Intuit, the tax preparation giant, performed a public service last week by announcing its exit from a federal program that let some Americans use a free version of its TurboTax software.
With this move, the company is making clear what has always been true: Intuit and the rest of the tax prep industry want Americans to pay to file their taxes.
By abandoning the pretense of good citizenship, Intuit is clearing the way for the federal government to do what it should have done long ago: create a public website where most Americans can prepare and file income tax returns at no cost.
In countries such as Japan, the Netherlands and Britain, most taxpayers don't file tax returns. The government withholds taxes from wage income and handles the paperwork. People with more complicated finances still need to fill out forms and submit them, but everyone else can simply check the government's math and move on with their lives.
In the United States, a strange coalition has repeatedly prevented the creation of a similar system. Tax preparation companies loudly protest the unfairness of the government undercutting profits by making it easier to deal with the government. They have won support from anti-tax zealots like Grover Norquist who say that making it easier to pay taxes would also make it easier to raise taxes. The IRS has joined the resistance at critical moments, fearing that it will receive new responsibilities without new funding.
In 2002, the Bush administration scuttled a plan to create an "easy, no-cost" system for filing taxes online after fierce opposition from that coalition of the unwilling. To make the government's surrender politically palatable, the tax prep industry signed a deal with the IRS. In exchange for the agency's promise to do nothing, the companies agreed to offer free versions of their tax preparation software to most taxpayers.
For the last two decades, that Free File program has failed to serve most Americans. Seventy percent of taxpayers are eligible to use it. But in 2019, the last year for which data is available, only 2.4% did so, according to a federal review.
The IRS, starved for funding, has not paid to advertise the Free File program since 2014. The companies, naturally, aren't trying either. They'd rather charge people for the same service. Indeed, dogged reporting by the journalism nonprofit ProPublica has shown the ways that Intuit, in particular, tried to steer people to pay for tax preparation.