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Congress is About To Ban the Government From Offering Free Online Tax Filing (propublica.org)

Posted by msmash on from the how-about-that dept.

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.

23 of 449 comments (clear)

  1. Absolultely shocking... by flippy · · Score: 5, Funny

    Politicians from both sides introducing a bill that's bad for citizens based on the lobbying of an industry. To quote Claude Raines from Casablanca, "I am shocked—shocked—to find that gambling is going on in here!"

    1. Re:Absolultely shocking... by Major_Disorder · · Score: 4, Informative

      What do you expect form the "Best Democracy money can buy."

      --
      First law of people: People are generally stupid.
    2. Re:Absolultely shocking... by Humbubba · · Score: 4, Insightful

      US corporations actually run the US, the elections are only there to change the people whom are told what to do, and to give the voters the false impression they have a choice.

      "If Voting Made a Difference, They Wouldn't Let Us Do It" - Mark Twain (?)

    3. Re:Absolultely shocking... by lgw · · Score: 5, Insightful

      You'd need a constitutional amendment for a national sales tax or VAT. Plus those are regressive tax schemes.

      Interestingly, you could probably do a national sales tax if all the money went directly to some sort of UBI - the requirement is that the money be sent to the states in proportion to population, can't be spent directly by the federal government.

      A flat tax on all forms of income (including dividends, interest, inflation-adjusted capital gains, and so on) would be ideal. Make it progressive by sending everyone a check for a fixed amount on top of that tax. No need for an income tax at all: a payroll tax will cover all wages, sine it's a flat tax. But we'll never get this, because the very rich would pay a lot more.

      Now as soon as you allow any deductions whatsoever to the flat tax, it's ruined as loopholes will immediately be added for the 1%, and the tax rate will neeed to double to bring in the same total. But if there were no deductions or exceptions of any kind? Golden.

      --
      Socialism: a lie told by totalitarians and believed by fools.
    4. Re:Absolultely shocking... by PuckSR · · Score: 5, Insightful

      Why do we need a "flat tax" or a "fair tax".
      For 90% of Americans, who take the "standard deduction", tax calculations aren't even "calculations". I could write an Excel spreadsheet to do them in an hour. The govt has ALL of the relevant information and could just do them for the people. You don't need to do some kind of "flat tax" or "Fair tax". It already is EASY

      The problem is that most Americans don't understand it because of laws like this one.

    5. Re:Absolultely shocking... by greythax · · Score: 4, Insightful

      Yeah, because those slackers making 15k a year should TOTALLY pay a third of their income to make filing easy. No other possible solution could exist. All those countries which fill their citizen's tax forms out for them are merely fake news.

    6. Re:Absolultely shocking... by VValdo · · Score: 4, Informative

      Doing your taxes doesn't have to be a pain. In many countries around the world, filing taxes is so easy and painless, "tax day" isn't even a thing.

      Back in 2005, a little group of California tax experts were talking shop and they figured, we could do that here in the U.S. A lot of people in California get all of their income from their paychecks, and taxes are already withheld from those paychecks. In those cases, California could just fill out the W-2 for the taxpayers, who could check for errors and just send them back in. Easy as 1-2-3. (That was the slogan the state came up with). They named it: ReadyReturn.

      --- Here's the podcast episode. Hit play and enjoy. (I say "enjoy" as in get boiling mad.)

      --
      -------------------
      This is my SIG. There are many like it, but this one is mine.
    7. Re:Absolultely shocking... by tlhIngan · · Score: 5, Interesting

      Then again, it would be simple and easy and efficient.....so, at the same time, I think I"ll wish for a pony too.

      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.

    8. Re:Absolultely shocking... by rossz · · Score: 5, Insightful

      Income - PovertyLine = Taxable income. With a flat tax, calculating the amount is easy.

      You make 30,000. You subtract the 25,000 Poverty Line (or whatever it is) from your income. That leaves 5,000 that is taxable. A 10% flat tax rate means a $500 tax
      Even the rich guy with a 500,000 income gets to subtract that 25,000 from his income. Not that it will make much of a difference in his taxes. The tax would be $47,500, assuming a 10% flat tax.

      But I have three kids. Where's my deduction?
      You don't get a child deduction. Having kids was your choice that other people should not be required to subsidize.

      What about my mortgage interest deduction?
      You don't get a mortgage interest deduction. Buying a house was your choice that people stuck in apartments should not have to subsidize.

      Incomes and tax rates chosen at random for illustration purposes only.

      --
      -- Will program for bandwidth
    9. Re:Absolultely shocking... by Darinbob · · Score: 4, Interesting

      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.

    10. Re:Absolultely shocking... by trawg · · Score: 4, Interesting

      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.

    11. Re:Absolultely shocking... by smi.james.th · · Score: 4, Informative

      As much as I enjoy your mindless bashing of the right, have a look at the wombles in charge of this. Two of them are Democrats.

      --
      One thing I know, and that is that I am ignorant...
  2. Well at least they're consistent. by GameboyRMH · · Score: 5, Insightful

    Just like health care, they throw the good of the population under the bus to protect existing industries that profit from the horribly broken status quo. And a large chunk of the population has been tricked into liking it that way.

