IRS Tried to Hide Emails That Show Tax Industry Influence over Free File Program
propublica.org
propublica.org
The only people who are experts in a particular industry are the people running the businesses that make up that industry. So the government, in order to try to make rules that don't suck, depend on their input when drafting the rules.
This, and in combination with significant lobbying, means that given enough time the industry being regulated gets to have significant amount of control over the rules being created.
Oil, airflight, cars, steel production, cable television industry, etc etc. Everything that the government tries regulate suffers the same fate to differing degrees.
And when it comes to certain industries, like banking or medical industry, and handful of executives of top corporations end up rotating in and out of government. Being a VP one year, a lobbyist for a couple years, and then end up as a higher level bureaucrat on some cabinet or board somewhere.
They have a phrase for it:
That was not always the case. Once upon a time, there was the Office of Technology Assessment[0]. As to why it is no more, one need look no further than Newt Gingrich[1][2]:
> OTA was abolished (technically "de-funded") in the "Contract with America" period of Newt Gingrich's Republican ascendancy in Congress. According to Science magazine, "some Republican lawmakers came to view [the OTA] as duplicative, wasteful, and biased against their party."[0]
0 - https://en.wikipedia.org/wiki/Office_of_Technology_Assessmen...
1 - https://www.theatlantic.com/technology/archive/2012/10/the-m...
2 - https://economix.blogs.nytimes.com/2011/11/29/gingrich-and-t...
https://techcrunch.com/2019/09/27/to-curb-lobbying-power-eli...
OTA isn’t a panacea though. You have to figure out ways to make it financially reasonable for people to blow the whistle on massive firms. The Waste, Fraud and Abuse laws might be a good template.
What could the OTA bring to the table when it came to regulating something like mines that the EPA/DEQ wouldn’t have?
One does not need to have more expertise to come up with some sane regulations, i.e. you can't dump trash in the river, a tax filing co. can't lobby for tax legislation.
The tax filing co isn't the one going to congress, they hire some PR company that does lobbying to talk to congressmen about tax law. Of course, that PR company just so happens to hire people from tax filing co because they know the industry. With OTA, the PR company goes to OTA to talk about tax law, it's just adding a different step to the process.
Think of the OTA as connective tissue connecting the different regulatory specialties if you prefer.
This is a result of structural issues with our government, it's not as if adding yet another office will magically change that fact.
Regulators at the federal level have be de-fanged because of the increasing reactionary forces controlling pursestrings in Congress. It became obvious with OSHA and now even the FAA is a wimp in the face of pressure from Boeing. That's part of a strategy by certain people who want to erode trust in government.
It's possible to structure things in a way that limits politicalization.
Then you end up with companies like Boeing who are the only players in the country and no one even tries to compete given the massive overhead and then people get surprised the one company who gets 99% of the oversight ends up having a say in the oversight.
This type of thing needs constant vigilance and churn to avoid capture. But at the end of the day it’s just going to come with the whole arrangement every once in a while.
Of course we could come up with ways to have this type of oversight which the market can’t practically account for financially or organizationally but again that’s wishful thinking as almost every situation like this has resulted in some level of capture.
Pretty much the only option is hoping they actually attempt to fix processes when it goes wrong, at least for the next while. But more often than not rules get rushed in during the panics which merely reinforces the company’s monopoly by adding even more special rules only a billion dollar entrenched company with the decades of other specialized processes they themselves helped establish through lobbying.
No one wants to remove regulations for the sake of competition but I think we need to be more realistic about the monsters we’re creating in exchange for worse monsters.
Instead of being surprised every time the fragility of the whole system gets exposed at least once a decade. While perpetually hoping and expecting for better oversight for the next time it.
Tangential, but I've read comments on HN saying that part of the reason is that Boeing, along with Lockheed, are strategic to the US and there are actually some regulations to keep them on life support with government money, so that when a serious war starts, they're still there to serve US military's needs.
