Thursday, August 21, 2014

You are the IRS's worst-paid employee

A disgruntled employee. SAUL LOEB/AFP/Getty Images

"It's so frustrating," says Austan Goolsbee. "Taxpayers have been turned into the Internal Revenue Service's lowest-paid employees. They're doing the IRS's work for nothing."

Goolsbee is an economist at the University of Chicago's Booth School of Business. But from 2010 to 2011 he chaired President Obama's Council of Economic Advisers. And like so many economists who've come to Washington before him he saw an obvious way to make tax day a whole lot simpler. But he couldn't get it passed.

"If you're a person with one job and one bank account and a reasonably simple tax situation," Goolsbee says, "every piece of information that you're sending to the IRS is information they already have!" And that makes it easy for them to fill out your tax return on your behalf.

It's important to stop for a moment and clear something up: The IRS would just be filling out your tax form and sending it to you for approval — or modification. You could choose to sign off or you could scrap it and start anew. "It's totally optional if you don't want to use it or you don't trust them," Goolsbee says. "You can just crinkle it up and throw it away."

This isn't some unproven idea. Sweden and Denmark use versions of it. California tried it with a pilot program called Ready Return. The results were astounding: 98 percent of people surveyed said they would use the program again. When is the last time you heard of a government program with a 98 percent satisfaction rate?

In a paper for the Hamilton Project, Goolsbee estimates that a national system along these lines could save taxpayers about 225 million hours and $2 billion in tax preparation fees every single year.

Goolsbee wasn't alone on this one. President Obama supports automatic tax filing, too. So, in fact, did President Reagan. But it never quite seems to pass Congress.

"The reason it doesn't happen nationally is it creates a strange coalition of opponents," Goolsbee says. First, it offends the anti-tax activists, like Grover Norquist, who want taxes to be a difficult as possible. Then it threatens the massive tax-preparation firms like Intuit, makers of TurboTax. Then there's the IRS, which in the manner of so many government agencies, doesn't want to take on a new, difficult task.

On Monday, ProPublica reported from the front lines of Intuit's lobbying campaign, which has become so comically vast that it now includes rabbis publishing op-eds in the Jewish Journal. "As an ethicist, I look beyond my own experience and shudder at the impact this program will have on the most vulnerable people in American society," wrote Rabbi Elliot Dorff.

Dorff, the rabbi-ethicist, wrote his article after being contacted by a former student, Emily Pflaster, who works for a PR and lobbying firm that represents Intuit (or, more precisely, a trade group that includes Intuit). ProPublica found suspiciously similar op-eds from state NAACP officials, small-town mayors, and various other community leaders. Apparently, PR firms call this "grasstops" organizing. And this is in addition to the millions of dollars Intuit spends on direct lobbying of Congress.

For Intuit, it's just good business. Return-free filing can only save billions of dollars because there's billions of dollars being made preparing tax returns. And a lot of those dollars flow to Intuit.

But for most taxpayers it's a waste of money — and time. There's an easier way, if only Congress would make the IRS work for us, rather than the other way around.

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