The Time Tax
by Tom Yamachika, President, Tax Foundation Hawaii
In a recent book The Time Tax: How the Government Wastes Our Time — and How to Fix It, Annie Lowrey, staff writer at The Atlantic, explores how government paperwork, bureaucracy, and administrative hurdles cause an “extortionate” burden on American citizens. She writes that Americans spend 12 billion hours every year filling out government forms, which equates to about six workdays per person.
The author traces administrative burdens from the colonial era and Civil War, arguing that red tape historically has been a tool of discrimination and exclusion.
Our tax system, of course, contributes to this mess. Buried within it are several common traps. For example, what happens when you change your address? You notify the USPS to forward your mail from your old address to your new one. The data is picked up by tons of companies who are eager and willing to sell you goods and services related to the move you just made. The data is ignored by the tax agencies, such as the IRS and the Department of Taxation, either of which might send you important information, such as an audit notice, to your old address long after the USPS’ automatic mail forwarding expires. Under the tax law, it is sufficient for the tax agencies to send you notices at your last known address, so you can’t complain when they drain your bank account after they conduct an audit without your knowledge and then mail notices of assessment to the same address even if they know it is invalid. I know of a taxpayer who was sent a notice but happened to be out of town at the time. The mailing was returned to the Department. The Department forged ahead, and when the final assessment was sent to the same address, the taxpayer received it and was aghast at what the Department had done in her absence.
This nightmare scenario cannot happen if you notify the tax agencies that you have changed your address — by filling out and sending in a government form. For the IRS, it’s a Form 8822 for individuals or an 8822-B for businesses. For the Department of Taxation, it’s Form ITPS-COA.
On this score the lower end of the income spectrum seems to be hit particularly hard. Social safety net programs, such as TANF, require paperwork. Healthcare via Medicaid? More paperwork. Unemployment benefits? Different agency, different forms. Refundable tax credits? Still more paperwork.
A point where we differ from the author relates to tax credits. The author argues that complex, bureaucratic social programs like welfare should be replaced with tax credits like the Child Tax Credit, which the author argues distribute cash with minimal paperwork. But tax credits are not a replacement for social programs. First, the tax credits result in a check going out (mailed to the taxpayer’s last known address) only once a year, while the taxpayer and family need to pay the rent every month and eat something more often than that. Second, if we want social programs to offer highly tailored relief or if we want to impose eligibility requirements such as job-seeking requirements, a taxing agency is not equipped to tailor the relief or enforce the additional requirements. Taxing agencies are built to bring revenue in the door, not to dish it out.
One of the recommendations we do agree on is for government agencies to share data more extensively. Wouldn’t it be great, for example, if the tax agencies took notice of the USPS change of address feed like many other companies already do? It wouldn’t only be nice, it would save the government so much in postage and returned mail costs. It would also spare the government from litigation against taxpayers who felt the tax agency should have given them notice but instead sent it to what they knew was an invalid address.
Weren’t we working on data systems in Hawaii government that were supposed to be able to talk to each other? Hasn’t the effort been ongoing since the 2000’s? What’s up with that?
When we think about tax cuts as a desirable goal, let’s also think about reducing the time tax.