Wonkbook: Making Tax Day easier (and more fair)

April 16

Welcome to Wonkbook, Wonkblog’s morning policy news primer by Puneet Kollipara. To subscribe by e-mail, click here. Send comments, criticism or ideas to Wonkbook at Washpost dot com. To read more by the Wonkblog team, click here.


(AP Photo/J. David Ake)

Wonkbook’s Number of the Day: 10 percent. That's how much U.S. greenhouse-gas emissions have fallen since 2005.

Wonkbook’s Chart of the Day: Inflation is falling (almost) everywhere. And that could be a big problem.

Wonkbook's Top 5 Stories: (1) Tax Day tribulations; (2) how we should feel about inflation; (3) better days ahead for Obamacare?; (4) good news and bad news on climate emissions; and (5) problems befall two federal social programs.

1. Top story: Congrats! Hopefully you've survived Tax Day. It all could be easier and more equitable. 

WEISSMAN: The sleazy campaign to prevent the IRS from simplifying your taxes. "There’s a reasonable argument against easy tax filing and an unreasonable argument. As you might be able to guess from the underhanded tactics, this seems to be an example of the latter....Of course, e-filing wouldn’t instantly turn everyone’s taxes into a snap. There would still be state returns to deal with, and if we’ve learned anything from health care reform, it sometimes takes the government a while to get a website up and working. But, in the end, it doesn’t speak well for an argument if you have to trick a mouthpiece into making it for you." Jordan Weissmann in Slate.

JARED BERNSTEIN: On Tax Day, what's fair? "Tax day is upon us and with it comes a lot of buzz about tax fairness. That’s a broad concept, for sure, with many different meanings. One of its meanings has been quantified as the share of taxes paid by various income groups. And that leads to claims of unfairness over the alleged disproportionate share of taxes paid by those at the top of the income scale. For example, The Wall Street Journal cites the Tax Policy Center’s findings that 'overall federal tax receipts from the top 1 percent of earners rose by 1.3 percentage points to 29.3 percent of all federal tax revenue.' Meanwhile, the center’s data show that middle-income families’ tax share is around 10 percent. If that sounds unfair, consider the following: The taxpayers whose liabilities and share of total taxes paid are going up also happen to be pretty much the only people whose incomes have been rising. Certainly another dimension of fairness, especially in a progressive tax system within an increasingly unequal income distribution, is assigning the burden to those who’ve made the gains, especially when they’re such a small group." Jared Bernstein in The New York Times.

The elusive dream of never having to file your tax returns. "It’s difficult to imagine who wouldn't want to make filing taxes easier, quicker and free. On average, the fees for filing federal taxes with the help of an accountant can cost hundreds of dollars. Doing it yourself with tax preparation software is less expensive, and for many tax payers it can be free, but it still requires wrestling with 1040s, 1099s, and W-2s and a host of other forms. According to Pew Research, 63 percent of Americans either hate, dislike or are ambivalent about doing their taxes. The 5 percent who love it are probably accountants, no? But the reality is that it's difficult to estimate just how many people would be saved from an annual tax-induced headache by return-free filing. Return-free filing is best for people with the simplest returns, not for those who itemize their deductions, according to the non-partisan Tax Policy Center." Abby Phillip in The Washington Post.

But a tax software maker doesn't want you to have that ability. "Intuit has long worked against return-free filing. The company has said in filings with the Securities and Exchange Commission that it views free government tax preparation as a risk to its business. Last year, the company spent more than $2.6 million on lobbying, some of it to lobby on four bills related to the issue, federal lobbying records show." Liz Day in ProPublica.

Were you dreading Tax Day? These explainers are for you:

Americans' love/hate (mostly hate) relationship with taxes. Scott Clement in The Washington Post.

Video: Got an excuse not to pay your taxes? The IRS has heard'em all. Julie Percha in The Washington Post.

So, you've filed your taxes. If you get a refund, retailers want YOU. "They're offering sales and promotions to separate you from your hard-earned refund." NPR.