I suspect a lot of people actually do want to do this. In cases where all else is equal, I’d strictly prefer less regulation. Even where regulation has an epsilon positive impact, I would often prefer to not have that regulation.
I don't have answers, but the problem is real.
https://www.citylab.com/transportation/2018/01/why-its-so-ex...
Literally no one ever calls for regulations "as a panacea."
A straw man... with rabies!
Also, the government provides free java/excel based tax filing systems with a certain level of sanity checking.
Apart from this there are several fremium sites like cleartax to help file taxes but they don't get to lobby.
(yes, corruption is inherent and tax evasion is rampant, but at least filing taxes aren't as painful as US tax filing seems to be)
It's only an argument that the state and local governments would need their own, parallel systems if they wanted to participate.
https://www.irs.gov/filing/free-file-do-your-federal-taxes-f...
Funny. Yes. I worked at a consulting firm doing permitting for California (wetland delineations etc). The only way to get something approved was to use a former gov employee. They could write a proposal "correctly", attach the correct docs, etc. Gov employees knew the cash wasn't in their position, but, in consulting later on. Tin foil hat on: I also think, the Gov employees knew when a proposal wasn't from a former Gov employee -- and would reject -- thus keeping the cycle going.
Everywhere I've ever lived I've seen a pretty wide variation from place to place within a state that seems to get applied on top of the state's baseline. In the poorer areas anything reasonable pretty much gets waved on through and in the rich areas they're much more controlling (because they have the resources to throw at it) and you can benefit from hiring people who know people or are at least known as "regulars" to whatever official is calling the shots. It's a lot like hiring a traffic lawyer.
- In Nova Scotia, an acquaintance food & safety inspector became a consultant to industry on how to navigate the arcane laws of food & safety. There was no fraud or wonkiness there that I could easily perceive - the companies wanted to do the right thing; knew they were not experts in what the right thing is; so hired a person they were confident knew what the right thing is.
- Though we had our own bright security analysts in the company I worked for, when dealing with the public sector we have been heavily advised, and learned the wisdom of, hiring from a pool of rotating local security analysts that knew how to write documents, architecture, assessment in a way that would clearly conform to regulations. Again, not due to any wonkiness - our security analysts who knew the product worked with security analysts who knew the rules, to make sure solution is amenable to all.
Blame the combination of a terrible voting system and relatively few representatives compared to the incredible prize of a slice of America's giant economy.
But reform is possible, effectively regulated competitive markets exist, other countries manage it. America can too if you're willing to work to make it happen.
While you could lobby congress yourself, odds are you don't really understand tax law in detail well enough to be effective, while they do.
People want simplified taxes, but they write letters and vote when their taxes go up, so more complex taxes are rewarded despite that want.
Sure I can read one bill and understand the details, but it would take more months than there are in a session (2 years) to UNDERSTAND all the bills congress passes. If I were a lawyer I could understand them a little faster, but not enough to make a difference.
The result is congress needs trusted experts to write the laws for them. Very few people are experts in anything useful that they are not paid for. (the exceptions are things like movie watcher - which congress is already as much an expert as everyone else)
No, but I'd wager is just as often as not
Plenty of individuals pursue high-paying jobs because the financial security it provides their family [including children, spouse, and possibly infirm parents]; and to pay back the student loan burden that the American institution levies on their best and brightest.
A government, for the people, should ask the users and customers of the corporations, its citizens who suffer the most from top-down decisions.
What recourse do average citizens have when corporations, which must always act in their own interest, decide to prey on them? Governments are supposed to protect us from that shit.
It should be a triangle: People choose which corporations to support, governments make sure people have a choice.
Whoa there. It may happen, it may even be common, but it’s certainly not expected or ok.
There’s also a huge difference between the regulatory capture of businesses like oil, airlines and banking that pose danger so the government regulates them, and this situation where the IRS apparently decided it was more expedient to essentially give these companies a business rather than write software that would implement their own regulations.