    --
    "When information is power, privacy is freedom" - Jah-Wren Ryel
    1. Re:Well at least they're consistent. by dargaud · · Score: 5, Insightful

      When looked at from Europe, some things in the US are absolutely insane: for profit prisons (that'll want to maximize recidivism), for profit health insurance (that'll deny any expensive claims), guns everywhere, and now you have to pay to fill your taxes ? Isn't it the _basic_ role of the IRS to make it as simple and automated as possible ?!?

      --
      Non-Linux Penguins ?
  3. Well by fabioalcor · · Score: 3, Funny

    IRS should just open-source it.

  4. Re:Good by jandrese · · Score: 5, Informative

    It doesn't have to be "totally free" to save me money. Currently to e-file costs around $45. It's nearly a guarantee that the government can run the service cheaper than that. Virginia had a service like that nearly a decade ago and it cost them about $40k/year for the entire state. Lobbying from the tax return industry killed it and now every taxpayer in the state pays on the order of $55 each year to e-file. Millions of dollars funneled to H&R Block, Intuit, etc... because they bought off some representatives. Not once has any service saved me a dime off of my state taxes. I can't think of any money they have saved me on federal taxes either. The only reason I use them is because there is no free way to e-file if you have a middle class income.

    --

    I read the internet for the articles.
  5. Re:Wait a minute, I just filed for free online by taustin · · Score: 4, Informative

    They're talking about the IRS creating tax filing software themselves, which the IRS has never done. Any free filing systems that you have used have all be created and run by third parties.

  6. Re:Ban makes sense for widely used material produc by Dragonslicer · · Score: 4, Insightful

    Software is different though - it has essentially zero cost of duplication and distribution. That's the entire premise behind the open source movement - leveraging that zero cost of duplication and distribution to maximize benefit to society. Essentially you can view what the IRS is doing as hiring a few people to write tax software for them (so, maybe $200k in development costs), then duplicating and distributing it to everyone for free. Even if the IRS charged double their development costs for it, I doubt Intuit and H&R Block could compete with that price (e.g. if they sell 10 million copies, then each copy should be priced at less than 4 cents).

    One other important point - the IRS already needs this software anyway, since they have to know if people are paying the correct amount. And really, as the summary points out, the IRS already receives most of the data that people enter in their tax forms, so forcing people to transcribe all of the data is a waste of time and obvious source of errors.

  7. Blame Grover Norquist and the Anti-Tax Faction by Koreantoast · · Score: 5, Insightful

    Isn't it the _basic_ role of the IRS to make it as simple and automated as possible ?!?

    A lot of the blame can be put on Grover Norquist, the leader of Americans for Tax Reform, an anti-tax, small government group. One of the things his group advocates for is to make filing taxes as hard as possible. The group fears that if filing taxes is easy, then people won't resist paying them or the growth of government. For those of you who may not be aware, Norquist pushes aggressively for politicians to sign a "Taxpayer Protection Pledge" that basically fights any new taxes. For Republicans, it's almost mandatory less have one of the largest right-wing groups move against you.

  8. Americ truly is a strange place by anarcobra · · Score: 5, Insightful

    The agency in charge of collecting your taxes is not allowed to provide a portal where you can submit them your tax information, and instead you have to pay a company to fulfill your legal obligation to file taxes?
    What a dystopian shit hole.

  9. You may be mixing different things by raymorris · · Score: 3, Insightful

    Article 1 section 8 says:

    The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

    Duties, imposts, an excises are taxes on transactions, on doing things, as opposed to a tax on being (either a tax on a person being alive or a thing existing). A sales tax is an excise tax. The requirement, then, is that the tax is uniform - the feds can't set a different rate in California than Florida. Note there is no mention of census or population. So no Constitutional issue with a national sales tax.

    So where DO we find a mention of population?
    We find that regarding "direct taxes", which are taxes on being (either a person, being a alive, or a tax on a thing based on what kind of thing it is - a tax being a car or being a house). This as opposed to taxes on transactions, on doing. Direct taxes therefore are:
    Real Property taxes
    Capitation ($x per person)
    Personal property taxes
    See
    Murphy v. Internal Revenue Service and United States, case no. 05-5139,

    For these direct taxes only, the Constitution provides that:

    --
    Representatives and direct taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers.

    So the feds can't tax each of the states $1 billion for property, direct taxes (taxes on people or property) have to be apportioned by population.

    What does "apportioned" mean? Well, we're talking about taxes here, not spending. Apportioning TAXES means how taxes are levied amongst the states. As mentioned previously, this applies only to direct taxes, so it has no relevance for transaction taxes anyway.

  10. No thank you by PopeRatzo · · Score: 4, Funny

    I'm like Donald Trump: I don't want the government seeing my tax returns.

    --
    You are welcome on my lawn.
  11. Re:While unpopular, I'm not 100% against by neurocutie · · Score: 4, Insightful

    "The job of the IRS is to collect taxes, not prepare them."

    except that how is the IRS supposed to know if you filed and paid the correct amount?

    that's right, the IRS has to also compute its version of what you owe to see that it matches, i.e. it has to "PREPARE" your taxes ANYWAYS. And they have to already have almost all info needed. Its all duplicate effort -- a waste of your time.