Here's What Would Happen if No One Paid Taxes

But don't the majority of people get refunds? And wouldn't that mean it wouldn't be quite so much of a disaster if no one filed?

$\color{red}{\text{There are more refunds; people are overwithheld.}}$ So for those folks, it works as a kind of forced saving. You get a lump sum that you can then spend for some item you may not have been budgeting for on a weekly or monthly basis. A bunch of economists have argued, pretty persuasively, that with modern computers, the government could do your taxes for you with no problem. The computer could do that stuff with the blink of an eye. They would have all your information, so you would either get a check or a bill in the mail.

Overwithholding Definition

Who wouldn't want to get a big tax refund check from the Internal Revenue Service (IRS), right? But think again: When you get a big refund, you’re just getting your own money back; but with no interest. In effect, you're letting the IRS use your own money for most of the year without paying you any interest.

If governments can accurately and automatically do your taxes, why would people be overwithheld and there be more refunds? Can't the government's supercomputers can factor in and compensate you the interest?


This is US specific and more of a political than an economic or technological problem.

In the US, there is a lot of lobbying by tax preparation firms for the antiquated tax system to remain unchanged. See e.g. this 2019 article "Inside TurboTax’s 20-Year Fight to Stop Americans From Filing Their Taxes for Free".

In many other developed countries, the quote from Vice applies: Their governments do simply calculate your taxes correctly (and automatically deduct/credit from/to your bank account the exact amounts). Most taxpayers have to do zero work (all their information on their salaries having already been automatically submitted to the government through their employer). There is also no need to bluntly withhold large and arbitrary sums.


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