Or you can donate some of that refund to the Treasury to help cut the national debt (a teensy, weensy little bit). "In the 2013 fiscal year, which ended in September, the U.S. collected $1.8 million in donations from those voluntary contributions. The deficit that year was $680 billion. So the U.S. closed 0.0003% of the gap through donations." Josh Zumbrun in The Wall Street Journal.

What is the likelihood that you'll get audited by the IRS? "Last year did indeed mark the first time audit rates dipped below one percent since 2006. But the rate was even lower in previous years, bottoming out at 0.49 percent in 2000. Audit rates were highest over this time period in the early 1980s, when more than 2 percent of individual returns were examined by auditors....In sum, you're about half as likely to get audited today as you were in 1980, but twice as likely as you were in 2000. If you get audited this year, congratulations! You are the one percent -- at least when it comes to tax filers." Christopher Ingraham in The Washington Post.

So, who's paying what, and where will it go? These explainers will help:

How much do Americans pay in taxes? The Peter G. Peterson Foundation.

Where do Americans' taxes go? Barry Ritholtz in Bloomberg View.

Who will pay more taxes in 2014? John D. McKinnon in The Wall Street Journal.

Corporations are better at tax loopholes than you. "While individuals have long sought to take advantage of dozens of deductions and loopholes, corporations have famously excelled at this game. How well? Companies paid an average effective federal tax rate of 12.6 percent in 2010, the last time the Government Accountability Office measured the rate. That compares with the nominal federal tax rate of 35 percent, so all those accountants appear to have done their jobs in exploiting the loopholes in our tax code. The chairman of the House Ways and Means Committee, Representative Dave Camp, a Michigan Republican, proposed a vast reform of our tax code this year, eliminating a lot of the Swiss cheese that makes it so porous and, arguably, unfair. Mr. Camp’s proposal, as you might imagine, isn’t gaining a lot of traction." Andrew Ross Sorkin in The New York Times.

Other taxation reads:

Should the IRS use private collection agencies to pursue tax debts? Josh Hicks in The Washington Post.

SUNSTEIN: Nudging taxpayers to do the right thing. "Most Americans comply with the tax laws, but every year many of our fellow citizens don't. The result is the 'tax gap' -- the amount of revenue that the government loses because people are cheating. In one recent year, for example, the tax gap was $450 billion. That’s a lot of money -- more than 10 times the budget of the State Department. What can be done to increase compliance? Remarkably, a short letter to delinquent taxpayers -- based on the findings of behavioral science -- can have large effects. And the central lesson is simple: When tax delinquents are told that most people pay their taxes on time, they are far more likely to pay up. It’s a nudge that can really work." Cass R. Sunstein in Bloomberg View.

VINIK: The tax code drags millions of childless workers into poverty. "The progressive nature of our tax code is supposed to help the poorest Americans, but it is actually doing the opposite for seven million childless workers. It’s dragging them into poverty....The reason for this is the structure of the EITC....The Congressional Research Service (paywall) found that the EITC reduced the number of families in poverty by between 14 and 29 percent in 2012. Childless workers, though, barely receive anything from the EITC. There is bipartisan support for correcting this flaw....Despite the bipartisan support, there is little hope that childless workers will receive help anytime soon. Democrats will not accept any plan like Rubio’s that helps childless workers at the expense of working parents. Meanwhile, Republicans oppose the spending offsets in Obama and Murray’s respective proposals. In the meantime, the tax code will continue to pull millions of childless workers into poverty." Danny Vinik in The New Republic.

