A few weeks ago, I came across the concept of Return-Free
Tax Filing, which led me to further research from a Morning Edition report
on NPR from March 2013. Return-free tax filing essentially lets the government
do your taxes for you, thereby easing some of the difficulties associated with
taxes (i.e. gathering all your forms, paying a tax preparer) for people with
straightforward tax returns. Not only would this new tax-filing system save a
lot of time and money for consumers, it would also create more accurate returns
for the IRS, which would lead to fewer audits. Maybe most interesting, the idea
of return-free filing was supported by Ronald Reagan in 1985, and Barack Obama
in 2007. If return-free filing is supported by both Republican and Democrat
presidents and would be beneficial to the average American consumer, why would
return-free filing not be the law of the land? Rent-seeking may be the answer.
According to an article
from Propublica, Intuit (makers of TurboTax) and H&R Block spent more than
$2 million and $3 million respectively in 2016 to lobby against legislation “that
would permanently bar the government from offering taxpayers pre-filled returns.”
By lobbying against this legislation (Free File Act of 2016 from Sen. Elizabeth
Warren), Intuit and H&R Block are diverting resources to secure profits
from their consumers and ensure their services are not obsolete. This means consumers are paying more money and
spending more time filing taxes, which is not socially beneficial or efficient.
Intuit and H&R Block lobbying against return-free filing is a clear example
of Tullock’s concept of rent-seeking behavior, and is the reason return-free tax filing may never be fully instituted in the United States.
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