So, it’s a very different situation.
In fact you’ve got to wonder what the IRS is thinking. They should be holding all the cards. But they act like the Intuit has them over a barrel. The IRS gave them a business under certain conditions. Intuit has failed to meet the terms of the agreement. So, start writing the software and terminate the agreement once its ready.
False premise. Most experts on/in a given field are employed within it, but employment/economic interest is by no means a prerequisite for expertise. Regulatory capture is a real thing, but it's fallacious to argue that because regulatory capture exists, governance is the problem. After all, markets are just as easily captured as governments, and businesses are open in their pursuit of market share and monopoly.
The IRS should know a thing or two about filing taxes, should they not?
Here's how it could work, based on a real-world example from another country:
Before each tax season begins, the IRS sends each taxpayer an estimate of how much they are expected to earn that year, based on previous years. They are assigned a tax bracket based on this estimate. If they think the estimate is wrong, they send back a new number and their tax bracket is adjusted accordingly. The taxpayer can also give estimates of their deductions at this point, for a more accurate estimate of the tax bracket.
Employees withhold taxes from wages before payment, based on the tax bracket each employee is in. They report the wages paid and pay the IRS the withheld amount.
Investment funds etc. are required to report gains and losses for each of their clients to the IRS.
At the end of the year, the IRS sums up the income they know about from these reports, compare the sum due to the sum already paid from withheld taxes and send the taxpayer a summary. If the taxpayer has no other income to report, and has no complaints about the data the IRS already has, they don't need to file anything further. The report comes with a bill for taxes remaining, or if too much has been paid, a summary of how much will be returned.
For the majority of taxpayers, that is, those whose source of income is wages from employment or government benefits, all this takes maybe 10 minutes a year to handle. Some people still need to file, but they're a minority.
I used to do my taxes by hand: it was actually faster than the online system I use now - mostly because it was a lot quickly to skip the section dealing with rail road retirees and such. I quit doing it only because one time I missed copying line 13 of form 1234 to line 47b or form 5678 and got the wrong numbers. A simple mistake that the IRS caught right away, but then I had to go refile my state taxes which depended on the wrong numbers: that was painful enough I quit doing it by hand. (why the state didn't also catch the mistake and avoid the whole refile garbage I don't know)
When an employee leaves a job they are given a P45 form to hand to the new employer, which contains a summary of any pay to date for the current tax year along with a tax code.
All I have to do when hiring is enter this information into the accounting software and everything just works. National Insurance, Pensions and Student Loans are calculated monthly and taken via Direct Debit, as are VAT payments and returns. Employees are automatically emailed payslips with breakdowns of their pay and deductions.
Any relevant information is submitted to HMRC (the UK's IRS) by the accounting software, so it takes me ~10 mins a month to complete payroll for 5 employees. When an employee leaves, creating a P45 for the next employer takes a single click.
The gov.uk website is exceptionally well organised and contains detailed lists of everything an employer or employee needs to do at all stages in the process.
The US self-assessment system seems opaque, inefficient and ripe for abuse in comparison. It also places the stress of reporting taxes onto every individual rather than just the employers.
Honestly I can't think of many ways to improve the UK's online accounting process from either an employer or employee's standpoint because I already spend less than a day total per year on it.
The annoying thing is that the U. S. does this, too. They just wait until the numbers don't match before they tell you what their number is. Hey, why don't you tell me that number up front and save us a lot of trouble? Because I just paid several thousands dollars recently because our numbers didn't match up. The IRS already knew, "here's your bill". A lot of back-and-forth could have been saved if the IRS said up front before I filed, "here's what we've got, just to give you a ballpark figure to work with and let you know if we're lining up, or have a problem."
This alone should be grounds enough to fire everyone involved for incompetence, even if corruption can't be proven.
People want to eat yummy sausages, but they don't want to know how sausages are made.
This is how sausages are made if you define 'sausages' as 'market regulation'.
