Filing Your Taxes Is Hellish By Design

Summary

Everybody's Business – Episode Summary

Filing Your Taxes Is Hellish By Design

Original Air Date: April 10, 2026
Hosts: Max Chafkin & Stacey Vanek Smith
Guest: Ben Steverman (Bloomberg Tax Reporter)

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Episode Overview

This episode of Everybody’s Business dives into why the U.S. tax system remains so convoluted—and for whom it benefits. Hosts Max Chafkin and Stacey Vanek Smith, joined by Bloomberg tax reporter Ben Steverman, unpack the ongoing changes in the U.S. tax code, who wins and loses each season, the power of tax-prep lobbies, and whether generative AI can actually help you file. The conversation swings from global economic turmoil and oil price shocks to the everyday dread of tax day, offering clarity (and a fair amount of commiseration) on one of America’s most frustrating annual rituals.

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Key Discussion Points & Insights

1. Geopolitical Turbulence Sets the Scene

[01:01–15:56]

• The episode opens against the backdrop of the ongoing U.S.-Israel-Iran conflict and its economic aftermath.
  • Ceasefire Shakiness: Hosts discuss Trump-brokered ceasefire, Iran’s intermittent closure of the Strait of Hormuz, and subsequent market volatility.
  • Long-term Implications: Javier Blas, Bloomberg energy columnist (from a prior episode), is quoted on the oil market's global interconnectedness:

    “A crisis anywhere is a crisis everywhere...on a truly worst case scenario…I think that we go north of $200 [per barrel], we will need massive demand destruction.”
    (Javier Blas, 05:40)

  • Economic Shock: Gas prices remain high. Even if the conflict ends, the “long tail” of supply disruptions and backlogs will linger, hurting trade flows and consumer prices worldwide.
  • Political Fallout: Trump’s handling of the conflict tanks his approval ratings, erodes political capital, and shapes 2026 midterm prospects.

    “We could be watching Donald Trump’s sort of presidency kind of collapsing ...he is losing a lot of political capital basically by the day.”
    (Max Chafkin, 09:55)

  • Stagflation Worries: U.S. inflation remains high, posing a dilemma for the Federal Reserve.

    “Both of the cups are poisoned—if they raise rates, that’s bad for the economy; if they cut rates, prices spiral out of control.”
    (Stacey Vanek Smith, 14:39)

2. Tax Season Anxiety

[19:01–22:29]

• April 15th looms. Stacey confesses to last-minute filing, jokes about the “lucrative” world of freelance radio, and admits needing an accountant.
  • Man-on-the-street interviews in NYC reveal a mix of panic, confusion, and begrudging organizational pride.
  • Highlights:
    • Surprise at tax bills.
    • Challenges for gig-economy and freelance workers locating the right forms and support.

      “Sometimes it’s hard to find an accountant to do it for you…not knowing how to do all that, that’s scary.”
      (Anonymous, 21:49)

3. Why Is the U.S. Tax Code So Complicated?

[22:29–25:36]

• Historical Overpromise: Max plays a clip of Paul Ryan touting the dream of postcard filing.
• Complexity Grows: The tax code expands by about 3% a year (“in words”), according to a Rand Corporation researcher cited by Ben Steverman.

  “We’ve had the income tax since 1913. That gets pretty big.”
  (Ben Steverman, 23:55)

• Policy By Tax Code: U.S. system is loaded with deductions/credits to incentivize or discourage behaviors (e.g., mortgage, charity, healthcare)—instead of legislating these policies directly.
• Lobby Power: Tax-prep companies (TurboTax/Intuit, H&R Block) and accountants lobby hard to preserve complexity and prevent IRS “autofiling” systems.

  “A lot of efforts to simplify things, filing and automate…have been quashed…Big Tax stepped in.”
  (Ben Steverman, 25:33)

• Comparison With Rest of World: Many nations use much simpler tax systems; their tax authorities often do most calculations and send pre-filled returns.

4. Arguments For and Against U.S. Complexity

[25:36–27:33]

• Pro-Complexity Stance:

  “People benefit from a more adversarial relationship with the IRS…You have the ability to maximize…This is the American dream.”
  (Ben Steverman, 26:12)

• Counterpoint:

  “This is the American dream. Everybody gets to spend weeks on their taxes.”
  (Stacey Vanek Smith, 26:44)

• Max notes the potential risk of a government-controlled system in low-trust environments, stressing personal agency—even if it means sifting through receipts.

5. What’s Changed This Tax Season?

[27:33–29:33]

• “Big, Beautiful Bill” Effects:
  • Trump-era slogans (“No tax on tips/OT/overtime/seniors/auto loan interest”) made it into law, with “lots of fine print.”
  • The SALT (state and local tax) deduction cap rose to $40,000—but not many qualify due to restrictive income limits.

  “A lot of people are getting to the end of this tax season and realizing, oh, I don’t qualify for the SALT cap…now I can’t take the overtime deduction.”
  (Ben Steverman, 29:11)

6. Who Really Pays?

[29:33–31:46]

• Payroll taxes hit the working and middle class hardest; the wealthy only pay substantial taxes depending on how they earn income.
  • Salaried, high earners in high-tax states can be taxed up to nearly 50% of income.
  • Business owners and investors pay substantially less, especially due to business deductions, qualified dividends, and carried interest loopholes.