Top opinion

GALLSTON: A bipartisan consensus on income inequality? "What are we talking about when we talk about economic inequality? Some Americans focus on the breakaway gains at the very top, others on the plight of those stuck at the bottom, still others on stagnant mobility and declining household incomes in the middle. Because Americans have long been more willing than Europeans to tolerate large inequalities of income and wealth when they believe that the opportunity to advance is widely shared, the focus on unequal outcomes is more controversial in the U.S. So today's heightened discussion about inequality is significant....Nonetheless, the political parties remain divided on fundamentals....These findings could easily lead to despair: Even when the issue is the well-being of the least advantaged, and even more when the issue is the advantages of the best off, it appears that entrenched polarization will thwart action. Yet there are signs that some convergence is developing." William Galston in The Wall Street Journal.

COLLENDER: Why no one is celebrating the falling federal deficit. "The Congressional Budget Office yesterday reported that the federal budget deficit will fall to 2.8 percent of GDP this year, almost one-third below what it was in 2013. As a percent of GDP, not only will that be the lowest deficit since 2007, the drop from 9.8 percent in 2009 to 2.8 percent in 2014 is the largest five-year reduction in federal red ink since the end of World War 2, that is, in almost 70 years. There was no celebration. The president didn’t appear in the White House Rose Garden to make a statement. There were no dueling press conferences on Capital Hill to claim credit for the improvement. And the deficit hawk groups didn’t send letters to their funders saying that this was a monumental accomplishment for which they have worked tirelessly." Stan Collender in Forbes.

PORTER: Tech leaps, job losses and rising inequality. "It’s hard to overstate the excitement of tech people about what is on the verge of happening to the practice of medicine....A few years ago, this kind of technological development would be treated like unadulterated good news: an opportunity to improve the nation’s health and standard of living while perhaps even reducing health care costs and achieving a leap in productivity that would cement the United States’ pre-eminent position on the frontier of technology....But a growing pessimism has crept into our understanding of the impact of such innovations. It’s an old fear, widely held since the time of Ned Ludd, who destroyed two mechanical knitting machines in 19th-century England and introduced the Luddite movement, humankind’s first organized protest against technological change." Eduardo Porter in The New York Times.

Animals interlude: Animals react to RC toys.

2. Inflation is too low, and that could be a big problem for the economy

Consumer inflation last month could reassure Fed policymakers as they continue their taper. "Higher housing and food costs helped lift overall consumer prices last month, a development that could reassure some Federal Reserve officials as they roll back their easy-money policies. The consumer-price index, which measures how much Americans pay for everything from hospital visits to gasoline, advanced a seasonally adjusted 0.2% in March from the prior month, the Labor Department said Tuesday...Economists view moderate inflation as a sign of healthy demand that encourages businesses to boost hiring and investment. Weak inflation or falling prices, on the other hand, discourage businesses and consumers from opening up their wallets." Jonathan House in The Wall Street Journal.

Or will it? One Fed official is actually more worried about deflation than inflation. "'Am I more worried about inflation being low than high?' said Minneapolis Federal Reserve President Narayana Kocherlakota Tuesday evening. 'I'm more worried about inflation being low'...Mr. Kocherlakota, who spoke at a North Dakota State University town hall forum in Fargo, N.D., said he is concerned about how long it has taken for the economy to recover and said the Fed is well placed to control inflation once it kicks in. 'We will raise rates gradually as recovery continues,' he said....The Minneapolis Fed president said the central bank needs to convey that it 'has the economy's back' and will continue with accommodative policy until recovery is well under way. Part of that has to do with the Fed better communicating its intentions to bolster confidence among investors and the public, he said." Ben Kesling in The Wall Street Journal.

Chart: Globally, a number of banks are worrying about falling inflation. The Wall Street Journal.

Here's why you shouldn't get too excited about the new inflation report. "But while low inflation is generally good news, in today's economy it's really in many ways bad news. One reason that's the case is that inflation helps erase old debts. People with underwater mortgages, for example, would benefit from a more rapid level of price increase. Of course for everyone who wins that way someone else loses. But we're currently in a situation where old housing debts appear to be a special burden on the economy. More generally, though, a very low inflation rate is a sign that the economy is still depressed....Again, in normal circumstances this would be good news. The Fed would respond to low inflation with an interest rate cut, and we'd all have the chance to get a cheaper car loan or mortgage and business owners could expand. But the Fed has already cut short-term interest rates to zero and seems very reluctant to take new unconventional steps." Matthew Yglesias in Vox.