But this particular sausage isn't yummy. It's gross, and the packaging is deceptively labeled, and it steals from veterans.
If I was being handed a yummy sausage, I might not want to ask many questions. But this one smells funky; so now I want to know what's in it, and what went wrong cooking it, and I'm even thinking I might want to get my sausages made by someone else from now on.
People naively think the problems will be obvious. The issue at the heart of the analogy, though, is that those same people would find what they define as problems with the process for making the yummy ones. Thus, the "problems" are not as obvious as they think.
https://www.propublica.org/article/how-the-irs-was-gutted
https://www.nbcnews.com/business/taxes/turbotax-h-r-block-sp...
I don't think anyone is directly paying the IRS officials or corrupting them, they're paying lobbyists and donating to political campaigns. Intuit spends a LOT on lobbying, 6.6 million just in 1 year or something like that.
If we fire everyone involved in the IRS, the new folks who go against the same political diktats will be fired by the President.
This phenomenon was much more common among Tea Party groups and libertarians (many of whom fundamentally dispute the legitimacy of the tax code) than among paleoconservatives, neoconservatives, or any brand of liberal or progressive. See generally Jᴀɴᴇ Mᴀʏᴇʀ, Dᴀʀᴋ Mᴏɴᴇʏ: Tʜᴇ Hɪᴅᴅᴇɴ Hɪsᴛᴏʀʏ ᴏғ ᴛʜᴇ Bɪʟʟɪᴏɴᴀɪʀᴇs Bᴇʜɪɴᴅ ᴛʜᴇ Rɪsᴇ ᴏғ ᴛʜᴇ Rᴀᴅɪᴄᴀʟ Rɪɢʜᴛ (2016).
Having a 501(c)(4) with a political term like "Tea Party" in the name is per se probable cause for an investigation. The ability to spin that into some kind of partisan witch hunt was a major propaganda victory. This was conduct by principally one side of the political spectrum, and the IRS had no more an obligation to treat the parties equally than the ATF does when investigating Second Amendment fringe groups or the DEA does when investigating head shops or the FBI does when investigating eco-terrorism.
TLDR: If you don't want to be investigated for unlawfully using your non-profit for political purposes, maybe don't put political terms in the name of your non-profit.
It is perhaps reasonable suspicion (at most) but I can’t see how it’s per-se probable cause.
Imagine a cause that you support instead. Would you want Alabama to be able to treat any charity with “Family Planning” or “Pride” in it standing alone to be probable cause for the authorities?
https://www.amazon.com/Set-Mini-Porcelain-Basket-Pink-Design...
Probable cause is a moderately high standard in law. One’s name alone should not make for probable cause.
Oooh, that's a bingo!
That’s the issue. Choosing which names are “political” is a political action in itself. How often were names investigated that mentioned “environment”, “social”, etc?
The Sierra club is extremely political and the name indicates nothing.
Unless these investigations were all equally applied to orgs regardless of name, your argument holds no water.
> After ProPublica sued in federal court, the agency dropped that objection and released the records.
4chan would get a few thousand people to file requests for things like "all CIA agents deployed in Russia" and trigger a billion dollars in legal fees.
So what does the IRS get out of this?
A good theory for government is to always do the minimum -- do only the part that can only be done by the government and let private companies compete to do everything else. The IRS is doing roughly this, by providing the e-filing API. The surprising thing is that TurboTax has so few competitors.
There's no reason they couldn't contract a private company to build the system, perhaps with a hand-over plan at the end of it with advice on how to build and manage a development team to maintain it in-house.
There are plenty of dev companies capable of doing this and doing it well. Put it up for tender.
Why?
I mean, presenting a specious premise such as "the government sector is incompetent" ignores the fact that whatever private company which offers tax preparation must, by definition, interact with IRS systems.
Unless your premise is that one or more startups can replace federal tax collection.
> There are plenty of dev companies capable of doing this and doing it well.