  “Those folks are paying much lower taxes, often lower than their secretaries or the janitor in the office.”
  (Ben Steverman, 31:21, 31:35)

7. Can AI Do Your Taxes?

[31:46–34:16]

• Max considers using AI chatbots for taxes—Ben’s verdict is clear:
  • AI “makes a lot of mistakes,” has trouble with time, often applies wrong-year rules, and struggles with tax law’s hierarchical structure.

  “A probability-based system just has a real problem with a hierarchical-based system like taxes, where there’s usually one right answer.”
  (Ben Steverman, 33:14)

  • AI is helpful for basic research, organizing receipts, or summarizing information—but not for proper filing.

8. Tax Season Winners & Losers

[34:17–35:18]

• Winners:
  • People in tip/OT jobs earning below income limits.
  • Some retirees (if income is low enough).
  • Business owners/corporations (they kept lucrative 2017 breaks).
• Losers:
  • Salaried workers (“just didn’t get anything”).
  • High-income individuals (especially >$600k) miss out on deductions.

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Notable Quotes & Memorable Moments

• On American tax complexity:

  “We should not trust the IRS to do our taxes for us…this is the American dream.”
  – Ben Steverman, 26:26

• On personal agency amid bureaucracy:

  “…that elevated cortisol is just the feeling of freedom coursing through your veins.”
  – Stacey Vanek Smith, 27:27

• On AI and taxes:

  “We’re nowhere near being able to do that [file taxes with AI] yet, but people are trying.”
  – Ben Steverman, 34:12

• On high snack inflation:

  “Suddenly people are like, you know what? I’m not paying $7 for a bag of Doritos.”
  – Stacey Vanek Smith, 42:05

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Timestamps for Key Sections

• Geopolitical Backdrop & Oil Shock – [01:01–15:56]
• Tax Season Dread & Public Opinion – [19:01–22:29]
• Why The Tax System is So Complex – [22:29–25:36]
• Arguments For/Against Complexity – [25:36–27:33]
• 2026 Tax Law Changes – [27:33–29:33]
• Who Pays: Breakdown – [29:33–31:46]
• AI vs. Taxes – [31:46–34:16]
• Winners & Losers This Year – [34:17–35:18]
• Snack Inflation & Economic Humor – [40:03–43:00]

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Additional: Underrated Stories Segment

[37:42–43:00]

• Max shares the Silicon Valley trend of “token maxing”—companies rewarding employees for spending the most on AI tokens (sometimes millions/month per employee).
• Stacey brings Doritos as her new economic indicator, pointing out that $7 Doritos mark a breaking point for consumer price resistance (“demand destruction” for snacks).

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Tone & Takeaways

The episode is fast-paced, slightly irreverent, and empathetic to anyone dreading tax day. The hosts blend policy wonkdom with everyday frustrations, make the economics real, and never miss a chance for a laugh—even about $7 Doritos or the “freedom” of filling out a Schedule C. Expert guests provide grounded, critical insights into why tax misery persists and who benefits most from the status quo.

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For Further Information

Contact/Feedback: [e-mail] (as mentioned at [15:56] and [42:43])

Transcript

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[Max Chafkin]

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[Stacey Vanek Smith]

It has been about six weeks since the US and Israel attacked Iran. And ever since then, I mean it has just been pretty non stop. I mean there have been thousands of casualties. We have seen the oil supply to the world largely hamstrung and it has just been a very dramatic back and forth of tweets, of talks, of statements and it is completely captivated the attention of the world.

[Max Chafkin]

Yeah, it's a really uncertain time. Who knows how long this current phase is going to last? But we're going to spend a few minutes today just unpacking what we know right now, where things stand and what we can expect going forward.

[Stacey Vanek Smith]

Certainly on every level, this is just an incredibly important and pivotal moment in the world. A little bit closer to home, there is a ever so slightly less important and pivotal moment which is tax season.

[Max Chafkin]

In case you weren't feeling anxious enough about the war.

[Stacey Vanek Smith]

Yeah, this is the week.

[Max Chafkin]

This is the weekend folks, where you gotta do your taxes.

[Stacey Vanek Smith]

Have you filed your taxes yet?

[Max Chafkin]

We have Ben Steverman, Bloomberg reporter, tax guru, basically my accountant, here to tell us all about the tax changes and really importantly, the question on everybody's mind, can I just put my stuff into Claude and let them do it? From everybody's business. I'm Max Chaffkin.

[Stacey Vanek Smith]

And I'm Stacey Vanek Smith.

[Max Chafkin]

Call your accountant or your friendly Bloomberg reporter. We're going to have all the information whether you need to celebrate or cry this tax season.

[Stacey Vanek Smith]

As we're recording here on Thursday, the conflict between the US and Iran and Israel is on pause. There is a ceasefire and we're all watching and waiting to see what happens.

[Max Chafkin]

President Trump seconds ago taking to Truth Social to say that he has talking to Pakistani officials and based on that conversation he will agree to stop stop

[Stacey Vanek Smith]

bombing for Two weeks.