Homebuilder sentiment isn't looking so great either right now. "The National Association of Home Builders/Wells Fargo builder sentiment gauge climbed to 47 this month from a revised 46 in March that was weaker than initially reported, figures from the Washington-based group showed today. Readings greater than 50 mean more respondents report good market conditions. The median forecast in a Bloomberg survey called for 49. Tight credit for some home buyers and limited availability of lots are restraining builder sentiment months after snow storms and freezing temperatures held back construction. At the same time, historically low mortgage rates and hiring gains helped drive an increase in the outlook for sales, the report showed." Michelle Jamrisko in Bloomberg.

Other economic reads:

How working women help the economy. Annie Lowrey in The New York Times.

U.S. Treasury slams China on currency. Robin Harding and Josh Noble in The Financial Times.

How innovation may make Wall St. less efficient. Pedro Nicolaci da Costa in The Wall Street Journal.

Another animal interlude: Exercising with a cat around can be difficult.

3. Signs that Democrats can breathe easier on Obamacare

Insurers aren't pulling out; more are planning to go in. "Health insurers got their first taste of Obamacare this year. And they want seconds. Insurers saw disaster in the fall when Obamacare’s rollout flopped and HealthCare.gov was a mess. But a strong March enrollment surge, along with indications that younger and healthier people had begun signing up, has changed their attitude. Around the country, insurers are considering expanding their stake in the Obamacare exchanges next year, bringing their business to more states and counties. Some health plans that skipped the new marketplaces altogether this year are ready to dive in next year....None of the big-name insurers have signaled plans to shrink their presence or bail altogether after the first rocky year. And a slew of smaller health plans are already making moves to join more states or get into the Obamacare business for the first time." Kyle Cheney and Brett Norman in Politico.

Video: 3 signs that Democrats can breather easier on Obamacare. Gerald Seib in The Wall Street Journal.

Those 7.5 million exchange signups are only part of the story. "The Obama administration is tracking the number of plans purchased on HealthCare.gov and on the state exchanges, and this month reported that it had exceeded expectations by signing up 7.5 million people. In addition, federal officials have said that 3 million people have enrolled in Medicaid this year. But what's often overlooked is that enrollment in private health plans outside the marketplaces is also booming. The federal government hasn't been counting the number of people who buy new plans directly from insurance carriers -- and that number could be substantial." Annie Feidt in NPR.

This new poll may make Democrats happy: Americans increasingly prefer Democrats to Republicans on health care. Gabriel Debenedetti in Reuters.

But keep this in mind: We may not know the true Obamacare story for a while. "After months of focusing on how many people have or haven't signed up for health insurance under the Affordable Care Act, we now have a rough total (7.5 million) and everyone's keen to get to the bigger questions: How well is the law working? How many of those who signed up have paid their premiums and are actually getting coverage? How many were uninsured before they signed up? And just how big has the drop been in the number of uninsured people? Unfortunately, the answers to some of these questions simply aren't knowable -- or, at least, not knowable yet." Julie Rovner in NPR.

Time's up, procrastinators: Open enrollment is done. "For Obamacare procrastinators, time’s up. Yesterday was the last day of a two-week health-law extension for hundreds of thousands of people who couldn’t finish their enrollment by March 31, the official deadline to sign up for a federally subsidized insurance plan in 2014....Starting today, Americans can sign up for private health plans using government insurance exchanges only if they experience a life-changing event such as marriage, the birth of a child or the loss of a job. They may be able to buy coverage on their own without a premium discount from subsidies and sign-ups continue year round for Medicaid, the government program for low-income people, which has been expanded in 26 states to cover more adults with low wages. The enrollment period for 2015 plans begins Nov. 15." Alex Wayne in Bloomberg.

