The tax-prep industry lobbies hard to keep Tax Day a torture for you
It’s the eve of April 15, when America enters the final phase of its annual tax-preparation torture. So it’s proper to recognize the companies that have lobbied hard to make sure the process remains as agonizing as possible for the average taxpayer.
Step forward, Intuit and H&R Block!
Intuit is the maker of the top-selling tax preparation program, TurboTax, which retails for as much as $100. H&R Block distributes the second-ranking program under its own name. Both have spent millions of dollars lobbying Congress on goals that include quashing initiatives to promote nearly effortless tax filing. Under this system, the IRS would provide eligible taxpayers with a pre-filled return, using information the agency already received from employers, banks and other income sources. Taxpayers would simply have to sign the form, assuming they agreed with the figures, and send it back.
The supporters of such a system include President Obama, and many tax experts and economists. Obama’s former economic advisor Austan Goolsbee estimated in 2006 that return-free filing could apply to as many as 40% of taxpayers, saving them as much as 225 hours of time and more than $2 billion a year in tax-preparation fees. It could also save the government an estimated $36 million a year through reduced errors and investigations.
But it could cost Intuit and H&R Block, not to mention other tax-preparation firms, dearly. Intuit’s annual report warns investors of the “risk ... that government encroachment at both the federal and state levels may present a continued competitive threat to our business.”
The corporate opponents of easy filing have made an ideological alliance with anti-tax activists such as Grover Norquist, whose purpose presumably is to keep tax-filing burdensome to bolster anti-IRS and anti-government sentiment.
Norquist’s Americans for Tax Reform said in 2005 that return-free tax filing “would create a conflict of interest where the Internal Revenue Service would become both tax preparer and enforcer.”
Here’s what Intuit’s spokeswoman, Julie Miller, told my colleague Evan Halper about a California return-free program in 2006: It’s “a fundamental conflict of interest for the state’s tax collector and enforcer to also become people’s tax preparer.” Sound familiar?
H&R Block has spent $9 million in lobbying since 2010, according to a database compiled by Maplight.org, including in support of legislation that would bar the federal government from providing individual tax filing or preparation services.
Intuit has lobbied against return-free filing with special ferocity and has never let up on the pressure, as has been documented by ProPublica’s Liz Day, an indefatigable tracker of the company’s lobbying efforts. The company has spent nearly $13 million in Washington lobbying since 2010 to “oppose IRS government tax preparation,” among other things.
In its home state of California, which offers as part of its CalFile system a no-cost return-free service to taxpayers with simple tax situations called ReadyReturn, Intuit has stood up strong for the right of taxpayers to pay for unnecessary tax preparation.
In the two years after ReadyReturn was first proposed in 2004, Intuit spent $500,000 on Sacramento lobbying and campaign contributions. Its purpose wasn’t much of a secret in the halls of the Capitol: to keep the program from expanding and eventually to kill it.
“In all my years as a state senator, a U.S. Congressman and state finance director, I never saw as clear a case of lobbying power putting private interests first over public benefit,” wrote Tom Campbell, the dean of UC Berkeley’s business school, in a 2006 Times op-ed. (Campbell is now the dean of Chapman University’s law school.)
Don’t expect the pressure from Intuit and other tax-preparation companies to ebb. Intuit derived a large share of its $1.8 billion in consumer software and services revenue last year (41% of its total revenue) from TurboTax. The firm has been striving mightily to increase its take -- much to customers’ chagrin, as we reported in January.
The company tries to portray its opposition to easy filing as a blow against government intimidation and in favor of freedom. “Return free filing minimizes the taxpayers’ voice and control over the tax process,” Intuit’s Miller says. “Such a system ... does not advance taxpayer rights, citizen empowerment or real simplification of the tax code.”
You can believe that, or you can believe what the tax-prep industry told California lawmakers when it was trying to kill the state program behind closed doors in Sacramento.
“The argument was never presented in terms of the public interest,” Campbell told The Times. “It was stark. It was: ‘We are doing it and we don’t want the competition.’ ”