Elizabeth Warren Introduces Bill To Make Tax Season Return-Free

Legal Issues

from the intuit-ive-thinking dept

Yay, it’s tax season again! As our American readers will know, this is the wonderful time of year when we scramble to get all of our taxes and deductions paperwork in order, take them to some storefront that looks like a military recruitment center, push all of those papers in front of someone that looks like they just graduated from college, and scream, “You figure it out!” For our foreign readers, I should explain that we do this because our tax code is more complicated than the plot of Game of Thrones, our tax authorities are every bit as ruthless as that same series, and we’ve collectively allowed our citizens’ payment of due obligations to become a for-profit industry. But seriously, though, come to America. It’s great. I swear.

Several times in the past, some members of our government have attempted to lessen the burden we bear to pay our taxes. It never seems to work because the industry that makes money off of this tax system — the tax preparation people and software makers — lobbies to keep filing free taxes a pain in the ass, directly scaring the public into thinking the government will over-charge them, and then indirectly and unethically having sockpuppets do the same. It’s in this way that you have a free-to-file federal tax program that roughly two-thirds of the public would be perfectly qualified to use, instead only being used by 3% of the population. ‘Merica!

Well, Elizabeth Warren and seven co-sponsors would like to change that by simply eliminating the need for returns entirely for a significant number of people.

On Wednesday, the Democratic senator introduced a bill with seven cosponsors, including Democratic presidential candidate Bernie Sanders, seeking to make significant reforms to the Internal Revenue Service (IRS). Under the bill, Americans with simple tax obligations would have the option not to complete a tax return at all, but to instead receive a pre-prepared return from the IRS with their liability or refund already calculated for them. The IRS already gets most employer and bank information on taxpayers’ obligations — such as W2s and interest earned — so all it would have to do is calculate what they would owe for them.

For others with more complex situations — those who want to itemize their deductions or with many dependents who have to provide more information — the bill would direct the IRS to develop a free, online preparation and filing service that would allow everyone to file directly with the government, rather than relying on third party filing services like TurboTax or H&R Block. And taxpayers would be able to download the tax information the IRS already has.

In other words, have the IRS, which will be evaluating these people’s returns anyway, simply do all the math for most of the simple tax returns. We’re not talking about returns that would legitimately make use of deductions; we’re talking about very simple tax returns, which is what most people have filled out by tax preparers or tax software anyway. Now, this is usually where someone will make the obvious point: the government doesn’t deserve to be entrusted with this math. And, hey, I take that point seriously. The government has certainly shown its capacity to lie and deceive. But so has the tax-prep industry. Intuit has been guilty of all kinds of underhanded attempts to keep people from being able to file for free. They are proven deceivers, too.

In addition to that, this bill is directly setting its sights on the cozy relationship the IRS has with the tax-prep industry, so anti-governmenters should really think about getting on board with this.

The bill would also prohibit the IRS from entering into agreements that would restrict its ability to provide such free, online services directly to taxpayers. The IRS has signed a number of binding agreements with the tax preparation industry over the years that blocks it from offering free services directly to taxpayers itself, saying that it will “not enter the tax preparation software and e-filing services marketplace” and “not compete” with private service providers. The IRS’ declarations that it won’t enter the tax preparation space fly in the face of what it’s been mandated to do. In 1998, Congress passed a bill requiring the Treasury Department to develop a “return-free” tax system by 2008 for those with simple obligations, computing what those people owe with information the IRS already has. Yet Warren’s office argues that the IRS has instead turned control of the process over to private tax preparation companies.

When a government institution rebukes its public duties in favor of corporate wishes, there’s a word for that. And it’s that corporate control that will be pushing back on Warren’s bill. The tax-prep industry, after all, has spent nearly $30 million in lobbying Congress since the late nineties. We’re all about to get a very real lesson on the effect of corporate lobbying on a Congress that is ostensibly designed to serve the public need. I suspect the results will be as instructive as they are ugly.

Part of the solution to this is, of course, a simplified tax code. But it’s somewhat strange to see some in favor massive tax reform, including simplifying the tax code, come out against simplifying filing tax returns or eliminating returns entirely.

Yet some anti-tax groups that say they want a simpler tax code have fought against these efforts. Grover Norquist, founder of Americans for Tax Reform, has testified and advocated against a return-free system. Republican presidential candidate Ted Cruz has consistently called to abolish the IRS, rather than get on board with plans to direct the agency to make things easier for taxpayers.

Some of that sentiment is likely coming from a worry that a simplified filing system would lead many people to be less angered by the overall tax system, and thus less interested in more radical reform. And some is likely born of a deep-seeded mistrust of government in general and the IRS in particular. Which, again, I completely understand. But it would be wise for the listeners of those mouthpieces to truly understand what this legislation would accomplish, because it’s largely built around eliminating returns for filers with returns so simple that charging to file them is downright silly.

Filed Under: elizabeth warren, irs, regulatory capture, tax returns, taxes
Companies: intuit