[Max Chafkin]

He also says that Iran has agreed to open the Strait of Hormuz for that time period.

[Stacey Vanek Smith]

We're looking at oil prices plunging and WTI and Brent also seeing premium narrowing as well.

[Max Chafkin]

We're seeing reports of air defense systems

[Ben Steverman]

going off in Tehran tonight.

[Public Ad Narrator]

This cease fire agreement is not even

[Max Chafkin]

24 hours old and there's signs that it's falling apart. The White House is demanding Iran reopen the Strait of Hormuz.

[Public Ad Narrator]

It was originally reopened overnight, then Iran

[Max Chafkin]

closed it a few hours later. Stacey? Easter Sunday, Trump sends this profane message and threatens essentially to destroy all of Iran. Says he's going to destroy an entire civilization. These threats continue for days and it leads to this kind of like dramatic situation on Tuesday night where it's either Trump is threatening to destroy huge amounts of infrastructure, potential war crimes, you're not allowed to just bomb civilian infrastructure according to the Geneva Convention, or Iran is supposed to open up the Strait of Hormuz. What ends up happening is we have this sort of conditional ceasefire brokered by Pakistan. The two sides have two weeks to work it out, and right now, not that much has changed. The fighting seems to have cooled off, although not entirely. On Wednesday, Israel was still doing some bombing, Iran was still doing some bombing. And Iran has yet to let very many ships through the Strait of Hormuz and is saying essentially they're gonna control it and potentially even toll it. So we may sort of be in a pause, but it's not clear that this conflict is resolved.

[Stacey Vanek Smith]

It's a pause, but it doesn't necessarily seem like at the end of the pause we will have a productive deal.

[Max Chafkin]

And we had Bloomberg energy and commodities columnist Javier Blas on the podcast six weeks ago. During that podcast, the kind of consensus was that this thing would last just a few days. And Javier said, hey, I'm a glass half empty kind of guy, and if this lasts longer than that, it's gonna be really, really bad. And he basically said it would be hard to imagine it going 60 days. If it went much longer than just a few days, there would be severe economic consequences. Let's just listen to a little bit of that conversation just to kind of like refresh our memories, Refresh listeners memories.

[Javier Blas]

The US Produces a lot of oil. It's a net exporter, actually. But the price of oil is set on the global market and a crisis anywhere is a crisis everywhere. Everyone is going to feel the pain and the price is going to go up for everyone. The oil market is not really thinking about 60 days. I think it's thinking more about six days at the moment. It will mean a significant oil shock. People say, oh, worst case scenario is $100 oil on a truly worst case scenario. What I will call a really worst case scenario, I think that we go north of $200, we will need massive demand destruction. It will imply an economic shock of the size that the central banks will have to intervene, et cetera, et cetera. It's very ugly. But that's one of the reasons that I cannot see this lasting 60 days. I think that the White House will call it over a lot earlier. There is a lot of cynicism on Wall street and they say, oh, that will be taco.

[Stacey Vanek Smith]

So we're glass half empty days apparently.

[Max Chafkin]

Yeah, we're around 40 days. This is a two week ceasefire. It seems likely we are getting to 60 days or very close to it.

[Stacey Vanek Smith]

Yeah, yeah. And one of the sort of interesting points about this, I think one of the reasons that it becomes so serious after 60 days is it's even when the Strait of Hormuz opens back up and the oil starts flowing again. That's 20,000 barrels of a day of oil that is, is not reaching the global market every single day. And so that starts to compound. And for places like in the US we likely won't have a supply issue because we're, we produce so much oil. We're the largest producer of oil in the world. But for other countries like Japan, like the Philippines, they import almost all their oil. And so this becomes a huge supply issue like gas lines, like it was in the US in the 70s. The more backed up things get, the longer these whole countries, economies, people go without the ability to get to work, deliver things, run their business, all that and that compounds. And then also the longer it takes the price to go back to normal because there's this big backlog. And so the price that just means we are all going to be paying all around the world a higher price for oil for a long time. What they like to call in economics a long tail.

[Max Chafkin]

Back at the beginning of the war we talked about the gas prices. Gas prices shot way up. And what happens if it ends tomorrow? And you were saying the gas prices are gonna stay up for a very long time. Obviously it took, it's taken a lot longer than tomorrow. I think we need to start thinking about something like a new normal here. A new normal that is not as great as it was before this thing started. One with elevated cool commodity prices, as you said, potential supply chain shortages in a lot of countries, especially in Asia. And a situation where Iran, although weakened, although its nuclear program has been degraded, according to the Trump administration, still controls this very crucial trade artery.

[Stacey Vanek Smith]

Yeah, yeah. I mean, I, to me, there are two main implications, one of them global, one of them more local. The global one is that I just feel like I'm watching a lot of trade routes get sent, set without the US in it. The US We've just been the center of global trade for so long. The US Consumer, we've just. And especially the oil trade, all of that happens in dollars. It's one of the reasons that they say dollar is the reserve currency of the world, because all international trades with oil before now have happened in dollars. The. That isn't really happening anymore. That's happening in like Chinese Yuan. And other countries are basically creating trade locations around us, which I think has huge long term implications. But more locally, closer to home and with a bunch of elections coming up, I think also we're getting inflation numbers out this week, which will reflect gas prices. But here at home, gas, as we've discussed before on the show, gets into everything because between delivery and our commutes and things like that, people are very emotional about gas prices and it's looking like those are gonna be elevated for a really long time.

