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Congress is About To Ban the Government From Offering Free Online Tax Filing (propublica.org)
Just in time for Tax Day, the for-profit tax preparation industry is about to realize one of its long-sought goals. Congressional Democrats and Republicans are moving to permanently bar the IRS from creating a free electronic tax filing system. ProPublica reports: Last week, the House Ways and Means Committee, led by Rep. Richard Neal (D-Mass.), passed the Taxpayer First Act, a wide-ranging bill making several administrative changes to the IRS that is sponsored by Reps. John Lewis (D-Ga.) and Mike Kelly (R-Pa). In one of its provisions, the bill makes it illegal for the IRS to create its own online system of tax filing. Companies like Intuit, the maker of TurboTax, and H&R Block have lobbied for years to block the IRS from creating such a system. If the tax agency created its own program, which would be similar to programs other developed countries have, it would threaten the industry's profits.
"This could be a disaster. It could be the final nail in the coffin of the idea of the IRS ever being able to create its own program," said Mandi Matlock, a tax attorney who does work for the National Consumer Law Center. Experts have long argued that the IRS has failed to make filing taxes as easy and cheap as it could be. In addition to a free system of online tax preparation and filing, the agency could provide people with pre-filled tax forms containing the salary data the agency already has, as ProPublica first reported on in 2013.
"This could be a disaster. It could be the final nail in the coffin of the idea of the IRS ever being able to create its own program," said Mandi Matlock, a tax attorney who does work for the National Consumer Law Center. Experts have long argued that the IRS has failed to make filing taxes as easy and cheap as it could be. In addition to a free system of online tax preparation and filing, the agency could provide people with pre-filled tax forms containing the salary data the agency already has, as ProPublica first reported on in 2013.
While we're at it, let's ban the government from negotiating the cost of drugs that they buy, let companies certify their own products, get rid of Net Neutrality, and start a forever war or two. Nothing like the Rule of Industry to really help a country flourish.
Think about it this way - for the vast majority of Americans, the IRS already knows about you and how much tax you owe. They get all that information from your employer(s), your banks, etc. Turns out they pretty much do your tax return for you. Hell, even if you buy and sell shares they get that information as well.
So you doing your tax return is redundant - there is no reason for it since the IRS has already done it. They could just as well present their calculations to you and say "If you agree, just sign here and pay the amount owing (or to release your refund)".
Of course, the tax industry would hate that, since they built up empires on ensuring people are forced to do taxes so they'd get business every year. And yes, many countries already do this as well - they realize that they already have every document you have, and every deduction you claim they know about.
I had one tax form I did in the 90s while in graduate school, or possibly immediately after while my income was very low. It wasn't 1040EZ, it was simpler. Large type, one page, less than 10 lines, and when done I filed this in on a touch-tone phone and punched in the final number directly to the IRS.
After that I used 1040EZ a lot and it was straight forward as nothing was complicated if all your income was salary and interest. It could have been simpler, but in any way that it was simpler it meant removing someone's tax benefit. (I believe that any simplification that keeps the same tax rate is essentially a tax increase for someone)
It only got complicated really once I had a mortgage and larger investments. (possibly in the past I failed to include income from mutual funds...) Then the tax prep software was very useful and helpful. However the most complicated parts were never the itemized deductions (mortgage, charities, etc), the complex parts were always the minutiae of your income. Detailing all the interest, dividends, capital gains, figuring out the basis, and such. Where I've got most of the money it won't import into tax software, and the places I did import this year it didn't report basis to IRS so I had to still manually enter the numbers.
The stuff that drives me the most nuts getting exactly correct is data that is already reported to the IRS. If I get those numbers wrong they'll notice immediately and have interesting questions for me. And that data is very often highly detailed. I'd rather just report what they don't know.
The overall trajectory here is that the more money I made the more complex the taxes were. If you're poor the taxes are already simple! If you're really rich then you just pay someone to do taxes for you to take advantage of all the loopholes. So when politicians are calling for simpler taxes I would think that this is not done for the benefit of the poor or the rich.
I listened to a great podcast from NPR the other day called Tax Hero, about a Stanford professor who created a system in California called ReadyReturn to basically do this with the state taxes.
It is a fascinating podcast so if you have the time it's worth a listen (I say this as an Australian that finds US taxes a byzantine mess), but the basic gist of it is this professor was all like, why the fuck doesn't our government do what every other government in the world does and take the pain out of taxes for our citizens?
So he banged out a system to do it in California and after a successful trial tried to roll it out further. Then he discovered Intuit and the tax lobby and Grover Norquist and that mob and was basically stonewalled by (you guessed it) Republicans.
He spent tens of thousands of dollars of his own money on a lobbyist and made a ton of progress but ended up losing out on getting into the legislation, or whatever (I can't remember the gritty political details) by a single vote.
There's some commentary from Norquist and the other side is well represented in the discussion, IMO - I have a better understanding as to why people are against it. I just think it's not at all worth it at all and the massive amount of pain, stress and financial burden could be better spent literally anywhere else.