Congress Is About to Ban the Government From Offering Free Online Tax Filing. Even Dems are on board for this one. In fact a Dem is one of the sponsors. In the tradition of GOP-style nomenclature, this legislation is entitled the Taxpayer First Act.
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.
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.
70% of Americans qualify for the free e-file programs provided by commercial companies, but only 3% take advantage of them. One reason I haven’t used them is because they usually save your information to the cloud, and I do not consider the cloud secure enough for that kind of personal information. A lot of them require working online as opposed to downloading a fillable form that does the math and allowing the taxpayer to work offline and save their tax return on their own computer. I also would rather mail my tax return and many of the free-file programs require e-file, and do not allow the option to print out the completed return and mail it in.
One member of the Free File Alliance explicitly told shareholders that the IRS “developing software or other systems to facilitate tax return preparation … may present a continued competitive threat to our business for the foreseeable future.”
A threat to their business is not a good enough reason for this legislation. Similarly, the fact that a decent health care system would likely threaten the bottom line of health insurers is not a reason to compromise the system. It should be considered a public good for the government to make it as easy as possible to pay their taxes, right up there with bridges and roads.
The congressional move would codify the status quo. Under an existing memorandum of understanding with the industry group, the IRS pledges not to create its own online filing system and, in exchange, the companies offer their free filing services to those below the income threshold.
However, the consumers have voted with their feet and have largely rejected the commercial free-filing systems. Nevertheless, Dems are moving to make it illegal for the IRS to create their own free-file system. If it is fair to examine the relationship of political donations and legislative agenda of Republicans, it is just as fair to examine those relationships when they involve Democrats.
Those efforts have been fueled by hefty lobbying spending and campaign contributions by the industry. Intuit and H&R Block last year poured a combined $6.6 million into lobbying related to the IRS filing deal and other issues. Neal, who became Ways and Means chair this year after Democrats took control of the House, received $16,000 in contributions from Intuit and H&R Block in the last two election cycles.
Let’s not be so weary of fighting trump that we apathetically allow this sort of corporate partiality to become law.