[Max Chafkin]

You hinted at the politics, but one of the reasons, I think we saw this kind of very erratic messaging from the White House over the last couple of days. You know, part of it, of course, is that this is how Donald Trump negotiates art of the deal, yada yada. But the other part of it is he. The polling numbers have been horrible on this. Usually historically during conflicts, there is this thing, the rally around the flag effect, where people tend to at least briefly support the sort of military, whatever the military action is, because they want to support the troops who are in harm's way. Obviously, this was a little bit different. This is not a ground conflict. And this was basically underwater from the beginning, like more Americans are against this than for it. And in the last six weeks or so, it has become much more unpopular. It was unpopular at the beginning, at the beginning of this conflict has become more unpopular. The overall approval ratings for Donald Trump also have fallen. He is basically less popular than he has been. This is, this is politically bad. And you're seeing prediction markets and so on go from giving the Democrats kind of an outside chance of retaking the Senate to, to now, it's either even or it's a little bit ahead for the Democrats. We could be watching Donald Trump's sort of presidency kind of Collapsing. I'm not saying like he's going to be removed from office or something, although some Democrats of course have suggested that, but just that he is losing a lot of political capital basically by the day. And because this ceasefire is so chaotic and so on, it's hard to see how he kind of brings it back quickly, especially before the midterm. Like I said, this is like a really unpopular war. So it's hard to imagine that's going to like somehow dramatically turn around. It seems like, you know, our sort of best case scenario, the thing that we're all hoping for is that we kind of get back to where things were. The, the. I think a more interesting question is like who won this conflict? It was it Iran or the us? And we were going to.

[Stacey Vanek Smith]

It is not over yet. I would like to point out, as much as I feel like we're getting that message, it definitely isn't.

[Max Chafkin]

Well, and both sides of course are claiming victory Iran, victory Iran, everybody wins. US. Donald Trump saying you, we've, we've, you know, dramatically limited the, you know, this, this regime that he sees as, as being malign. He's, he said there's been regime change, you know, on the Iranian side. You know, frankly there really hasn't been regime change. I mean there, some leaders have changed but it's, it's basically the same regime and they're gonna sort of say that they have managed to assert control over the Strait of Hormuzzi a little bit. Hard to argue with that. The other day Donald Trump proposed a joint venture with Iran where cuz Iran has been threatening to toll oil as much as a dollar a barrel, which would be a ton of money, millions of dollars I think for the biggest

[Stacey Vanek Smith]

ships to go through the Strait of Hormones.

[Max Chafkin]

Yeah, exactly. So now from now on, every bet

[Stacey Vanek Smith]

like a couple million dollars a ship from what I remember.

[Max Chafkin]

Yeah, exactly. And Trump's said oh well maybe we'll split it with Iran. So that's kind of, would be a fun and unexpected turn of events if this, if this turns into a, a little jv.

[Stacey Vanek Smith]

Although this is the beginning of a

[Max Chafkin]

beautiful as, as good a deal maker as Donald Trump is. And I think we have to admit that at times he has been that one feels, feels, feels like a, like it may be unrealistic.

[Stacey Vanek Smith]

Yeah, I mean at least economically speaking I don't see a scenario where this is a win at all. Um, it could, all I see are different kinds of losses at different scales. But I mean I do think at least in the immediate future, in this country that politically this is really tough. And, you know, we're seeing prices rising already. And the longer the strait stays closed and the longer it is before this gets resolved, obviously, the more lives are lost. That's the part that really matters. But also the more expensive everything is all around the world.

[Max Chafkin]

Stacey, we gotta. We gotta hit the question I'm sure you are thinking about that's keeping you up at night. But what. What does the Fed. What does the Fed do about this?

[Stacey Vanek Smith]

Well, this puts the Fed in a really tough position because, you know, this word is stagflation gets thrown around a lot. Basically. That is just for me, when I hear stagflation, I just see it's like a pick your poison situation. Do you remember in the Princess Bride when there's that moment where when Carrie Elwyn sits down at the table with Wallace Shawn and he's like, I know that.

[Max Chafkin]

You know that. I know that the. Yes, I remember it.

[Stacey Vanek Smith]

Yes, that amazing moment. And it turns out both of the. Sorry, spoiler alert. It turns out both of the cups are poison. Stacey, I'm sorry. It's been. I feel like there's a statute of limitations on spoilers, and we have passed that with the Princess Bride. But it's a great moment. And the ways that I think about it is I feel like that's the moment the Fed's in where basically both of the cups are poisoned. If they raise interest rates in order to control inflation, which is likely to go up because of gas prices going up and pushing the price of everything up, if it raises interest rates in order to combat that, that is really hard on the rest of the economy. That means it's more expensive for businesses to borrow money, so they make less money, so they hire less. They might lay people off. They cut back on expenses. That is. That's like slowing growth in order to get inflation under control. That's just bad all around. But if they cut interest rates to help the economy, prices can go out of control because the prices for everything are already going up. You don't want to end up in a situation where you're paying $15 for your Starbucks latte, and that can really take on a life of its own and spiral out of control. So I just feel like if you're Jerome Powell, you are like Wallace Shawn trying to figure out which of the poisoned cups to drink because it's a lose, lose situation.

