Congress With the Help of H&R Block and Intuit Moves to Ban Free Online Tax Filing
The House of Representatives passed bipartisan legislation on tax filing Thursday that would prohibit the IRS from creating a free tax preparation service.
The IRS has the information necessary to file the vast majority of Americans taxes without external assistance, but lobbyists from Intuit and H&R Block have worked to keep lawmakers from allowing the IRS to create a free program out of fear it would eliminate their profits.
ProPublic published a report on the pending bill, saying, “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.”
Free Public Tax Filing Option Common in Many Countries
Developed countries throughout the world, such as the UK, Japan, Germany, Denmark and Sweden have a free, public option for filing taxes. Since taxation is a public sector activity, it does not benefit from private sector assistance in most cases. Critics argue tax service corporations are lobbying to prevent competition from a public option at the taxpayer’s expense, with no extra benefit beyond profit for a few private companies.
Rep. Richard Neal (D-Mass.), chair of the Ways and Means Committee, led the passing of the bill, called the Taxpayers First Act. Neal received $16,000 in contributions from Intuit and H&R Block in the last two election cycles.
The Democratic party was split over the bill, with some supporting it due to other provisions and some denouncing it entirely. Rep. Katie Hill (D-Calif.) had some of the most strident criticism of the bill, calling the IRS-tax filing aspect a “sneaky provision the tax preparation lobby has been pushing for, and it hurts consumers. It goes against everything we ran on. It has to be addressed. It’s a huge benefit to the corporations.”
New Bill Receives Mixed Reviews
Other elements of the Taxpayers First Act, such as consumer protections from private debt collectors and millions in assistance to low income taxpayers, led other prominent Democrats, such as Rep. John Lewis (D-GA), to sponsor the bill.
Interestingly, private tax prep corporations have the support of conservative anti-tax activists like Grover Norquist of Americans for Tax Reform. Paul Waldman of the Washington Post believes Norquist is against return-free filing because making taxes easier to file would improve public perception of taxation. The more needlessly complex and inconvenient the tax system is, according to Waldman, the more likely people will want tax cuts.
The IRS already has a free tax filing system for low-income tax payers, but it is not well publicized and only 2 percent of eligible filers use it. The new bill contains a memorandum of understanding that the government will not provide a free tax filing service, and a new “working group” will be created to study the relationship between private tax preparation corporations and the IRS.