Advocate Calls for Taxpayer Receipts

Do you know where your federal and state tax dollars go? Not too many Americans do. One man wants to change that by having the IRS (and state tax departments) send out a receipt with your tax return — letting you know just how your dollars were used. California, of all places, appears to be ahead of the curve. Governing has the story:

As Americans spend the next three weeks rushing to file their income taxes before the April 18 deadline, most will likely come to the realization that the amount they paid the federal government is greater than any other purchase they made that year. There’s a good chance their state income taxes will rank high on the list too.

Although each taxpayer transfers thousands of dollars to the federal and state government, they’ll get nothing to show for it. Sure — there’s roads, education programs, a standing military and things like that. But they don’t get a tangible piece of paper that comes with nearly every other purchase, large or small: an itemized receipt.

David Kendall, a fellow at the think tank Third Way, hopes to change that. He’s urged the IRS to send Americans an itemized receipt breaking down how much of their money funded various activities like defense, education and low-income assistance, and he says state tax departments should consider doing the same thing.

His organization already has already created a web-based tool that anyone can use to make the calculations, but he wants the IRS to automatically mail out individualized data…

So far, California appears to be the only state that’s doing anything like that. Residents can visit the state tax board’s website, enter the amount they paid in state income taxes and find out just what their money bought.

For example, a single person living in California earning $50,00 would pay $2,485 in taxes. Of that:

•$747.49 paid for health and human services for at-risk Californians
•$730.84 funded K through 12 education
•$250.49 went toward higher education

California’ receipt calculator — similar to the federal one posted on Third Way’s website — isn’t tremendously complicated. Each calculates a spending item’s percentage of the overall budget, and then multiplies that by an individual’s tax burden. It’s relatively simple stuff. But Kendall says it’s a powerful tool, and the IRS and states should consider automatically mailing those receipts to taxpayers every year.

For starters, it would help increase civic engagement and contribute to a meaningful debate about taxes spending. It could also help with tax compliance.

“Some people don’t feel like they’re getting good value for their money,” Kendall tells Governing. “It’s just one more reason not to comply.” Giving taxpayers a receipt would show them that their money, is in fact, funding specific activities and may make the payments matter more to citizens.

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