[Max Chafkin]

Listeners, you know, let us know what you want to know about this war and how it affects us. Everybody'[e-mail] and we will try to do our best to find out.

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[Max Chafkin]

it is almost April 15th. It's gonna be tax day here in the US before we know it. Millions of Americans, including I believe, our Everybody's Business co host, Stacey Vanek Smith, have been waiting until the last minute to file their federal and state returns. Stacey, what are you doing?

[Stacey Vanek Smith]

I don't appreciate getting called out like this. Listen, I did quite a bit of freelance work last year. I needed to get an accountant.

[Max Chafkin]

Don't be helping my taxes, but I made a lot of money.

[Stacey Vanek Smith]

Oh, yeah. Freelance radio is extremely lucrative, in case you're looking for just a cash windfall in your life. No, but I needed to hire an accountant, and he did not. By the time I got around to asking, which, in my defense, was in early March or maybe mid March, the earliest he could do. I'm going to do my taxes later today.

[Max Chafkin]

All right, I will take that on. That's all I need to know. But you know what, Stacey? You're not the only person who is feeling a little bit of anxiety.

[Stacey Vanek Smith]

I am not alone.

[Max Chafkin]

You are not alone. And I'm not saying me, because I did my taxes way ahead of time.

[Stacey Vanek Smith]

Have you done your taxes?

[Max Chafkin]

Oh, yeah. But our producer, Jasmine J.T. green, went out in New York City to ask people how they're feeling about tax day. So with tax day coming up in a few days, I've just been asking, how's your tax preparation been? Have you done it yet? Are you nervous about it? I did my taxes with somebody who did it for me, and I prepared by making sure my taxes were, but then order by December so I can make sure I get that tax money beforehand. So this is actually the first year that I've been ahead of the game and gotten everything to my accountant ahead of tax day.

[Ben Steverman]

So it'll be the first time in

[Max Chafkin]

five years that I haven't had to file for an extension.

[Stacey Vanek Smith]

The thought of, like, eventually filing taxes

[Ben Steverman]

is kind of, like, concerning and, like, kind of stressful.

[Stacey Vanek Smith]

I don't know how to file. I hope I will eventually learn how to file, file my taxes, but I think that's an issue for later on.

[Max Chafkin]

Were you surprised by your. By your result? I absolutely was. They got me what they needed to get me, and I was so happy

[Stacey Vanek Smith]

that they got me that amount.

[Max Chafkin]

Have you been following at all, like, the changes with the tax code and things like that?

[Stacey Vanek Smith]

Yeah, I have been, absolutely.

[Ben Steverman]

Especially the $40,000 for homeowners and the

[Max Chafkin]

credits that are here. Very few things I can agree with the current administration, but this is a nice benefit to see some of that and grateful. Luckily, my accountant is also a master

[Ben Steverman]

of these things, so when I brought

[Max Chafkin]

up the questions, he was able to

[Ben Steverman]

help educate me across them.

[Max Chafkin]

What makes you nervous?

[Stacey Vanek Smith]

I think just, like, having this, like,

[Max Chafkin]

obligation and, like, responsibility to, like, pay

[Stacey Vanek Smith]

something on a specific time and, like, I'm, like, not, like, in that world

[Ben Steverman]

yet, and I don't know what to expect. It is a little scary mostly because when there's. When it's like, jobs that don't give you, like, your W2 at the end, you have to go do that by yourself and you have to have the accurate number. And sometimes it's, like, hard to find, like, an account to do it for you. So I feel like it's a very scary process not knowing how to, like, do all that. But when the time comes, I feel like hopefully I'll learn.

[Max Chafkin]

Wow. There are some people who are really on top of things.

[Stacey Vanek Smith]

Yeah. I am very happy for the people who are so prepared. That's great for them.

[Max Chafkin]

Luckily, we have Bloomberg reporter Ben Steverman to chat with us about what's changing this tax season. Ben, welcome back to everybody's business.

[Ben Steverman]

Thank you. Happy to be here.

[Max Chafkin]

Ben, I want to take you back ancient history. First Trump administration, 2017, and we were having a conversation about taxes that feels very different from the one that we're having today. Let's just listen to a quick clip of Paul Ryan, the former House majority leader, who I vaguely remember. We want to simplify the system for Americans, for families, for workers. And in addition to helping businesses be more competitive so that they can keep hiring and grow, we want to simplify system so much that 96% of American workers can fill their taxes on a postcard.

[Ben Steverman]

That kind of dramatic simplification is possible.

[Max Chafkin]

A postcard. I feel like we should have the postcard by now. And given that people have been talking about this, I'm sure you're about to say basically, for decades, like, why is it so complicated to do your taxes in the United States?