The position argued by both @Obversity and @tlb is that somehow "private companies" can satisfy what the IRS is required, by statute and Congressional oversight, to provide. "Private companies" are not subject to such constraints.
Hence my reductio ad absurdum conclusion of:
> Unless your premise is that one or more startups can replace federal tax collection.
IMHO this implies they will also be unable to create a meaningful tender and evaluate the results.
The hardest part of writing this kind of software is not the coding, but getting all the details right.
If they automatically filled in the information they had and fleshed out the calculator bits (like not making you use a tax table by hand) it would be a fine tool.
i have a feeling, if not defeated by anti government types they could do the job.
You're likely thinking of USDS (US Digital Services), or possibly 18f?
You really want to give them more power?
It will end when it ceases to be true, and reliably so.
My statement should not be construed to imply that Intuit handling it is morally superior (not only because of the incentive for corruption involved), even while the thought of using tax filing software written by government contractors makes me shudder.
Freedom to own guns without many restrictions or permits is probably unique to the US.
Freedom to not have health insurance (mind you I prefer not having to worry about crushing medical debt in Germany, but it is a kind of freedom).
There's probably more than these 3,but for certain definitions of freedom the US is quite high.
You could say that Germany for example has a very different view of freedom. The government mandates that you get at least 4 weeks vacation, that you are insured at least half way properly, that you pay a lot more taxes for public goods (trains, roads, television, food subsidies, ...). This restricts the freedom of employers, your freedom to do with your money what you want, etc. but in return you have more freedom from debt traps, you have free time to go on vacation, you can get around the country without a car, etc.
So by limiting certain individual freedoms you can gain a different definition of freedom.
If you answer "yes" to both, then there's no issue and you're happy.
If you answer "no" to either (or both), it doesn't matter. You're still stuck with them.
Therefore, the real "freedom" you have is to agree with them. Everything else is decorative.
Honest question.
> Not having to do the hard work of making a usable tax filing system and providing phone support for users.
Since the IRS is the Single Point of Truth[0] for federal tax collection, by definition any commercial entity which offers tax preparation must conform to the IRS's tax filing system. Which, BTW, is used by millions of people via paper-based filings.
> A good theory for government is to always do the minimum -- do only the part that can only be done by the government and let private companies compete to do everything else.
While you may feel this to be a "good theory for government", many do not. Some consider a government's role to also include ensuring equitable treatment of all peoples within their domain.
> The IRS is doing roughly this, by providing the e-filing API. The surprising thing is that TurboTax has so few competitors.
TurboTax has many competitors[1]. Which may explain why they did their best to help write the rules (per the article):
> For a decade and a half, the IRS program to allow most Americans to file their taxes for free has been floundering.
> Now, IRS emails obtained by ProPublica help show why: The agency has allowed the tax preparation industry to write the rules.
0 - https://en.wikipedia.org/wiki/Single_source_of_truth
1 - https://www.bls.gov/ooh/business-and-financial/accountants-a...
For 90% of Americans, the IRS could just snail-mail them a pre-filled tax form... That they could dispute, and file manually, if they disagreed with it.
One has to wonder whether the only thing preventing our government from succeeding at providing simple and effective services for everyone is interference from radical capitalists.
The approval of elected politicians and appointed officeholders in the legislative and executive branches that are paid by—or plan to improve their post-government job prospects by service to—the members of the Free File Alliance.
I'm sure there are both legal obstacles and practical ones. I'm just curious what those obstacles are.
This isn't a "why didn't they" problem. It is a "how can I" problem.
Also, please stop using outdated terms like "third world countries". The world hasn't been broken up into 2 different brackets of income for a long time. See https://www.gatesfoundation.org/Who-We-Are/Resources-and-Med...
The main argument I heard against simplifying the tax code (and allowing automated free filing) is that it would eventually lead to a slow but steady increase in taxes. Another way of saying this is that: the "pain" of paying taxes makes people scrutinize the tax code and acts as a deterrent.
