The major tax-prep companies have spent the better part of this millennium lobbying to knee-cap their competition. It’s been a two-front lobbying war, trying to keep out both the little guy and the big guy.
H&R Block and Jackson Hewitt lobbied for stricter regulation of tax preparers, with the aim of knocking out independent part-time practitioners. The Obama administration was so on board with this lobbying push that President Barack Obama, violating his own revolving-door pledge, hired H&R Block’s CEO into the IRS to write these strict new rules.
The Obama administration lacked any authority to regulate tax preparers, and so these cronyist rules were tossed out by a federal judge.
At the same time they were teaming up with Big Government to create a cartel, the big preparers were also trying to keep Big Government from encroaching on their business. For decades, liberals have been arguing that the government should simply do our taxes for us and send us a bill.
It’s called “return-free filing.” The argument, as columnist Marty Smith put it, is “if the IRS already knows how much I owe in taxes, why do I have to file at all?”
“It’s already used in Germany, Japan, the U.K.,” Smith wrote, “and all those other countries whose names come up whenever there’s some simple, obvious public policy solution that only the U.S. is too thick to pull off.”
You can see why TurboTax’s parent company, Intuit, would oppose this idea, along with Jackson Hewitt and H&R Block. You can also see why taxpayers and the government shouldn’t care very much about what these companies want.
The Democrats’ dishonestly named “Inflation Reduction Act” doesn’t establish return-free filing, but it does earmark $15 million for a study on the feasibility of this idea. Supporters see this as a first step toward freeing most of us from having to fill out our tax forms every year.
But can the tax-prep companies successfully kill the idea? It all sets up a classic rivalry, one which is easy for the media to cover: Big Business lobbying against Big Government in order to preserve profit.
Of course, lobbying is almost never that simple. One big reason, as demonstrated by the Obama and H&R Block-vs.-mom and pop fight, is that the best ally Big Business has is often Big Government.
So here’s my prediction: We will probably get some sort of government-run, no-cost, low-labor option for filing our taxes in a few years, and it will either be government-designed garbage or a massive, expensive project lucratively built by and run through H&R Block or Intuit.
That is, this will either be Treasury Direct or Medicare Part D.
Treasury Direct is an incredibly clunky website that continues to be used as the only way for a person to buy government bonds directly. The website involves, and I am not joking here, a digital keyboard you need to click on with your mouse. It’s 1990s stuff.
If the IRS decides to build its own website for reviewing and correcting pre-filled tax fillings, it will be like Treasury Direct.
The alternative is more interesting. Picture this:
The IRS pushes ahead and decides it will pre-fill everyone’s taxes, thus obviating tax preparation for most people. H&R Block and Intuit will hire new lobbyists, including former top IRS staffers and members of the House Ways & Means Committee, to figure out how to handle this threat.
These revolving-door lobbyists, who are native to government and eyeing future jobs at the Treasury Department, are not the type to take on the IRS or the administration in a battle. Instead, they will seek an accommodation that is agreeable to both sides.
H&R Block and Intuit will support the IRS pre-preparing everyone’s taxes, mooting tax prep for most taxpayers. But the IRS will contract with an industry coalition, led by H&R Block and Intuit, to build and run the IRS check-your-taxes website. And this check-your-taxes website will funnel taxpayers who object to their IRS-prepared returns into H&R Block and Intuit.
Voila! Big Business, Big Government. Bipartisanship! Everyone wins!
