JUDY WOODRUFF: It’s tax season, a dreaded time for many Americans feeling burdened as they complete forms that many argue have become too complicated.
So, as Congress and President Trump weigh changes to the tax system, our economics correspondent, Paul Solman, looks at what we can learn from other countries.
It’s part of his series Making Sense, which airs every Thursday.
PAUL SOLMAN: Taxes. Americans have been griping about them ever since the revolution.
RONALD REAGAN, Former President of the United States: I would like to speak to you tonight about our future.
PAUL SOLMAN: Two hundred years later, in 1985, President Ronald Reagan gave this assessment of the tax code:
RONALD REAGAN: Complicated, unfair, cluttered with gobbledygook and loopholes designed for those with the power and influence to hire high-priced legal and tax advisers.
PAUL SOLMAN: The next year, Reagan signed into law our last major income tax reform: lower rates, fewer loopholes. A lot of good it did. Thirty years later, House Speaker Paul Ryan told Judy Woodruff:
REP. PAUL RYAN, R-Wis., Speaker of the House: We have the worst tax code in the industrialized world, bar none.
PAUL SOLMAN: So, what we can learn from the rest of the world about taxes?
Writer T.R. Reid took us to the New Zealand Embassy in Washington to explain.
T.R. REID, Author, “A Fine Mess”: New Zealand is a model of good tax policy. They have done what all the economists think is right, to get a tax code that is simple, fair and efficient.
PAUL SOLMAN: Reid, a former Washington Post foreign bureau chief, has reported from around the world for decades.
For his latest book, “A Fine Mess,” Reid went on a global quest for a better tax system. He really liked New Zealand’s formula, BBLR.
T.R. REID: BBLR, broaden the base, lower the rates. So, you broaden the base by making everything taxable. If your employer gives you free parking, well, in New Zealand, they say, gee, that would cost $20 a month. That’s income to you.
If your employer pays your health insurance, that’s income to you. And then, you know, you want to buy a house with a mortgage, that’s fine. You don’t get a tax break for it. They have rates less than half of ours, and they bring in more money per capita.
PAUL SOLMAN: And for Kiwis like Ben Contreras, filing couldn’t be simpler.
BEN CONTRERAS, New Zealander: I never thought about taxes when I lived in New Zealand. For most people, you don’t really have to take any time out to take care of your taxes every year.
PAUL SOLMAN: But Contreras has worked in the U.S. for three years. Filing his taxes now requires the help of often bedeviling computer software, a heavy price to pay, says Reid.
T.R. REID: Americans spend about six billion hours a year collecting the data and filling out the forms. We spend $10 billion to H&R Block and other preparers and, on top of that, $2 billion in tax preparation software, which still takes hours of work. And it’s outrageous, the burden we put on people.
PAUL SOLMAN: And how long does it take to do your income taxes or file your income taxes in some of these countries, if it’s so simple?
T.R. REID: I was in the Netherlands on March 31, the day before their taxes are due.
I was with an executive who makes $200,000 a year, two mortgages, a lot of investments. He’d have to fill out 12 forms in America. I said, Michael, how do you pay your taxes? He pops a beer. He goes online. The government’s filled in every line. If the numbers look right, he clicks OK. It takes five minutes.
And, in Japan, you get a postcard from the IRS that says, we think you made this much. We withheld this much. We owe you a refund of that much. We will put it in your bank on April 1. It takes one minute, if you think the numbers are right.
And I said to my friend Togo, you know, in America, people spend hours, days filling out these forms. And he said to me, why would anybody want to do that?
PAUL SOLMAN: And you explained to him nobody does.
T.R. REID: I said, nobody does, yes.
And guess what, Paul? We could do that here. The IRS could fill in every line of the return for most American families. They know all the numbers. Have you ever gotten a CP-2000 letter? This is the one that says, on line 48-Q, you entered $4,211.
PAUL SOLMAN: Oh, yes, yes.
T.R. REID: But, actually, it should have been $4,681.
PAUL SOLMAN: Yes. Actually, yes, yes.
