Why simplification of the tax code is never going to happen

Meaningful simplification of the tax code is never going to happen. Congress can’t agree on where to go to lunch, let alone on something as politically charged as tax reform. The right is primarily funded by corporate America and the wealthiest 1% of individuals. These folks benefit greatly from the myriad loopholes and tax breaks in our system, resulting in dozens of hugely profitable companies that pay no federal income tax.  An IRS study found that one in every 189 taxpayers earning $200,000 or more in adjusted gross income paid no income tax in 2009. That's more than 10,000 wealthy households that paid no taxes anywhere in the world. How do people get away with paying little to no taxes? They invest in tax-exempt municipal bonds, which pay interest that you don't have to include as income on your tax return. They make a disproportionate amount of their income from stocks and other investments that are taxed as capital gains (15%) instead of ordinary income (up to 39.6% in tax year 2014). And they hire expensive accountants who know how to hack the system.

The left is no better. They can’t risk alienating their working class base by eliminating popular credits and deductions, like the mortgage interest deduction, property tax deduction, and Earned Income Tax Credit. If the proposed 2 percent floor on charitable giving is enacted, the Congressional Budget Office estimated it would reduce charitable donations in the United States by $3 billion annually. Non-profits aren’t keen on this of course, and they lobby the Democrats accordingly.

Throw in the millions of dollars that the tax prep industry spends lobbying against tax reform, and the headwinds are just too strong. Intuit alone has spent about $11.5 million on federal lobbying in the past five years — more than Apple or Amazon.

Yet the need for a pro forma (pre-filled) tax return remains huge. Tens of millions of taxpayers could use such a system each year, saving them a collective $2 billion and 225 million hours in prep costs and time. The most frustrating part – it’s not hard to do. The IRS certainly has all the data it needs to do millions of American's taxes for them. Even without the treasure trove of data Uncle Sam has, a commercial product could pre-fill a tax return for most Americans rather easily. The info needed is readily available from public data records (property tax records, marriage records) and social profiles (Facebook, Twitter). Throw in a picture of your W-2 or import it from your employer’s payroll provider and bam! Your taxes are essentially done.

Look, the IRS actually wants tax simplification to happen. They’re the ones that feel the pain and expense of processing everyone’s taxes. But it’s not their call, they’re beholden to the gridlocked American political system and an entrenched, multi-billion dollar industry. We’re not. We’re a startup, beholden to no one other than the free market. We can't change the tax code, so we’re doing the next best thing – building a product that abstracts the complexity of it away from tax payers. Please take a look at what we’ve built so far and let us know your thoughts.