And since governments themselves use it to look for tax and benefits fraud, they are unlikely to to do anything about it.
As an example, CA might use The Work Number to check if you are working in NV but not claiming or under reporting that income on your CA medicaid application.
In addition - some people don't file returns that they should.
In addition - sometimes their are crazy backlogs govt / IRS side (transcript services have been very off and on, 35 million paper filed returns still pending processing).
Work number does pay day to pay day updates, so is current to within a few days usually.
The original purpose of the interstate commerce clause was to ban state and local governments from collecting sales taxes on transactions cross state lines, so that states had to compete to keep excise taxes as low as possible, and rely more on direct land taxes on property owners instead. This was because Madison and many of the other early federalists and democratic-republicans were influenced by the Physiocratic school of economics which thought there should be no internal taxes on trade and labor, that all internal taxes should be direct taxes on land.
So if state and local payroll taxes and the work number system are the new rakeoff allowing state and local governments to fund property tax cuts for the rich, it would make sense for federal government to continue its grand historical tradition of using the interstate commerce to suppress this nonsense, in order to encourage any states with broken property tax systems that are struggling to raise revenue to appoint commissioners to redo their assessments instead, in order to discourage state and local governments from taking the easy way out and imposing regressive taxes on workers with the least leverage to complain.
The issue is more about privacy rules. Local governments have to compartmentalize data and avoid impermissible use. They often buy data from third parties because the data isn’t “infected” with IRS compliance rules.
Luckily - in some cases you can send folks to go talk to someone at a child support agency or they do part of eligibility screening - but many of those folks never come back because they get gobbled up by the hassle factor over there (already disorganized / not stable in their situations).
I've become convinced that some of the eligibility screening hoopjumping is just to save money by making it damn difficult to get through the paperwork - even if you are actually poor (which is often obvious). I remember when some programs went to QUARTERLY eligibility verification on services delivered quarterly - so every visit practically was a re-screen on eligibility (the overhead of this is monumental).
So the desire / demand for private solutions to all this is there for sure. Some folks just do front-ends for systems like IRS transcript requests!