If you were to frame it in that context (and if that statement were indeed true), I am sure more people championing a simple tax code would stop doing so. I would rather pay $100 to Intuit's potentially unneeded service than $1000 as a tax increase.
I am not claiming that it is true - I don't have a way of testing this hypothesis - but it is something that is worth musing about. There are always unintended consequences.
People do not need to get "involved" into legislating beyond voting for someone representing them - and choosing the person they believe will do so.
People do most certainly are clear what their obligations end up being when they submit their tax return.
The question is only whether the process should be easier or is it better if it is tedious and ineffective. The question of whether Intuit also profits along the way is almost marginal here.
As much as I wish the world was logical, I came to believe it isn't - it is always full of unintended consequences.
In this case, the argument about rising taxes seems completely arbitrary. Why couldn’t I likewise argue that they would actually be lower (e.g., by closing loopholes)?
Well for one, there is no incentive to lower taxes.
Loopholes have nothing to do with the ease of submitting a document. Loopholes exploit the various requirements of the law and play them out against each other.
Intuit needs developers, UX/UI designers, entire tech infrastructure as they are a SaaS and Software Business. H&R Block is a franchising company with some enterprisey software (that's a lot more complicated to use than any of the TurboTax editions) that the tax preppers use.
A lot less tech goes into H&R Block than Intuit, so H&R Block can be in a lowish-noish tax state like Missouri or Kansas and take the decent developers that they have to maintain and update their backend tax-prep software.
With Intuit being a company in an area that is overwhelmingly liberal, I would hazard that the majority of the people working there are as well(It is possible that the key positions are occupied by conservatives but over a period of years and consistently makes it less likely.).
It is telling that you think this is even remotely similar to a justification. And in the case of bribery, both parties are at fault - the one giving, and the one receiving the bribe.
It's only deductible if you itemize deductions, which most people don't do. And even then it isn't free. Your tax deduction only means that you don't have to pay taxes on the cost of your tax preparation service or software.
That said, I agree with you about everything else!
Any money shunted away from the state is money that the state will have to raise additionaly.
The answer to that question can be found in the article itself:
> This year, as part of our coverage of the IRS and TurboTax maker Intuit, we filed a request for correspondence between the IRS and the Free File Alliance, an industry group. The request sought records surrounding a public-private partnership called Free File.
> Under that program, which has long been championed by Intuit, the IRS agrees not to create its own tax filing system that would pose a threat to the industry’s profits.
HTH
I’d also like to point out that “utility” is subjective. There are serious methodological shortcomings with quantifying the subjective satisfaction of various goods and services, particularly heterogenous goods like housing.
The group that does not qualify for Free File most often requires the services of a tax professional anyway. Not because it is complicated, but because the monetary benefit of a tax professional is going to be more than the cost of their services.
These IRS grumpings by fringe libertarians is wildly unproductive and has no place on HN as it does not fall within any of the guidelines for content.
But I file my state taxes on paper because fuck those assholes. If your coworker stole 50 dollars straight out of your wallet would you not make a fuss? That is what these tax software companies are doing every year.
And I don't need a paid tax professional, I get paid on a single W-2. And the one time I did need them (income in multiple states, ambiguous residence, as an international student) they were useless and I knew the laws better than they did.
Sure, structuring your spending in advance to optimize taxes is something you might want to ask outside help for. But when it comes to paying your taxes based on how you’ve already used your money, why does it make sense for there to be anything other than one value which both you and the government agree is owed? Why should it be negotiable?
Come on. Seriously? That's worth making this crazy fuss about?
You're paying a tax to pay your taxes. That's fucked, and doubly so because you're paying the toll to a parasitic company that only exists because of the government's inability to provide basic services.
You’re making as much a fuss about this as me. If you want to foster productive discussion, at least respond to what the comment you’re replying to was about: why should your tax bill be negotiable after you’ve finalized your spending?