ProPublica reported this morning that Congress is preparing to pass a bipartisan bill that would “permanently bar the IRS from creating a free electronic tax filing system.” The ban is the goal of a group called the Free File Alliance, which—as political naming conventions would imply—lobbies to make sure the United States will never establish a free, public tax-filing system:
The Free File Alliance, a private industry group, says 70% of American taxpayers are eligible to file for free. Those taxpayers, who must make less than $66,000, have access to free tax software provided by the companies. But just 3% of eligible U.S. taxpayers actually use the free program each year. Critics of the program say that companies use it as a cross-marketing tool to upsell paid products, that they have deliberately underpromoted the free option and that it leaves consumer data open to privacy breaches.
Critics say these things because these things are true! Electronic tax filing is a service that has evolved into a full-on scam, in which for-profit companies insert themselves between taxpayers and tax collectors for no good reason. And a bipartisan Congressional effort wants to keep it that way forever. It is the ideal case study in how and why nothing will ever get better.
Electronic tax filing is a service that has evolved into a full-on scam, in which for-profit companies insert themselves between taxpayers and tax collectors for no good reason.
TurboTax and related computer-filing systems used to be helpful when they were an upgrade over doing taxes by hand, the same the way private toll highways were helpful when the alternative was following some haphazard trail across the new nation. Eventually, though, we built the Interstate Highway System, and now highway privatization exists as a scheme to steal money and property from the public.
It would be trivial, at this point, to cut the ribbon on the Federal Tax Expressway. Unless you’re running your own business—in which case you should get a real accountant—the IRS already has your income information. It just needs to confirm it with you and figure out your deductions, which is what TurboTax does.
In TurboTax, what used to be a lightweight questionnaire to walk you through your tax form has evolved into a sort of immersive text-based role-playing game, where you move blindly from one room to the next with no ability to zoom out and read the map.
But because the commercial software has to pretend to be doing something useful, it’s gotten progressively more opaque and obtrusive. In TurboTax, what used to be a lightweight questionnaire to walk you through your tax form has evolved into a sort of immersive text-based role-playing game, where you move blindly from one room to the next with no ability to zoom out and read the map. If you leave the path—say, if you’ve been properly complying with the nanny taxes, and you want to figure out where to enter that information—it’s easy to end up in a relentless error loop, where the system tells you that a number is wrong but doesn’t re-ask you whatever question might make it right again.
If there were a free, public alternative to the for-profit tax software, the tax preparation companies would have to make their products somehow more helpful or more valuable.
If there were a free, public alternative to the for-profit tax software, the tax preparation companies would have to make their products somehow more helpful or more valuable. There is a decades-long ideological commitment to the notion that the nimble private sector can outcompete the government, but it is mostly expressed by taking away government functions and outsourcing them for profit, not by letting corporations actually try to compete. So the tax software companies want the market to itself, knowing (as Tim Cook knows) that once the private sector has developed a captive enough audience, people will just suffer along with whatever product design gets forced on them.
And with this bill, ProPublica wrote, the industry is likelier than before to create that perpetual captivity:
While efforts to make the IRS’ deal with the tax preparation industry permanent have fizzled in the past, critics are particularly worried this year. The Taxpayer First Act also includes a provision that would restrict the IRS’ use of private debt collectors to those above a certain income.
Witness the power of bipartisanship and private-public partnerships: the debt-collection industry is providing the muscle for the tax-preparation industry to extort what it wants. If you want to stop poor people from being abused by collection agencies, you have to give up on free, easy direct tax preparation. The price of calling off the predators is protecting the parasites.
