Buried within the 1,700-page reckless tax and spend bill is a provision that would move the U.S. toward the creation of a government tax preparation system. This is a terrible idea that has been a long priority of progressive politicians in Congress like Senator Bernie Sanders (I-Vt.), Senator Elizabeth Warren (D-Mass.) and Congresswoman Alexandria Ocasio-Cortez (D-NY). It would replace the existing system of voluntary compliance, where Americans are responsible for filling out their own tax returns, with a system where the government assesses and files taxes for Americans.
The provision is found under section 138301, “enhancement of internal revenue service resources” and is described as a task force to design an IRS-run “direct e-file” tax return system. It would provide $15 million to have the IRS conduct a report to Congress examining the cost of building and administering a government tax preparation system. It would also require the collection of taxpayer opinions on government tax preparation, and the opinions of an unspecified “independent third party” on the feasibility, cost, and best approach of this new program.
There are many reasons to be concerned with this proposal.
First, it would create a strong conflict of interest. Under a system of government-run tax preparation, the IRS would tell you how much you owe and give you the opportunity to contest. This would give the government an incentive to overcharge or withhold information from taxpayers.
Americans already struggle with understanding the tax code — 65 percent of voters think the tax code is too complicated, according to polling conducted by HarrisX. Just 7 percent think the code Is too simple, and 28 percent think the code has “about the right level of complexity.” Given this, it is probable that many taxpayers will take the government at their word and accept whatever the IRS tells them they owe. Even if a taxpayer does decide to contest, there is no guarantee they will be aware of every deduction and credit they are owed unless they hire an expert to assist them.
Second, the proposal would empower the IRS to collect even more personal information. A recent report by the Progressive Policy Institute noted that the IRS currently does not have the information it needs to prepare tax returns for American families. This could deprive low-income Americans from important tax credits like the child tax credit and earned income tax credit (EITC).
In order to properly file for Americans, the report notes that the IRS would have to have a “deep knowledge” of the personal lives of a family, which would result in a significant intrusion into the personal lives of American citizens.
Not only would giving the government this new power be unfeasible, but it is also deeply unpopular. According to data by the Computer & Communications Industry Association, 60 percent of taxpayers oppose government tax preparation including 45 percent that “strongly oppose.” Just 8 percent of taxpayers strongly support government tax preparation.
Third, the IRS already struggles to protect taxpayer data and complete basis tasks, so we should be wary of giving the agency new responsibilities. In June of this year, the progressive group ProPublica announced it had received the stolen private tax returns of thousands of taxpayers covering 15 years. Since this announcement, ProPublica has released multiple articles claiming to have detailed taxpayer information of specific individuals. If this information is accurate, its disclosure is illegal. However, the IRS and Treasury department claim to not know how this tax information was obtained.
While this is concerning, it is not the only case where the IRS has failed to protect taxpayer data. For instance, a 2016 TIGTA report found that the IRS had lost track of 1,000 laptops containing sensitive taxpayer data that contract employees used. Similarly, in 2015, hackers stole the personal data of 330,000 taxpayers. Reports indicated that the hackers didn’t use suspected tactics but instead managed to steal data by going through the website and pretending to be regular people filing their taxes.
California already tried a government tax filing system, and it was an abject failure. According to media reports, roughly 3 percent of eligible taxpayers used the system when it was first launched, and total participants topped out at 90,000 filers.
The Democrat’s $2 trillion socialist tax and spend plan contains numerous troubling provisions including tax increases on working families and small businesses and special giveaways to left-wing special interests. The proposal to put the U.S. on the pathway to having a government-run tax preparation system is yet another way the Left wants to expand the size and scope of the federal government, further intrude in the lives of taxpayers, and squeeze more tax dollars out of American families.