[Ben Steverman]

Paul Ryan, just to give him a little bit of credit, they did simplify the tax code in 2017. The problem is that the complexity of the tax code has been growing and growing over the years. I was just talking to, like, this Rand Corporation researcher that had actually mapped the tax code over the years, but basically they were saying 3% a year is the growth of the tax code in terms of the number of words.

[Stacey Vanek Smith]

Like, it gets 3% more complex every year.

[Ben Steverman]

Yeah, yeah, basically. And when you add that up, we've had the income tax since 1913 that

[Stacey Vanek Smith]

you get gets pretty big in many countries. It is essentially a postcard system. Right. Why is our tax code so complicated and apparently getting more complicated by the year?

[Javier Blas]

Yeah.

[Ben Steverman]

In other countries have a much simpler and quicker system where often the tax authority will send you your information and you just look at over the numbers and you say, oh, that looks right. And then you sign off and send it back. In our tax system, it's like everybody is treated like almost like a business in and of themselves. You're able to play a lot of games. Often you're able to pursue strategies and like, there's a lot of loopholes and there's a lot of lobbyists who have lobbied for those loopholes.

[Stacey Vanek Smith]

Yeah, there's a lot of policy that gets enacted through our tax system, like mortgage deductions and like, it's like a way for the government to encourage you or discourage you from doing things right

[Ben Steverman]

from charity without having to pass a law. Right, right. Health care expenses. And when you layer those things on top of each other, it just gets really complicated. The other thing is that TurboTax Intuit is owns TurboTax and that's the market leader for online filing. And H and R Block and the accountant, the accountants, they are also a powerful lobby. And there have been proposals and there has been free filing through the federal government. There was a pilot program under the Biden administration and a lot of efforts to simplify things filing and automate filing for Americans have been quashed and Big Tax stepped in.

[Stacey Vanek Smith]

Quashed it.

[Ben Steverman]

Yes, exactly.

[Stacey Vanek Smith]

Quashed the postcard dream.

[Ben Steverman]

Yeah.

[Max Chafkin]

Ben, can I ask, is there an argument for why our system is preferable to the the systems used in other countries? Like, what do the tax preparers who lobby against these changes say? Like, beyond the fact that they don't want this industry to go away, that's going to cost jobs and could lead to economic dislocation. Is there some kind of argument for our strategy where everyone is like a little tax optimizing and it has the ability to employ these complicated strategies and hire accountants and do sophisticated stuff that in another country, like only a business would do?

[Ben Steverman]

Yeah, there is an argument for that. And the argument is that people benefit from a more adversarial relationship basically with the irs. Like, why are. The argument is we should not trust the IRS to do our taxes for us.

[Stacey Vanek Smith]

Like don't tread on me taxes.

[Ben Steverman]

Yeah, exactly. What if you have the IRS filling out the form for you? Maybe it's not maximizing your deductions. Maybe it doesn't know certain things about you, but it almost certainly doesn't, that ultimately this is your responsibility and you have the ability to maximize. You know, this is the American dream.

[Stacey Vanek Smith]

This is the American dream. Everybody gets to spend weeks on their taxes.

[Max Chafkin]

Honestly, I sort of. I mean, I see it right like the, the a situation where the government is in control of all the data and is basically telling people, here's what you owe. With very little information, very little transparency. You could imagine a situation, especially where you don't have a lot of trust in your leaders, where that is, I can't believe I'm saying this, a slippery slope to something that feels more authoritarian. So I am gonna choose to believe when I'm in this complicated process that basically takes a full of digging through receipts and stuff, that I am exercising my freedom.

[Stacey Vanek Smith]

That elevated cortisol is just the feeling of freedom running coursing through your veins.

[Max Chafkin]

But, Ben, what has changed, like, what has gotten more complicated with the passage of the big, beautiful bill?

[Ben Steverman]

Trump on the campaign trail came up with these really almost brilliant slogans. No tax on tips. No tax on overtime. No tax on seniors. No tax on auto loan interest. They were just campaign slogans. Like, literally, Trump dreaming up no tax on tips while he was in Las Vegas. And he sounds great to a server. And so those things were actually actualized in the tax code and along with an extension of all the other changes that had happened in 2017 that actually made taxes more complicated for businesses. They were basically tax cuts for businesses, but they did make things a little bit more complicated. Plus the salt cap. They expanded the Salt cap from 10,000 to 40,000 so that people can deduct their local and state taxes.

[Stacey Vanek Smith]

So if you pay $10,000 to New York State, then you can deduct that fully from your federal.

[Ben Steverman]

Yeah, well, you can deduct up to 40,000. But every single one of these things comes with all this fine print because if they didn't want to give them make these unlimited, they didn't want everyone to start getting paid in tips or overtime through some method. And there's income limits. And of course, it doesn't apply to your payroll taxes. You end up with relatively narrow groups of people that are benefiting from these things, including the $40,000 SOL cap. So you. A lot of people are getting to the end of this tax season, I think, and they're realizing, oh, I don't qualify for the $40,000 salt cap because I made too much money last year, I forgot. But I cashed in those stock options or my business did, really did better than I thought. And so I'm making a little bit too much or I worked too much overtime and now I can't take the overtime deduction. I think that what we have now is sort of a very complicated system for accountants and for regular peoples sometimes where they're having to rerun the analysis a couple times and there's a lot of regret.