There's a new Obamacare conspiracy theory. Here's why you should be skeptical of it. "The subject is the Current Population Survey, or CPS, which is one of the tools that the government uses to measure how many people have health insurance. The Census Bureau operates the survey and, as Pear reported, it is changing the wording of survey questions. That decision will make it difficult to compare future results to past results. Conspiracy theorists will say that Obama is 'cooking the books' -- in this case, by trying to hide data on whether the law is actually helping the uninsured. Count me as extremely skeptical. The change may or may not make sense on the merits. But it shouldn't change what we know about the law's impact on the number of uninsured -- or even when we know it." Jonathan Cohn in The New Republic.

Why you shouldn't worry about the survey changes. "What's being missed here is that the Obama administration will use the new survey questions to collect data for 2013, the year prior to Obamacare's health insurance expansion, a senior administration official says. The Census Bureau reports the health insurance rate with a one-year delay; in September 2013, for example, the agency reported the percent of Americans without coverage in 2012. It will most likely report the uninsured rate for 2013 sometime this coming fall. In other words: The survey will make it difficult to compare the uninsured rate for 2012, the last year for the old questions, and 2013, the first year for the new questions. But making the change now means that 2013 and 2014 -- the year before and after Obamacare's big programs started -- are using the same question set." Sarah Kliff in Vox.

Other health care reads:

Explainer: Are health care costs about to rise quickly? Sarah Kliff in Vox.

Prices are soaring for specialty drugs. Katie Thomas in The New York Times.

Remember that Obamacare 'bailout'? The administration has a plan for it. Jason Millman in The Washington Post.

Astronomical baking interlude: These planet cakes are amazing.

4. Good news and bad news on greenhouse-gas emissions

U.S. greenhouse-gas emissions on the decline. "U.S. greenhouse gas emissions fell nearly 10 percent from 2005 to 2012, more than halfway toward the U.S.'s 2020 target pledged at United Nations climate talks, according to the latest national emissions inventory. The report showed that emissions dropped 3.4 percent from 2012 to 2011, mostly due to a decrease in energy consumption and fuel switching from coal to natural gas." Reuters.

The problem: Global emissions efforts simply aren't going far. "But aggressive efforts to tackle climate change have repeatedly collided with political reality in Washington, where some Republicans question the underlying science of global warming and lawmakers’ ties to the fossil fuel industry have made them resistant to change. The rise of the Tea Party in recent years has also made a tax increase unlikely. This week’s report makes clear, however, that the window is rapidly narrowing to forge new policies that will protect the globe from a future of serious food and water shortages, a drastic sea level rise, increased poverty and disease and other profound risks." Coral Davenport in The New York Times.

Related: This March was the 4th warmest on record globally. Andrea Thompson in Climate Central.

The EPA could be underestimating emissions of a potent greenhouse gas, methane. "Natural gas drilling at some sites in southwestern Pennsylvania released 100 to 1,000 times the amount of methane as the Environmental Protection Agency (EPA) has estimated for such operations, according to a new study. Researchers used a plane that could detect methane emissions and found that a sample of seven gas wells in the Marcellus shale region released an average 34 grams of methane per second. That compares with EPA’s estimates that similar wells should release 0.04 grams to 0.3 grams of methane per second." Timothy Cama in The Hill.

Speaking of which, EPA is moving closer to methane-emission rules. "The Environmental Protection Agency (EPA) released a series of technical white papers Tuesday about sources of methane emissions, asking the public to comment on the research to inform EPA’s efforts to reduce emissions of methane, which is the main component of natural gas. The five papers each explore one place that methane may be released into the atmosphere: natural gas compressors, hydraulic fracturing -- or fracking -- for oil drilling, leaks during natural gas production, removing liquids in gas wells and pneumatic devices used in the gas industry." Timothy Cama in The Hill.

