Tax day is on Tuesday, and that means millions of Americans will curse the federal government not just for taking their hard-earned money, but for forcing them to sift through a colossal tax code. “Why couldn’t they make this easier?!” they will shout.
Or, maybe not.
A new poll from the Associated Press and GFP Public Affairs & Corporate Communications find some surprising results: Americans don’t think filing their taxes is hard. 58 percent of the 1,012 adults surveyed said filing their tax return was “very easy” or “somewhat easy.” Only 11 percent said it was “very hard” with another 27 percent saying it was “somewhat hard.”
Why aren’t Americans freaking out about tax day? Probably because filling out federal tax forms is pretty easy these days. 43 percent of respondents say they used a computer or website to do so while another 48 percent use a professional tax preparer. Only seven percent fill out tax forms by hand. And the vast majority of Americans (86 percent) are confident their taxes are correct. Just three percent are not confident.
This surprising data actually has some fairly significant political implications.
For years, Republicans (and many Democrats) have said a simplified tax code is one of their main goals. In fact, one fundamental feature of every Republican tax reform plan is to condense the number of tax brackets. It’s so complicated, they say, to navigate the gradations that charge you different rates on different chunks of your income. In the digital age, one where only seven percent of the population is manually using those crazy tables at the back of the tax book, this makes no sense.
Once upon a time, it was a complicated process to figure out the tax rate you would pay at various income levels. For instance, here are the tax brackets for single taxpayers in 2014:
That means the first $9,075 of a person’s income is taxed at 10 percent, the next $27,824 is taxed at 15 percent and onwards. Now, you just fire up TurboTax or hand your taxes over to a professional who plugs them into a computer for you. Presto! No calculation need. The application spits out your income tax liability. You could have seven tax brackets or 700 and all you would have to do is plug your income in and the computer would do the rest for you. In fact, we could create infinite tax brackets by using an equation instead.
Conservatives often argue that high marginal tax rates discourage work. They’re right. That effect is most powerful at the edge of tax brackets. For instance, for a person making $89,349, their marginal tax rate is 25 percent—their next dollar of income would be taxed at a 25 percent rate. But at $89,351, the marginal tax rate rises to 28 percent. Republicans want to create two tax brackets at 10 and 25 percent—but that means creating a steep cliff where the marginal tax jumps from 10 percent to 25 percent. Ultimately, what matters for work incentives is the marginal tax rate on the next dollar earned, not the previous dollar. But psychologically, moving from a 10 percent to 25 percent bracket is a big jump that can discourage work as well. Creating dozens of tax brackets in that range instead would eliminate those cliffs.
It may seem counterintuitive to move to a system with more tax brackets, not less. But that’s exactly how we could smooth out the increases in marginal tax rates. And Americans may be fine with infinite brackets—after all, they aren’t having too much trouble with the “complicated” system right now.