T.R. REID: And I get that every year, and I think, why did I spend hours trying to fill this out, when they knew? And so some members of Congress have suggested that the IRS fill out the forms for us.
And H&R Block and the tax software companies lobby against it. So here’s the deal: You do more work; they make more money.
PAUL SOLMAN: So what are the most egregious absurdities of the tax system, in your view?
T.R. REID: There are hundreds and hundreds of giveaways for specific groups or specific companies.
I have this scene in my book where the president goes to Congress and says, here’s a great idea. Let’s send a check for $7,500 to anybody who buys a $138,000 BMW hybrid car. We’d never do that, would we?
PAUL SOLMAN: No.
T.R. REID: It’s in the tax code.
I have a list here of stuff you get a write-off for. You ready?
PAUL SOLMAN: Yes, sure.
T.R. REID: You get a write-off for contributing to charity, taking a night school course.
PAUL SOLMAN: Hey, wait, stop. Contributing to charity, surely, that’s a good thing. You want to encourage people to give to charity, right?
T.R. REID: Yes, but it doesn’t work. Many countries have gotten rid of it, and here’s — there’s a pattern.
For one year, there’s a small blip in contributions, and then it goes up again at the rate of income increase. People give because they want to help.
PAUL SOLMAN: And, of course, the charitable deduction is just one of thousands.
T.R. REID: So, you get a deduction in America for taking a night school course, growing sugarcane, moving to a new city for a job, replanting a forest, insulating the attic, destroying old farm equipment, employing Native Americans, commuting to work by bicycle, or buying a plug-in hybrid sports car, or buying a recreational vehicle.
I mean, there are hundreds of them, and most of them are nuts.
PAUL SOLMAN: So, why can’t we get rid of these provisions in the United States?
T.R. REID: Because, in the United States, unlike any other advanced democracy, money really talks.
And there are more than 400 additions to the tax code every year, and most of them are giveaways to one or two taxpayers. Now, if there were good reasons for these clauses, they would put in there who’s going to benefit and what’s it for. But, in fact, if you read the tax code, it says, here’s a tax break for any company incorporated in Delaware on October 13, 1916.
Now, that’s General Motors, but they never say that. And the tax code is full of these things, where they don’t mention the name, but it helps one taxpayer.
PAUL SOLMAN: Are Americans right to hate the aptly named tax burden that we bear, both in the income tax and taxes overall?
T.R. REID: Well, we’re right to hate how hard it is to file. But, if you take the amount, the check you have to write, no, we’re getting off easy.
Of the 35 richest countries, in total tax burden, U.S. ranks 33rd. And in return, our government spends less as a percentage of GDP than other governments. You hear all this stuff about spendthrift big government? Relative to other rich countries, our government is a penny-pincher.
PAUL SOLMAN: So, we pay less, but we complain more?
T.R. REID: Yes. Yes, Americans complain about tax more than any other country.
In many countries, the IRS agency is the most respected government agency. Get this. In Japan, this movie “Marusa No Onna,” “Audit Bureau Woman,” won best picture, best actor, best actress. It’s about this perky, pretty young auditor in the Tokyo tax bureau who goes after a big evader.
He rides around Tokyo in this chauffeur-driven white Rolls-Royce, and our heroine is chasing him. It’s total David and Goliath. And, in the end, she nails him, and everybody in the audience cheers.
Can you imagine casting Meg Ryan as a peppy, pretty IRS auditor who goes after people? I don’t think Hollywood would do that.
PAUL SOLMAN: Well, I was thinking Julia Roberts, but, no, the IRS superhero remains an Oscar long shot.
But there is hope for the system, says Reid.
T.R. REID: Everybody in every party agrees that our code is a mess. It’s unfair, it’s complicated, it’s inefficient, needs to be fixed. And the way to fix it is to do it big, as other countries have done.
So I think even the U.S. Congress will figure this out.
PAUL SOLMAN: T.R. Reid is one thoughtful and well-traveled journalist.
But I remain the PBS NewsHour’s skeptical economics correspondent, Paul Solman, reporting from Washington, D.C.