[Stacey Vanek Smith]

One of the things that's come up again and again is basically, you know, there's like the tax the rich signs and a lot of allegations post big beautiful bill that it just gave tax cuts to the rich. Who pays taxes in the U.S. like, when you look into the numbers, who is paying most of the taxes?

[Ben Steverman]

One of the ways that people talk about this is who think that taxes should be lower on rich people. They say rich people are already paying so much money in taxes.

[Stacey Vanek Smith]

Yeah.

[Ben Steverman]

And that is true if you're, first of all, if you're talking about federal income taxes, but there are also payroll taxes that are also a huge amount of money, trillions of dollars that is coming into the treasury as well. And working salaried hourly workers, they pay a huge share of that. And rich people really don't pay that much in that, into that pool at all. The other thing is that if you're a rich person, it really depends on how you earn your money. So if you are a CEO and you're, or you're a hedge fund trader, or you're a professional athlete or you're an entertainer, you're paying, you could be Ben, paying like almost 50% of your income in taxes. And when we talk about the high tax rates in New York City, you have state and local as well. And that's how you get to almost 50%. If you're in California and New York or one of the high tax states, you can be paying a lot. But if you are a business owner under the, the 2017 law and now permanently in the code, you have the ability to deduct almost about 20% of your taxes comes off just by being a business owner in certain industries, most industries. And then if you are an investor, you're paying a much lower rate.

[Stacey Vanek Smith]

I guess it's like if your money is in stocks.

[Ben Steverman]

Yeah. Stocks qualified dividends carried interest. If you're a private equity person, you're paying a much lower rate. So those folks are paying much lower taxes, often lower taxes than their secretaries or the janitor in the office or whatever.

[Stacey Vanek Smith]

Like percentage wise or actual effective tax

[Ben Steverman]

rate can be lower than some somebody Who's a working class or middle class person in some cases if you're including payroll taxes as well.

[Max Chafkin]

Ben, I gotta admit something, and Stacy, you're gonna laugh at me. I, as listeners of this podcast know I am a certified AI skeptic. I am not a big user of the large language models and the chatbots. Although as I was gathering my information to send to my account, I had a thought which was like, I should do Claude or whatever. I should put this into Grok and have.

[Stacey Vanek Smith]

I feel like people are doing that.

[Max Chafkin]

They are. And Ben wrote a story about it and I just wanted to hear quickly the case against doing this. Cause I think that's where you wound up in your views.

[Stacey Vanek Smith]

Well, is there a case against it? I am not a skeptic of AI.

[Ben Steverman]

I talk to a ton of accountants and I talked to a couple CEOs of AI. AI tax companies, like companies that are offering AI tax service to accountants. And my colleague Charlie Wells, who worked with me on it, he talked to a bunch of people who've been using AI to do their taxes. And what we learned is that it just makes a lot of mistakes. Like a lot. The large language models are still messing up numbers, first of all. But then also it seems to have some problems with time. Often will be applying like 2023 rules to 2026 and it doesn't understand the difference. And I talked to a researcher at a university about this and he was like, there's just some, like the large language models. A probability based system just has a real problem with a hierarchical based system like taxes, where there is usually one right answer. You have to go down the subclauses and the exceptions and, and also it really interfaces with the real world in ways that are messy and complicated and very particular to you. And the model doesn't know those details about you necessarily the way that your accountant may know or may just be able to intuit. So AI is definitely being helpful for folks. It's like a good tax research tool. It's good if you don't understand what the SALT deduction even is, it can explain it to you. And another thing that people have been using it for is preparing their personal information to shift over to the accountant. If you want to go through your expenses and find out which ones were the deductible ones, it might be helpful for that. But to actually file your taxes, it's. We're nowhere near being able to do

[Stacey Vanek Smith]

that yet with AI, but people are doing it.

[Max Chafkin]

They're.

[Stacey Vanek Smith]

They're trying this tax season who are the winners? Who are the losers?

[Ben Steverman]

So the winners are somebody who is making pretty good money in a tip job or an overtime job, but not too much. Seniors who aren't making too much aren't over a certain income level limit are also going to be able to take a little bit more of a deduction. They're going to notice a refund goes up. Who are also the winners? Business owners, corporations. Got to keep a lot of the wins in the last law which were really significant. The losers are salaried workers.

[Max Chafkin]

Come on.

[Ben Steverman]

Basically just don't didn't get anything to be honest. They got some lower rates that they kept some lower rates in 2017, but they also lost those deductions. And then the salt cap will benefit like the extra salt cap will benefit some affluent people a lot. But if you're too affluent, if you make too much money more than $600,000, you basically don't get nothing.

[Max Chafkin]

Ben Siverman, thanks for being here.

[Ben Steverman]

My pleasure. Thanks for having me.

