Pluralistic: Turbotax is blitzing Congress for the right to tax YOU (20 Feb 2023)

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An ogrish, tophatted, cigar-chomping giant holds the US Capitol building aloft contemptuously, pinched between the thumb and forefinger of a white-gloved hand. He stands at a podium bearing the Turbotax checkmark logo, yanking a lever in the form of a golden dollar-sign. He stands before a IRS 1040 tax form.

Turbotax is blitzing Congress for the right to tax YOU (permalink)

Every year, Americans spend billions on tax prep services, paying a heavily concentrated industry of giant, wildly profitable firms to send the IRS information it already has. Despite the fact that most other rich countries have a far more efficient process, many Americans believe that adopting this process here is either impossible, immoral, or both.

That puts tax preparation in the same bucket as other forms of weird American exceptionalism – like the belief that we're too untrustworthy to have universal healthcare, or that we're so violent that we must all have assault rifles to protect ourselves from one another.

For those of you who aren't familiar with how they do it in, say, the UK, here's how it works: your employer submits all of your paystubs to the tax authorities; likewise the custodians of your pension and other people who send you money. The tax authority also knows about your major deductions, like your kids or other dependents.

The tax authority uses this information to fill in a tax return for you and they mail it to you. It's simple and easy to understand. If they missed some information, or if your tax status has changed, or if you've got new deductions, you can amend this return – or throw it away and start over by yourself or with a tax professional.

For the vast majority of Britons, filing their tax returns takes a few minutes once a year, and it's free. For the minority who don't fit the standard form, the system works like it does in the US – you either tackle it alone, or do it with professional help.

The IRS could easily do the same thing. Even in a world where many of us are being "casualized" and have income coming in as independent contractors, the IRS knows about it, thanks to the 1099 form. Sure, the IRS might make mistakes, and if you're worried about that, you can either manually review the precompleted return or pay someone to do it.

It's a no-brainer, or it would be – if it wasn't for decades of lobbying by the massively concentrated tax-prep industry – wildly profitable corporate giants like HR Block and Intuit, the parent company of Turbotax, who spent 20 years lobbying congress, spending millions to ensure that Americans would have to pay the Turbotax tax in order to pay their income tax.

The tax-prep industry couldn't have done this on their own – their astroturf campaigns were joined by a grassroots of useful idiots, bedwetters like Grover Norquist and his acolytes, who openly demand that tax preparation be as difficult and painful as possible, to drum up support for their campaign to "get the US government down to the size where we can drown it in the bathtub."

These extremists are joined by many independent tax-prep specialists, who are seemingly convinced that every taxpayer has 11 dependents, four different kinds of pension savings, and six all-cash side-hustles, two of them international. Some people do have complicated taxes – as a writer with income from all over the world, I'm one of them – but most people don't.

The point of getting the IRS to send you pre-populated tax returns isn't to deny you the opportunity to pay excellent, knowledgeable tax-prep specialists if you need them – it's to spare most of us from the needless expense of paying Intuit and HR Block to perform the rote form-filling by which they rake in billions in profits.

In reality, the campaign to defund the IRS isn't – and will never be – about helping "the little guy." As Propublica's IRS Files demonstrate, the defunded, shriveled IRS is a billionaire's plaything, which is why America's top 400 earners pay less tax than you do:

The commonsense utility of the IRS supplying you with prepopulated returns is so obvious that the tax-prep industry has had to really work to hold it at bay. The most successful scam was Freefile, a program cooked up by the tax-prep cartel that claimed it would provide free tax-prep to low-income Americans.

Freefile was a literal fraud: Intuit and its co-monopolists used a raft of deceptive "dark patterns" to trick people – students, veterans, retirees, and the poorest among us – into paying for services that they were entitled to use for free. Almost no one managed to find and use the Freefile offerings they'd hidden in a locked filing cabinet in a disused subbasement behind a sign reading "Beward Of the Leopard."

This was so obviously crooked that the companies were eventually forced to give it up, but they weren't done – their eye-watering, voluminous terms of service contained buried binding arbitration clauses that prohibited the people they ripped off from suing them:

Despite – or, more realistically, because of – the rising fury at the tax-prep industry's years of unchecked corruption, Intuit has actually increased its lobbying spending this year: Open Secrets reports that in 2022, Intuit showered lawmakers with a record $3.5m:

Their target? The $15m that the Inflation Reduction Act allocated to the Treasury Department to explore free tax filing. Intuit's line is that this would be "a waste of taxpayer money" and a "conflict of interest" – the same tired boomer nonsense that Nordquist has been shoveling since the Reagan administration. Once again, the proposal isn't to ban Intuit from offering tax prep services – it's to create a public option that lets people freely choose to pay for tax prep if they think they need it. It's a breathtaking act of paternalism to claim that we're all sheeple, too stupid to spot the IRS's greedy attacks on our pocketbooks.

Here's a choice quote from Intuit: "Creating a government run tax preparation program would be a waste of taxpayer dollars and further disenfranchise low income taxpayers. A direct to IRS tax prep system is a multi-billion dollar solution looking for a problem."

Unsaid: the tax prep industry rakes in billions of dollars from American taxpayers every single year. The $44.8m the cartel has spent lobbying against free filing since 1998 is a fantastic investment – for them. The dividends they reap from it come out of all of our pockets.

Another bargain? Hiring ex-government officials to work for Intuit, lobbying their former colleagues:

Or, as Senator Elizabeth Warren bluntly put it, "adroit influence peddling":

The neoliberal economists' theory of regulatory capture is a kind of helpless nihilism, grounded in the Public Choice Theory doctrine that says that regulators will always be captured, so we should just get rid of regulators or make them as weak as possible, so they won't become cordyceps-ridden puppets of the industries they oversee:

But capture isn't inevitable. Sure, if you have a referee that's weaker than the teams, you'll never get a fair game – never mind what happens when the ref either used to work for one of the teams or is sure of a cushy job with them when the season's over. If you want a small government, you need small corporations – need to block the anticompetitive mergers and predatory conduct that lets companies grow so large that they can fit their regulators into the little change pocket in their blue jeans.

Anyone who lived through witchhunts, torture and mass surveillance after 9/11 has good reason to want their government small enough to be accountable – but a doctrine of small governments and giant corporations is a plutocrat's charter – a recipe for regulatory capture so grotesque it is indistinguishable from farce.

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Colophon (permalink)

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