Happy Tax Day!

Today’s the big day… April 15th is the official deadline for filing your income taxes. While liberals and conservatives disagree on many factors related to taxation, one unifying point is that the tax code should be simplified.  Exemplifying this, President Obama’s bi-partisan fiscal commission made this a central part of their debt reduction plan and this idea remains popular today among both parties.

Despite the appearance of a political appetite to do so, there has yet to be any real traction in diminishing the complexity of the tax code. Arguably the only progress that has been made is in the proposal of “return-free filing,” a proposal endorsed by both Presidents Reagan and Obama and already in place in Denmark, Sweden and Spain . 

ProPublica explains how it works:

The government-prepared return would estimate your taxes using information your employer and bank already send it. Advocates say tens of millions of taxpayers could use such a system each year, saving them a collective $2 billion and 225 million hours in prep costs and time, according to one estimate.

So why has it not been implemented here? Well, it appears that the tax preparation industry’s political expenditures have been effective. Intuit, the parent company of TurboTax, the service of choice for over half of individuals filing electronically, has spent over $8.5 million on lobbying since 2010. Intuit has also partnered with several other industry players to publish the website the Stop the IRS Takeover website. They aren’t shy about the risk of return-free filing. They wrote in a disclosure to the SEC that such a policy shift would be lead to a reduction in “customers and revenue." 

Still, Congressional will for reform remains. The bi-partisan Free File Program Act was recently introduced in the House so perhaps change will come after all.