The Taxpayer First Act, which passed the House this week, has a deeply cynical name. The bill would make it illegal for the IRS to create a government-operated tax-filing system, which represents a far better deal for TurboTax than for Americans. Introduced by Representative Richard Neal (D, MA.) and Representative John Lewis (D, GA), the legislation all but ensures that paying taxes remains a giant, expensive pain in the ass for most workers and insulates Intuit, which runs TurboTax, and H&R Block from the potential harmful effects of competent governance to their bottom line.
As it stands, roughly 70 percent of Americans are able to file their taxes for free. Any taxpayer making less than $66,000 dollars a year can receive services from for-profit companies like TurboTax at no cost. However, only three percent of people eligible for this savings actually take advantage of it. The private tax industry has been accused of underpromoting the program to increase profit. Given the adoption rate, this accusation borders on statement of fact.
But the underutilized free filing program is ostensibly why the Internal Revenue Service has held off on creating a government operated filing system. This is effectively an agreement between the IRS and the Free File Alliance, an industry group that lobbies on behalf of companies that assist with filing. According to a ProPublica investigation, FFA members Intuit and H&R Block have spent over $6 million to lobby against a government system comparable to those that exist in many other developed countries. Rep. Neal got over $16,000 from the for-profit tax filing industry through the past two election cycles.
In contrast to the United States, many countries have uncomplicated and painless tax filing systems (to go with their less complicated tax laws). In Estonia, for example, it takes about a minute to file a tax return. A taxpayer in Estonia logs into their bank account online, finds their already filled out tax return form and clicks a button after verifying that their information is correct. That’s it. The average taxpayer in the United States will need about 13 hours to file their taxes after locating their own taxpayer forms, paying for a private service, and, in many cases, mailing the tax forms to the IRS.
The Taxpayer First Act is an attempt, essentially, to ensure that this will remain true for the foreseeable future — and doubly true for parents, who have dependents, often have dual incomes, and are more likely to work as contractors.
FFA Executive Director Tim Hugo, who is also a House delegate for the 40th district of Virginia, points out that the current system has “no cost to the government.” This is true. The cost lands squarely on workers and it is, for lack of a better word, a shakedown. A portion of the money goes into Intuit and H&R Block coffers and a portion of the money is used to lobby against the interests of taxpayers.
As if that weren’t bad enough, the bill also states that the IRS can’t use private debt collectors for people above a certain income. But “above a certain income” isn’t really the problem when it comes to private debt collection. Private debt collectors overwhelmingly go after the poor: About one in five people who are targeted by private debt collectors live below the federal poverty level and almost half had incomes below 250 percent of the federal poverty level. Private debt collectors also have a penchant for going after people who are victims of natural disasters. (The IRS illegally gave private collectors nearly 2,500 files for delinquent payments of taxpayers who had survived both Hurricane Harvey and Irma.) Where the IRS is legally required to ensure that taxpayers will have enough money for food, housing, and transportation while collecting overdue tax payments, private collectors are not.
So why is a piece of legislation ostensibly designed to help taxpayers funneling money to these bad actors? The answer is simple: Congress has cut the IRS’s budget by 18 percent over the last decade. Private collectors fill a gap. But when the IRS shrinks — when the agency isn’t empowered to actually work on behalf of taxpayers — people suffer. The executives running the companies lobbying in favor of Taxpayers First know this. They are putting profits first.