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April 15, 2013

TurboTax, Lobbying and Failure

Are you enjoying your tax day? Don't you wish this whole process was easier? We all do. Well, maybe not all of us.

In the most technologically advanced countries, filing a tax return is free, easy and fast: Instead of taxpayers painstakingly calculating figures themselves, the government provides estimates of what they owe based on the very bank records and wages it already collects. Intuit, maker of the popular tax preparation software, TurboTax, has funnelled millions to oppose every effort to make tax day less painful.

Intuit has spent $11.5 million lobbying the federal government — more than Apple or Amazon. Former California Senator, Tom Campbell, who felt Intuit’s power during his proposal for an easy-file system in California, wrote that he “never saw as clear a case of lobbying power putting private interests first over public benefit.”

It should be noted that both liberals and conservatives have opposed simplifying the tax filing process. Some Republicans, like Eric Cantor, see a government takeover of tax filing industry. Liberals like Zoe Lofgren oppose it for reasons she doesn't make clear, but I'm confident in guessing her motivations (she likes taxes. I'm saying she likes taxes).

Meanwhile, the tax filing industry is massive and succeeds at producing the lifeblood of any strong and growing economy, needless and soul-crushing paperwork.

There is a lot more to taxes than simply paying the bill. Taxpayers must spend significantly more than $1 in order to provide $1 of income-tax revenue to the federal government.

To start with, individuals and businesses must pay the government the $1 in revenue plus the costs of their own time spent filing and complying with the tax code; plus the tax collection costs of the IRS; plus the tax compliance outlays that individuals and businesses pay to help them file their taxes.

In a study published last week by the Laffer Center, my colleagues Wayne Winegarden, John Childs and I estimate that these costs alone are a staggering $431 billion annually. This is a cost markup of 30 cents on every dollar paid in taxes. And this is not even a complete accounting of the costs of tax complexity.

As if this all wasn't enough to drive you insane, Intuit's TurboTax online filing system crashed last night hours before the deadline. This is the same company that spent millions on lobbying to, I'll be charitable here, compel you to use their software.
TurboTax, the popular tax-filing software, went offline briefly on Sunday — the day before the filing deadline.

Users had problems entering data on the Web site, according to angry Twitter messages directed at the company.

“We’re having problems with TurboTax online. We’re in process bringing back the experience u expect. Updates 2 follow,” the company said on its official Twitter account Sunday evening.

They managed to get the system back up fairly quickly, but who knows how many people nearly lost their lives because of it (the government does not keep statistics on tax filing deadline-related heart attacks).

Where is the index card-sized return I was promised? Can we please end this nonsense?


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posted by JohnE. at 11:25 AM

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