Nudge

Goolsbee estimates that this proposal would save taxpayers up to 225 million hours of tax preparation time and more than $2 billion a year in tax preparation fees. True, many people don’t trust the IRS, so here’s one way to assure them that our tax collectors are honest: if there’s an error, you get the money back, plus a bonus (say, $100). Automatic tax returns are already being used in other countries around the world. Denmark pioneered the pre-filled tax return idea the early 1980s, and the other Nordic countries soon followed. Finland Prime Minister Matti Vanhanen awarded his Tax Administration an award in 2006 for its automatic tax return program, with the prize jury praising it for having “significantly reduced the time taxpayers need to complete and file their returns … (and) substantially reduced the Tax Administration’s internal costs from processing return forms.”1 Today, pre-filled systems of varying levels have been adopted in Australia, Norway, Sweden, Belgium, Chile, Portugal, Spain, and France, with the Netherlands planning to implement one in 2009.2 In Norway, taxpayers who want to alter their tax information can even request a change form through a text message.3