Congress Scraps Provision to Restrict IRS from Competing with TurboTax | Hacker News Reader

Congress Scraps Provision to Restrict IRS from Competing with TurboTax

propublica.org

82 pointsdanso18 comments

It seems like the incentive structure is broken here because the tax software companies have the wrong customer.

Their customer should be the IRS. These are the options asI see them:

1) Have the government “make” their own version. There would be little attention paid to user experience, since there’s no competition and the bureaucracy has no incentive to create good products.

2) Have the government hire a company - which is really the same as “making it” since I’m assuming government employees aren’t the ones writing the code. However, if structured properly, the outsourced company could be compensated based on user experience metrics. I see the likelihood of this happening as low.

3) Arbitrarily complicate the tax return policy. Put the burden of understanding on the citizen. Let the “free” (contrived by government intervention in this case) market fulfill the artificial need in the market. This seems to be the way things are being done now.

Trouble is, our democracy doesn’t seem to be effective at solving problems like this. It appears that we don’t have the ability to actually have a direct impact on this policy change. Only if the majority party happens to have the political willpower to work on this, and only if that party holds a majority in the house and the senate.

Couple that with a $100M+ annual investment (institutionalized bribery from my perspective) from these tax software companies to ensure that elected officials don’t unwind the artificial demand that’s been created, and you have the situation that we are in right now.

Let me know if I’ve missed anything or have been unfair. If anyone has any ideas about how an average citizen can affect this policy, I’d love to know.

> only if that party holds a majority in the house and the senate

Supermajority, or house and senate and president. :(

> Have the government “make” their own version. There would be little attention paid to user experience, since there’s no competition and the bureaucracy has no incentive to create good products.

Empirically, the place I live in (Zürich, Switzerland) has offered excellent government created tax filing software for several years (used to be somewhat monstrous Java apps, but nowadays the software is web based and really convenient to use), for ALL taxpayers, as far as I can tell.

I would argue that there IS an incentive to the government to make tax compliance simple, and keep grumbling to a minimum.

How does the Swiss tax system work? How are taxes added and/or removed? Do you have tax deductions or other incentives?

The truly weird thing about the American tax system is the way it handles deductions and other incentives. You can't take advantage of them unless you know they're available and request them specifically. This gives the government a real incentive to make the tax code as complicated as possible. If you don't know what deductions are available to you, then you'll probably miss some or all of them and end up paying a lot more money than you would have if the process was more straight forward.

There are all sorts of deductions, and there are also anti-deductions, e.g. imputed rent for homeowners. The more common deductions are enumerated in separate fields, the others you can itemize on more free form input.

It's not like all of those deductions are obvious here either. When we moved back to Switzerland, I had an accountant do my taxes once or twice, but after that, I knew what kinds of deductions I could claim.

Switzerland has no AMT, which is one of the more painful parts of the US filing process in my experience.

Most people use very few deductions, and most people use the same credits it deductions. Tax software shows that's it's trivially simple for the vast majority of of people. Where tax law gets complicated is high net worth, self employment, or business ownership. If love for taxes for these people to be simpler, but realistically if you need these deductions that aren't already captured by the IRS you should be hiring a competent tax professional. There's no reason the vast majority of Americans need to file except that it's intentionally painful to make people hate taxes, the IRS knows how much you make and what you owe because they already receive your tax documents from the organizations that provide them to you.

As I see it, the right solution is for the IRS to publish machine-readable, complete descriptions of all tax forms and all formulas along with a format for filled in forms. And they should publish software to take a filled in form set and make PDFs and/or submit electronically. Let other people compete to make nice UIs.

I dream of the tax code itself being written as a function that computes your taxes:

  def compute_taxes(**kwargs):
    # blah blah
    return how_much_you_owe

Enter bugs.

Unfortunately it's not only tax businesses that have incentives against making filing taxes easier. Americans for Tax Reform treats bills that make filing taxes easier as a tax increase. Any Republican that supports these types of measures can expect a swift and strong response Americans for Tax Reform.

> If anyone has any ideas about how an average citizen can affect this policy, I’d love to know.

Maybe start at the state level? I'm sure there are more than a few states who would want to work with a private company to streamline the process.

The income tax system is as much about the government asserting dominance over citizens (and residents) as it is about raising revenue.

There could be more efficient revenue collection schemes devised (less friction), taxes with fewer collection points, but then everyone would not have to submit to Caesar annually.

It is a tribute to the success of popular delusions that the 16th amendment was, and pretty much all new taxes are, sold as tax-the-rich schemes.

You get it. :)

> The Free File program will continue as before. The development in Congress only means the program will not be codified into law.

So uh, no real change.

Exactly, which is the point. If it was codified into law, then it becomes more or less permanent. It’s insane that we allow the tax filing companies to have so much say over how taxes are filed, so at least if it’s not an actual law, there’s a better chance the situation can change in the future.

It's not nothing. Until it got reported on, making the current status quo "codified into law" (instead of having to be revisited and revoted-on every few years) was very non-controversial. It was a small part of a tax reform bill that otherwise has broad bipartisan support. This was a bill written by Sen. Ron Wyden – and then defended in the New York Times by Wyden [0] – and usually, Wyden is seen as a stalwart champion for consumers (and Internet freedoms). The Free File provision was arguably the archetypal kind of law that lobbyists are able to get approved because people and lawmakers weren't paying attention.

In addition, it's not clear that the status quo of the IRS letting Intuit et al. administer the Free File program will continue. Preventing it being codified into law is just the most immediate step, but the controversy surrounding this issue – particularly the use of robots.txt/NOINDEX on the Free File pages -- has resulted in the NY state attorney launching its own investigation [1]. When the Free File Alliance agreement is up for renogiation in how ever many years (I think it's every 3 years?), there may be renewed interest in drastically changing the program.

[0] https://www.nytimes.com/2019/04/14/opinion/letters/taxes-con...

[1] https://www.propublica.org/article/turbotax-maker-intuit-h-r...

edit: Here's the URL for the IRS agreement regarding the Free File Alliance. It originally began in 2002, had an original term of three years, and "options to renew for successive two-year periods". Other news articles say the next date is October 2020: https://www.irs.gov/pub/irs-utl/2002-free-online-electronic-...

I hope which ever managers that ok'd that particularly insidious strategy at Intuit are shamed and the those staff that said "this is a terrible idea" are rewarded.

I know that will never be the case, but I can hope.

Those lobbyists have got to be so pissed too.

So wait, this is a part of a bill that was customarily added to legislation in the past protecting TurboTax but is not this time (good), but hasn't yet passed the House (ok - probably will) and only has Grassley as a sponsor in the GOP controlled Senate (who knows if it'll pass).

Sounds like Intuit needs to fire up their Senate lobbyists and push them into overdrive - I don't see this as a win, not until it passes the desk of McConnell (aka the grim reaper of legislation passed by this House) or signed by Trump (who vetoed another bill that passed with 100% Senator support - which just happened to cause the 2019 shutdown).

Let's not break out the champagne just yet.

Reply on news.ycombinator.com