“The first IRS reform legislation since 1998 … would recast IRS as a service-first agency to better serve American taxpayers.”
If you are near despair about the divisiveness of our body politic, take cheer in the rare bipartisanship demonstrated by the “Taxpayer First Act.” The 2019 measure, introduced by John Lewis (D-GA), co-sponsored by Mike Kelly (R-PA) and nine other Republicans and twenty-eight Democrats, passed the House unanimously by voice vote and now awaits action by the Senate. Ron Wyden (D-OR) and Chuck Grassley (R-IA) had already introduced similar legislation in the Senate.
Legislators from both parties are boasting that this Act safeguards innocent taxpayers from abuse by the Internal Revenue Service. And, oh yeah, it also permanently prohibits the IRS from developing a free tax-filing service for taxpayers with low-to-moderate incomes, as some other developed countries do. H&R Block and Intuit (TurboTax) spent $6.6 million last year lobbying for this outcome. Coincidentally, sponsors of the ironically-named bill received campaign contributions from them.
H&R Block and TurboTax, part of the “Free File Alliance,” offer – and lightly promote – free-filing services. They mostly use it as a come-on to leverage clients into fee-for-service products.
The IRS, with taxpayers’ income information already supplied by employers and banks, could easily send out pre-filled forms for taxpayers with simple returns to make corrections or adjustments to and sign and return, and probably at less expense than the current system. But that would be socialism and we can’t have that.
As you no doubt know, your tax return must be filed by April 15. When that due date falls on a Saturday, Sunday, or legal holiday, the filing deadline is delayed until the next business day. If you’re wondering why tax day is the 17th in 2018, you’re probably not familiar with Emancipation Day, a legal holiday in Washington D.C. Abraham Lincoln signed the Compensated Emancipation Act on April 16, 1862. This Act freed the more than 3,000 slaves in the District of Columbia. (Slavery was outlawed in the rest of the nation by constitutional amendment in 1865, after the end of Civil War. Mississippi ratified the amendment in 1995.) Emancipation Day became an official D.C. holiday in 2005.
War is expensive. Also in 1862, President Lincoln created the position of Commissioner of Internal Revenue and enacted an income tax to pay for the war. The tax was abolished ten years later. Income tax was legislated again in 1894, but the Supreme Court declared it unconstitutional. The 16th Amendment, providing for a tax on income was ratified in 1913. The rate was 1% and increased to 7% on incomes above $500,000. (The equivalent of $12.6 million in 2018.) With the onset of the Great War a couple years later, the rates doubled.
And here we are. One wonders about Donald Trump’s tax returns. Is money laundering taxed as ordinary income or does the more favorable “carried interest” rate apply?