Our stupid tax code

04.03.13

Meet the People Making it Harder for You to File Your Taxes

As tax day approaches, here's a thought: wouldn’t it be nice to get a pre-filled tax form from the IRS? All you would have to do is accept what the IRS says, make any necessary edits, or reject it in favor of your own filings, and be done with it.

Such a scenario is far from a novel idea. Return-free filing has been endorsed in the past by both President Ronald Reagan, as well as President Obama. In addition, such a system already exists in Denmark, Sweden, and Spain (who, should be noted, do have much simpler tax codes).

So why don’t we have such a system?

Answer: big lobbying money from those who profit from your annual headache. These companies include H&R Block and Intuit, creator of the popular program TurboTax.

Intuit has spent about $11.5 million on federal lobbying in the past five years — more than Apple or Amazon. Although the lobbying spans a range of issues, Intuit's disclosures pointedly note that the company "opposes IRS government tax preparation."

The disclosures show that Intuit as recently as 2011 lobbied on two bills, both of which died, that would have allowed many taxpayers to file pre-filled returns for free. The company also lobbied on bills in 2007 and 2011 that would have barred the Treasury Department, which includes the IRS, from initiating return-free filing.

Intuit argues that allowing the IRS to act as a tax preparer could result in taxpayers paying more money. It is also a member of the Computer & Communications Industry Association (CCIA), which sponsors a "STOP IRS TAKEOVER" campaign and a website calling return-free filing a "massive expansion of the U.S. government through a big government program."

In an emailed statement, Intuit spokeswoman Julie Miller said, "Like many other companies, Intuit actively participates in the political process." Return-free programs curtail citizen participation in the tax process, she said, and also have "implications for accuracy and fairness in taxation."

In its latest annual report filed with the Securities and Exchange Commission, however, Intuit also says that free government tax preparation presents a risk to its business.

Roughly 25 million Americans used TurboTax last year, and a recent GAO analysis said the software accounted for more than half of individual returns filed electronically. TurboTax products and services made up 35 percent of Intuit's $4.2 billion in total revenues last year. Versions of TurboTax for individuals and small businesses range in price from free to $150

Click here to listen to author Liz Day's conversation with NPR, who co-produced this story with ProPublica

It may be true that trusting a large government bureaucracy to take care of something as important as your tax filings could lead to problems. However, those in favor of return-free filing argue that using the IRS to settle your tax bill would be 100% voluntary. This means that if you wanted an accountant to take care of your taxes, you most certainly could.

Another argument in favor of return-free filing is that for most people, taxes aren’t going to change dramatically on an annual basis and the IRS already has your previous tax history.

"When you make an appointment for a car to get serviced, the service history is all there. Since the IRS already has all that info anyway, it's not a big challenge to put it in a format where we could see it," said Paul Caron, a tax professor at University of Cincinnati College of Law. "For a big slice of the population, that's 100 percent of what's on their tax return."

The source for this lack of reform is obvious when you look at those who strongly oppose the ideas.

Grover Norquest, founder of Americans for Tax Reform argues that by allowing for return-free filing, the government really wants to "socialize all tax preparation in America" in order to slyly increase tax revenue. In reality, having the choice to use the IRS or your own means seems like more choice and more freedom.

On the other side of the aisle, Rep. Zoe Lofgren, a Democrat from California, also is opposed to the idea. It should be noted that her constituency includes Silicon Valley, which is where Intuit is located. Intuit PAC and its employees have donated $26,000 to Rep. Lofgren in the past two years.