EPA scores victory on power-plant emissions of another kind: air toxics. "A federal appeals court Tuesday upheld the Environmental Protection Agency's first-ever limits on air toxics, including emissions of mercury, arsenic and acid gases, preserving a far-reaching rule the White House had touted as central to President Obama's environmental agenda. In a 2-1 decision, the U.S. Court of Appeals for the D.C. Circuit found that the rule regulating power plants 'was substantively and procedurally valid,' turning aside challenges brought by Republican-led states that had argued it was onerous and environmental groups that had contended it did not go far enough." Neela Banerjee in the Los Angeles Times.

Other energy/environmental reads:

Coal's last best hope? A costly power plant in Mississippi. Mark Drajem in Bloomberg.

Lunar eclipse interlude: Missed it? We've got you covered.

5. All that tax news may have drowned out bad news about two federal programs

Student loans are about to get more expensive. "Bad news for college students: new federal student loans are getting more expensive. The Congressional Budget Office estimated Monday that undergraduate student loans issued this fall will have an interest rate of 5.04 percent, up from 3.86 percent for 2013-14. And the interest rate increases don't stop here. The CBO projects student loans are going to get more expensive every year until at least 2018. The Consumer Financial Protection Bureau did the math and found next year's interest rate increase will add $3 in monthly payments for every $5,000 borrowed in undergraduate loans. That's not much on a monthly basis. But the average student who graduated with a bachelor's degree in 2012 and took out loans had $29,400 in debt. Annual interest rate increases could add thousands of dollars to that sum by the time a student graduates after four (or five, or six) years." Libby Nelson in Vox.

And the government is running out of money to pay for road and bridge repairs. "On the road in a tour bus this week, the U.S. transportation secretary is spreading some bad news: The government's Highway Trust Fund is nearly broke. If allowed to run dry, that could set back or shut down projects across the country, force widespread layoffs of construction workers and delay needed repairs and improvements....Congress will have to act fast. The trust fund -- the source of much of the aid -- is forecast to essentially run dry sometime before the end of the federal fiscal year Sept. 30, and possibly as early as late August. If that happens, the government will have to slow down or even halt payments to states, which rely on federal aid for most major highway projects. Uncertainty over whether there will be enough funds in the coming months is already causing officials in states like Arkansas, California and Colorado to consider delaying planned projects." Joan Lowy in the Associated Press.

Explainer: We're almost out of money for roads. Matthew Yglesias in Vox.

Dinosaur interlude: A T. rex skeleton.

Wonkblog roundup

Pollution is substantially worse in minority neighborhoods across the U.S. Emily Badger.

Did you just overpay or underpay your taxes? Donald Rumsfeld has no idea. Jia Lynn Yang.

The elusive dream of never having to file your tax returns. Abby Phillip.

You just finished your tax return. What’s the chance you’ll get audited? Christopher Ingraham.

Manufacturing is doing great -- but not for workers. Here’s what that means. Lydia DePillis.

The traumatic, sensual, addicted language of restaurant reviews (and what it says about you). Emily Badger.

3 big things to look for in Yellen’s first monetary policy speech. Ylan Q. Mui.

Remember the Obamacare ‘bailout?’ The administration has a plan to avoid that. Jason Millman.

The depressing durability of hate crime. Christopher Ingraham.

Et Cetera

Obama aid council faces questions. Josh Gerstein in Politico.

To Russia, with love: When Russia and the U.S. worked together. Brandy Zadrozny in The Daily Beast.

Immigration activists start last-ditch effort to press GOP for House vote. Lisa Mascaro in the Los Angeles Times.

Yellen signals more aggressive stance toward banks. Martin Crutsinger in the Associated Press. (Read her remarks.)

Pentagon plans major review of military justice system. Timothy M. Phelps in the Los Angeles Times.

Promises of earthquake preparedness. And yet. Clyde Haberman in The New York Times and Retro Report.

Got tips, additions, or comments? E-mail us.

Wonkbook is produced with help from Michelle Williams.

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