7. ON THE LIST: THE TAX PREP HOAX
The companies that sell you tax-help products are also lobbying against reforms that would make filing easier.
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It’s tax season — and an entire industry is eagerly standing by, ready to offer you a suite of paid products to make filing easier. But here’s the problem: the companies selling those tools are actively lobbying Congress to make sure that paying taxes doesn’t get any simpler. They aren’t helping us; they’re benefiting from our repeated pain.
TurboTax, a product by Intuit, is one of the most popular tax-filing services — and it’s what we’ll focus on today. Some of TurboTax’s software is free, but it uses a tiered pricing model. For example, if you want to “maximize your tax deductions,” you’ll pay at least $54.99.
The market exists solely because filing taxes sucks. And it’s a big market: TurboTax accounted for more than one-third of Intuit’s $4.2 billion revenue in 2012.
What exactly are they lobbying for, you ask? It’s actually about what they’re lobbying against: automatic filing. According to a ProPublica report, Intuit’s lobbying disclosures clearly note that the company “opposes IRS government tax preparation.”
Intuit and its supporters argue that involving the IRS in filing is risky, as the government stands to benefit from receiving more revenue — not saving Americans’ money. For that reason, filing should remain fully privatized, they say.
But we’ll just go ahead and repeat: for Intuit, one-third of $4.2 billion in annual revenue is what’s at stake here.
Manual self-filing, for the most part, could be done away with completely… if policymakers were motivated to act, that is.
When your employer sends you a W-2, for example, the IRS also gets a copy — meaning it would be very possible for the government to auto-file tax paperwork on behalf of citizens. (To be fair, there are certain components that can’t be automated, like itemized deductions.)
Companies like TurboTax know this, but it’s in their interest to maintain the status quo. Vox’s Dylan Matthews put it best:
“TurboTax is an evil, parasitic product that exists entirely because taxes are confusing and hard to file. Worse than that, Intuit is one of the loudest voices on Capitol Hill arguing against measures that make it easier to pay taxes.”
Ideas have circulated to make tax filing easier on citizens. In 2006, an Obama-administration economist designed a plan called “The Simple Return” that would provide pre-populated forms for most Americans. In California, a state version called ReadyReturn yielded a 98 percent satisfaction rate among users in surveys. Other countries have taken similar approaches, including Denmark, Sweden and Spain.
Where there’s a will, there’s a way. But when there’s a corporate lobbyist involved, that will tends to get a little bent.
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