are few enough people complaining and the free system stops being responsive to their complaints, but the main thing that depends on is how much the government cares about making their system any good.

If the premise of embarrassing the public system when a private system can do better is successful, the public system could get arbitrarily good over time -- until the private system doesn't have enough revenue to do better.

You push that point further down the line by not forcing the private system to duplicate the public system's work.

> That's no different from entering any other established market right now. Yes, incumbents have an advantage, this is always so, always have been so and always will remain so.

It's not the incumbent's advantage which is the issue because that isn't the change. What you'd be doing is closing the door to new entrants regardless of whether the incumbent continues to exist.

Even if the market provided enough revenue for Intuit to continue if well-managed, if they were to become mismanaged or otherwise go out of business, or just do a crappy job while not actually ceasing to exist, no one could replace them because no one else could cover the initial entry costs while competing with the free system.

I'm sorry if this is stupid - I'm not American and this is entire conversation about taxes here is nuts, but:

>Is the free-filing system designed to maximize your return?

Why does it need to? I mean, why do you need a tax return, if your taxes would be lower if you just got charged the right amount in the first place? And then isn't the role of society to audit their own taxes, and at the same time support candidates that vow to simplify the tax code?

To simplify what is an absurdly complicated topic, the US Tax Code gives you a lot of "breaks" for certain things. For a lot of those things, the government won't know they happened unless you tell them (and you prove it). In most cases (i.e. for regular salaried or hourly employees) your taxes are automatically deducted, and then at the beginning of the new year you basically give the government a list of things that happened that could/would/should reduce your taxable income, which results in you getting money back from the government (sometimes).

Well this is indeed stupid.

> if you just got charged the right amount in the first place?

right amount is loaded phrase. There is big range and disagreement over what is right amount.

> And then isn't the role of society ... to simplify the tax code?

It is about as intelligent as saying isn't it role of society that ensure we all live peacefully, then we don't need armies, defense budgets and so on.

Skepticism is welcome on all things government.

But most of the time our government does sketchy things away from the attention and affliction of the selectorate.

If millions of influential people were using a system, the IRS would have an extremely strong incentive to avoid negative PR through chicanery.

And we already have an incentive problem in the current setup, anyway.

You've always been able to file your taxes freely. My biggest problem is the IRS already knows what I owe, with the exception of a few small things. So why do I have to go through the process of telling them what I think I owe.