Wednesday, April 30, 2008
Lawrence A. Zelenak (Duke) has published Justice Holmes, Ralph Kramden, and the Civic Virtues of a Tax Return Filing Requirement, 61 Tax L. Rev. 53 (2007). Here is the Conclusion:
Given the overwhelming complexity of the income tax return preparation process today, it is difficult to imagine (or remember) that a tax filing obligation might have civic virtues. A system of inexact withholding and return-based reconciliation can serve as an attractive compromise between small government proponents who would like to make the taxpaying process as visible and painful as possible, and big *88 government proponents who would like to make the process invisible and painless. And if the tax system is not so complicated as to make return preparation a miserable experience (in terms of the taxpayer's own time and effort, money paid to a preparer, or both), the return preparation and filing process can serve as civic ceremony of equal dignity and importance to voting. All these benefits would be lost under a national sales tax or value-added tax, or under an income tax with exact withholding and no return filing. Although the President's Panel did not explain its implicit rejection of a return-free system, in the context of its simplification proposals it was right to retain a filing requirement. On the other hand, the preparation of tentative tax returns by a governmental agency (as in the case of California's ReadyReturn) is not really a return-free system. Such a system, made available to taxpayers in simple income tax circumstances, would be consistent with--and might even enhance--the civic virtues of a tax return filing requirement.