I’ve said and written the following many times: “Businesses do one thing—they sell stuff.” They pay attention to the numbers: sales volume, price of thing they sell, costs of production, the delta (aka profit), and market share.
It’s clear to me again in the fight over how we pay our taxes. A new report by Senator Elizabeth Warren and several colleagues in the Senate and House exposed how the tax prep companies shared personal taxpayer data with tech firms Meta and Google. For years those same tax prep companies have blocked the IRS and state governments from offering direct—and free—online ways to prepare and submit taxes.
Now there’s good news. A new coalition, the Coalition for Free and Fair Filing, has launched a campaign to support the creation of a free IRS “direct file” program to be piloted next year, thanks to President Biden’s reinvestment to modernize the agency.
In the Public Interest has joined the more than 200 organizations in the Coalition for Free and Fair Filing. It’ll take a groundswell of demand for this common-sense public option to overwhelm the power of the tax prep industry and their allies on Capitol Hill.
Tax preparation isn’t being privatized—it already is. Everyone pays taxes (well, almost everyone) so it’s clearly a public responsibility to make it as inexpensive (in time and money) as possible. But private companies have gotten effective control over that basic public function. The Free File Alliance is an industry coalition of the big tax software companies and the IRS “to help millions of Americans prepare and e-file their federal tax returns for free.” That’s not help—that’s privatization (and it’s also not entirely true).
The industry effort to derail Free and Fair Filing leads me to my amendment to what I say about what businesses do: They also pay attention to new things they can sell (it’s still all about sales). They up-sell (or promote costly products to tax filers who are already nervous about making mistakes), they extract saleable things from what they already do—like data from your tax returns, and, of course, they buy other companies that sell things.
Full disclosure: I use TurboTax to prepare my taxes. Costs me about $100 per year (I think). It’s good and easy. So, obviously it could be done. And it looks like we might save some money doing it.
Intuit, the owner of TurboTax, has net income of about $2 billion last year and their top five executives made $80.7 million. The company donated $646,000 to political candidates and organizations in 2022. They also spent $3.5 million in federal lobbying in 2022, and in 2023 outpaced all of their previous first quarter spending on lobbying—$980,000.
H&R Block behaved in a similar fashion. For 2022, the company made $554 million in net income and spent $23 million on its five highest paid executives. For that same year the company spent $2.65 on lobbyingexpenditures. It also spent $720,000 for the first quarter of 2023. H&R Block’s political action committee doled out $352,000 to federal candidates for the 2021-2022 cycle.
All that money could be used for two things that would help us all: invest in modernization of the IRS, and reduce our individual spending on tax prep (call it a tax cut for tax prep!).
Free and simplified tax filing should be a no-brainer. But there are many other benefits we’d get if this was the public service it ought to be. According to the myth-busting Economic Security Project, the IRS free file system “could leverage the data that the IRS already has in order to make sure more people can access the tax credits they are owed.” The project points out one in five families eligible for the Earned Income Tax Credit don’t get it because it’s too hard or expensive to file taxes. A free, direct-file program could make that much easier and, well, free.
What I find particularly interesting is how the industry arguments follow a predictable pattern (so predictable, in fact, that I’ve actually cowritten a book with Nick Hanauer and Joan Walsh, due out September 26, about this playbook; the title is….not subtle: Corporate Bullshit). They say there’s no need for the IRS to create this public option since the private sector has it covered, that it would cost billions in taxpayer funds, that it will hurt (somehow?) low-income taxpayers, and, of course, that it’s another big government program.
These are the usual corporate arguments for almost every issue that challenges corporate power and profit. We’ve seen them before. And as we do about many industry arguments, we call BS. We’ll break down the arguments in future newsletters. Stay tuned.