[Stacey Vanek Smith]

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[Max Chafkin]

Stacy, it's underrated Story time. I've got a funny one for you. Are you familiar with the term token maxing?

[Stacey Vanek Smith]

I am not.

[Max Chafkin]

Okay, so token maxing, this is all the rage among tech companies. Token maxing is when you try to use as much AI as possible on your job.

[Stacey Vanek Smith]

And is that the token?

[Max Chafkin]

These are tokens. They cost money. Each token. Each time you use a token, you are paying money. And there's been some reporting, first in the New York Times and then a couple of weeks ago, and then in the information about these tech companies that they're so enthusiastic about AI, They've created leaderboards to rank how many tokens employees are using. And it's, it's potentially like millions of dollars a month per employee. And they're celebrating this. They're like, good job. You have spent millions of dollars on like AI things.

[Stacey Vanek Smith]

So like if you're at a company then, and you use AI to like draft your emails, then the company gives you a token. It's like Chuck Cheese, but with a.

[Max Chafkin]

The company pays money to Anthropic or OpenAI for that email. And then at the end of the month is like which person spent the most money at OpenAI or Anthropic and like gives them a gold star. They're actually Facebook has these.

[Stacey Vanek Smith]

Well, I know who'd be leading the leaderboard on the Everybody's business team.

[Max Chafkin]

Yeah, Stacey has been token maxing more than me. But the thing that's crazy is that these, this is as if a comp. This is like a company's celebrating who logs the most first class airline miles in a given month. You have people spending huge sums of money, like I said millions of dollars a month for like single employee at Facebook and not Only are they like, where I come from, if you do this, maybe your boss is like, hey, do you really need to file a huge expense report? But know that at some of these Silicon Valley companies, they are so excited about AI it's the other way. They're like, great work. Keep vibe coding. Don't stop. Keep spending that money. I will say after this information story came out, meta, the parent company of Facebook took down their token leaderboard. Not because they said it was a bad idea, because they said it had been leaking and I think it was a little bit embarrassing. Now, Stacey, what is your underrated story?

[Stacey Vanek Smith]

I'm so glad you asked. Now I did ask you to bring something into the studio. I'm going to ask you to take it out now. I have my own bag of Doritos.

[Max Chafkin]

Okay, Mine.

[Stacey Vanek Smith]

This is my new economic indicator of choice.

[Max Chafkin]

I've got a pack of Cool Ranch Doritos. I think it's like a snack size. I don't know what you've got there.

[Stacey Vanek Smith]

Yeah, I also have a snack size. I have the classic. But let me explain why I think Doritos are the economic indicator for me of this week. PepsiCo, which is the company that owns Doritos, it missed its revenue target by a billion dollars for the second year in a row. And the reason it said it is missing these targets is because of Doritos. It specifically talked about raising its. It raised its price of Doritos by about 50% since the beginning of the pandemic to $7. Not quite this small, but like the larger snack sizes have been selling for $7.

[Max Chafkin]

Wait, like this is like a normal size bag of Doritos you buy at the grocery store cost $7. That's gotta be what it is. Okay. Which seems like a lot of money for Doritos.

[Stacey Vanek Smith]

It seems like a lot of money for Doritos and consumers stopped buying it. So I was turned onto the story because of a great article by our colleague Christina Peterson about how the $7 dorit down PepsiCo. But what I think is so interesting about this is ever since like the middle of the pandemic when we started to see inflation rise, consumers have basically been just paying the higher and higher prices that we've seen coming. Because if you're a person, you're going to the store, you don't know, you're like, I guess this is supply chain issues. I guess this is inflation. I guess this is tariffs. Whatever it is, we have been paying the higher prices. So companies have been nudging up their prices. Sometimes because they had to, because their costs were going up sometimes because they thought they could. And there was just this sort of wonder that economists kept talking about, like, oh, people will just pay it. Like, the prices go up and people keep buying. People keep buying more and more. Well, it seems like we've hit that ceiling, which with the Doritos, suddenly people are like, you know what? I'm not paying $7 for a bag of Doritos. And I think that's starting to happen across the economy.

[Max Chafkin]

This is called demand destruction. Right, Stacey? That's the economic term. Did we talk about this with oil? I mean, there's a point. This could very well happen with gas prices too, right? If it goes above a certain level, people stop using whatever this good is. And I guess we found the point with Doritos. Although $7, I don't know.

[Stacey Vanek Smith]

You're not at your demand destruction. Your demand is not destroyed.

[Max Chafkin]

It might still be worth it.

[Stacey Vanek Smith]

It's very cheesy and delicious.

[Max Chafkin]

Do you remember?

[Stacey Vanek Smith]

I don't know if it's $7 worth of cheesy and delicious. $7 is a lot. This show is produced by Jasmine, JT Green and Stacey Wong. Magnus Henriksen is our supervising producer. Sam Rogich handles engineering and Dave Purcell. Fact check. Special thanks to Jeff Muskus, Julia Rubin, Maria Ling, and Angel Reccu. If you have a minute, please rate and review the show. It really means a lot to us. And if you have a story that should be our business, email [e-mail] that is everybody's with an sloomberg.net thank you for listening. See you next week.

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