The One-Page Return

The problem

Every January, your employer sends the Internal Revenue Service a W-2 listing exactly what it paid you. Your bank sends a 1099-INT. Your broker sends a 1099-B. Your mortgage servicer sends a 1098.

By the end of February the government has, in a database, nearly everything it needs to compute the tax owed by the great majority of American households.

It then waits for you to tell it.

Americans spend something on the order of 6.5 billion hours a year complying with the tax code, at an aggregate cost measured in the tens of billions of dollars. The typical individual filer spends around 13 hours and a couple of hundred dollars on a Form 1040. More than 90 percent of filers now use software or a paid preparer, which is a market that exists almost entirely to transcribe information the recipient already possesses.

Since 2018 roughly nine in ten filers take the standard deduction. Their returns are, in substance, four numbers: wages, withholding, filing status, dependents. The IRS holds three of them.

Two consequences follow, and the second is worse than the first.

The first is waste. A few tens of billions of dollars and several billion hours, annually, transferred from households to an industry whose product is a formality.

The second is that complexity is regressive. The Earned Income Tax Credit is the largest cash antipoverty programme for working families in the country, and roughly one in five eligible households never claims it, forgoing billions of dollars a year. They do not fail to claim it because they do not want it. They fail because the credit is complicated, the filing is intimidating, and the paid preparer costs more than the refund is worth to someone deciding whether to bother.

We have built a benefit that requires an accountant to collect, and then wondered why the people who need it most do not.

Most of the developed world stopped doing this decades ago. Denmark, Sweden, Estonia, Spain, Chile, Japan and the United Kingdom's PAYE system, among roughly three dozen countries, either file for you or hand you a completed return to approve. In Estonia the median filing takes about three minutes.

America can do this. It has been demonstrated domestically: California's ReadyReturn pilot ran from 2005, filled in returns for eligible taxpayers, and posted satisfaction rates above 90 percent among users. It was discontinued. The IRS's own Direct File tool has been through a pilot and an expansion, and its future has been contested continuously.

The obstacle has never been technical.

The proposal

The IRS sends every taxpayer a completed return in January. You check it, correct anything wrong, and sign. If it is right and you do nothing, it files itself.

How it would work

1. Pre-populated by default. Every filer whose income is fully third-party reported, wages, interest, dividends, brokerage, retirement distributions, receives a prepared return showing income, withholding, standard deduction, credits and the resulting refund or balance.

1. Silence is assent. Do nothing by the deadline and the return is filed as shown. Any filer who disagrees may amend any line, or discard the whole thing and file conventionally. The right to file your own return from scratch is preserved absolutely and permanently, and the statute should say so in the first section, because the objection below is legitimate and the answer to it must be structural.

1. Credits computed, not requested. Where the government's own data establishes eligibility for the EITC or the Child Tax Credit, the credit appears on the prepared return already claimed. This is the single highest-value line in the proposal.

1. A published dispute path. A pre-populated figure is an assertion by the government, and the burden of proof on a disputed line stays exactly where it is today, with the IRS. Correcting the form must not require a lawyer or create any presumption against the filer.

1. Simplify what is being pre-populated. Pre-filling a baroque code entrenches the baroque code. Pair this with consolidating the overlapping education credits, retirement account types, and phase-out schedules that generate most of the arithmetic.

1. Fund the plumbing, honestly. The IRS's core taxpayer database still rests on assembly-era code written in the 1960s. Multi-year, ring-fenced modernisation money is a precondition for this proposal, not an afterthought, and the history of federal IT says to assume it costs more and takes longer than promised.

The numbers

Time. Return-free filing plausibly reaches 60 to 70 percent of individual filers. At roughly 13 hours saved for perhaps 100 million filers, that is on the order of a billion hours a year returned to the public. Valued at the median wage, something like $30 billion annually.

Money. Direct preparation spending saved runs to the order of $20 billion a year in household outlays.

