On pretty much the eve of tax day, imagine a world in which the IRS mails you a prepared return and all you needed to do was review and sign it? It’s estimated that tens of millions of taxpayers would be able to use it, save around $2 billion and 225 million hours of preparation time. Now imagine if that reality were squashed by classic Washington lobbying  – specifically by Intuit, maker of TurboTax. That’s what ProPublica and NPR are saying. Intuit has spent $11.5 million on federal lobbying in the last five years and while it’s unclear what they were lobbying, chances are they weren’t in favor of this prepared return.
If you look at tax preparation software , you’ll know that the simplest returns are often done for free. Companies offer this because it locks you into their system. Eventually your return will be more complicated and you’ll need to pay for software. Until then, they’ll gladly give you free until you pay. So you get five years of free returns, no big deal, when you start paying you’ll be paying for 40 years of returns. It’s a smart business decision.
I don’t know if I’d trust the government prepared tax return given our current tax law. Enough changes from year to year that I suspect the cost of implementing this system will negate the cost savings on a small percentage of the population. Do we want to subsidize their tax preparation? Just think about tax law in the last ten years and how it has changed. Just this year we had the fiscal cliff (resolved after the new year). Then there was Tax Relief Job Creation Act of 2010  that extended the Bush-era tax cuts just a few years earlier (resolved a couple weeks before the end of the year). In both cases, the IRS notified the public that forms would be delayed while tax law was being finalized.
I don’t see the government sending our prepared forms as a win-win situation but I also don’t like seeing companies like Intuit lobbying against it. The only way to achieve progress is to think about and discuss these ideas. I can’t see simple filing working but that doesn’t mean, through an iterative process, we can’t build a system that will work. By lobbying against it, only those who offer tax preparation services will benefit.
What do you think?
(Photo: blmurch )