Congress has landed on one of those rare ideas that command support from both Democrats and Republicans. Unfortunately, it’s a bad one.
On Tuesday, the House approved legislation misleadingly titled the Taxpayer First Act that includes a provision prohibiting the Internal Revenue Service from developing a free online system that most American households could use to file their taxes. The Senate is considering a similar piece of bipartisan legislation.
This makes no sense. Congress should be making it easier for Americans to file their taxes. Instead of barring the IRS from making April a little less miserable, why isn’t Congress requiring the IRS to create a free tax filing website?
Better yet, the United States could emulate the roughly three dozen countries, including Chile, Japan and Britain, where most taxpayers do not need to fill out tax returns. In some of those countries, the accuracy of tax withholding is sufficient to obviate the annual filing process. In others, the government sends out completed forms to most taxpayers. In Estonia, filing taxes can be done in less than three minutes.
The federal government collects enough information about most American households to mail out a completed tax form that people would simply need to verify, sign and return. President Ronald Reagan proposed a version of just such a system. In 1998, Congress passed a law instructing the IRS to develop such a system by 2008. President Barack Obama endorsed the concept during the 2008 presidential campaign. It still hasn’t happened.
The explanation is sad but not surprising. The most vocal opponent of simplicity is Intuit, the maker of TurboTax, which has spent millions of dollars lobbying against efforts to reduce demand for its services. The company draws support from conservatives worried that making it easier to file taxes would make it easier to raise taxes.
Intuit and its allies, including proponents of the legislation, say that it’s cheaper and better for the government to let private companies run the system. But companies have little incentive to advertise the availability of free filing or to make the system easy to use. Indeed, they have every reason to steer people away from the free products. That is how they make money. As a result, the government is saving taxpayer money at the expense of those taxpayers.
Members of Congress pay lip service to ideas like filing taxes on a postcard, but they continue to perpetuate the current system of mass April immiseration by preventing the most obvious and effective way to simplify tax collection.
FROM AN EDITORIAL IN THE NEW YORK TIMES