Credits actually reaching people. Unclaimed EITC alone is commonly estimated at $7 billion or more a year. This is the number that matters most, because it is not a saving, it is a transfer to the households the credit was written for. Automatic claiming would capture the large majority of it.

Cost. Building and running the system is on the order of a few hundred million dollars a year, against IRS modernisation costs measured in billions that are required regardless.

The ratio here is unusual. A public expenditure in the hundreds of millions delivering household savings in the tens of billions and putting several billion dollars a year into the hands of low-income working families who are already legally entitled to it.

There is no dividend in this proposal and no contribution to the Fund. It is in the catalog because a covenant that promises citizens a share of the nation's wealth cannot coexist with a state that makes citizens hire an intermediary to talk to it.

The honest objections

"The tax collector should not also be the tax preparer. The incentives are irreconcilable." The most serious objection, raised across the political spectrum, and it is not paranoid: an agency that computes your liability and presents it as settled has an interest in the number being high, and most people will sign what they are handed. Item 2 is the answer and it has to be absolute rather than gestural. The preserved right to file independently, the burden of proof staying with the agency, and an appeals path that costs the filer nothing are the load-bearing protections. Note also that the objection applies with equal force to withholding, to the automated matching notices the IRS already sends, and to every other country that does this, none of which has produced the predicted abuse.

"Making taxes painless makes them easier to raise. The friction is a feature." This is an argument made openly and it deserves a direct answer rather than a dismissal. It is a proposal to keep a system deliberately burdensome in order to generate political resistance, which means imposing several billion hours of real cost on real households as a lobbying strategy. If a tax cannot be justified on its merits it should be repealed on its merits. Withholding, incidentally, hides far more of the cost of taxation than filing complexity does, and nobody proposes to abolish it.

"It cannot work for the self-employed, gig workers, landlords or anyone with a business." Correct, and the proposal does not claim otherwise. Roughly a third of filers have income the IRS cannot see, and they will keep filing as they do now. Serving the 65 percent whose situation is fully reported is not diminished by not serving everyone. Gig platform reporting is improving the coverage at the margin, but the honest scope of this proposal is the simple majority, not universality.

"An industry disappears." Substantially, in its current form. Tax preparation employs a great many people, many of them seasonal, and firms that have lobbied for years to prevent exactly this outcome have done so because the outcome is real. Our position is the one this catalog takes generally: the answer to a job that exists because of an avoidable inefficiency is the transition support of № 026, not preserving the inefficiency. The prior on this is not neutral, though, and readers should weigh that a large share of the political opposition to return-free filing has come from the firms that bill for the alternative.

"The IRS cannot execute this. Look at its track record." A fair reading of the evidence. Its core systems are decades old, modernisation has slipped repeatedly, and Direct File was built small precisely because building big has failed before. That is the argument for item 6 and for phasing by filer complexity over several years rather than a single national launch. It is not an argument that the country should permanently forgo a capability that Estonia has had since the 1990s.

Sources

• Aggregate taxpayer compliance burden of roughly 6.5 billion hours; IRS and National Taxpayer Advocate Annual Report to Congress (taxpayeradvocate.irs.gov)
• Share of filers claiming the standard deduction following the 2017 tax law, approximately 90 percent; Joint Committee on Taxation
• EITC participation rate of roughly 80 percent of eligible households; IRS EITC statistics (irs.gov)
• Return-free and pre-populated filing regimes in Denmark, Sweden, Estonia, Spain, Chile, Japan and the UK; OECD Tax Administration series (oecd.org)
• California Franchise Tax Board ReadyReturn pilot, 2005–2007, and its discontinuation
• IRS Direct File pilot and expansion; Government Accountability Office and Treasury Inspector General for Tax Administration assessments
• IRS Individual Master File, originally implemented in the 1960s, and successive modernisation programmes; GAO high-risk list (gao.gov)
• Proposals № 017 (Dividend Day); № 026 (The Landing)