Tax preparation companies lobby Congress to keep tax preparation costly and complicated. Intuit, maker of TurboTax, the tax preparation software, lists government tax preparation as a threat to its business model. One example is the earned income tax credit, a government program for low-income people. The credit is so complicated that 20% of the people who are eligible never file. The anti-tax contingent’s desire to force Americans to spend time and money on tax preparation dovetails with the tax preparation industry’s desire to collect billions of dollars in fees. If the government prepared people’s tax returns, that 20% would receive government support. Nonetheless, Intuit has lobbied lawmakers to make the credit more complicated, thereby driving more taxpayers to paid preparation services. To date, the tax preparation industry has kept the system complicated because the potential cost to it in terms of lost revenue is vast. Only public outcry can change the system.
Block promise to pay all taxes and interest resulting from a failed audit. As a result, these services have every incentive to take conservative, pro-government tax positions. A second argument is that government- prepared tax returns encourage tax evasion. In a no-return system, the government reveals its knowledge of the taxpayer’s income before the taxpayer files. Thus, the argument goes, the taxpayer knows if the government has missed something and has reason to let the mistake stand. But taxpayers already know what information forms the government has because they receive duplicates of those forms. The incentive to lie does not increase because the taxpayer avoids weeks of tax preparation. BOLSTERING THE ANTI-TAXERS Finally, there is the anti-tax argument for onerous tax preparation: Keep tax preparation unpleasant to fuel anti-tax sentiment. In the past, Republicans argued against high taxes. But after decades of tax cuts, Americans are no longer swayed by that argument. Exasperating tax preparation, according to this argument, helps keep the anti-tax fever high. And that fuels public hate for government and the tax system. Unfortunately, the anti-tax contingent’s desire to force Americans to spend time and money on tax preparation dovetails with the tax preparation industry’s desire to collect billions of dollars in fees.
Beverly Moran is Professor Emerita of Law at Vanderbilt University. © The Conversation
American Consequences
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