The Honorable Sam JohnsonThe Honorable Dave ReichertUnited States House of RepresentativesWashington, DC 20515
Dear Congressman Johnson and CongressmanReichert:
Onbehalf of the 362,000-member National Taxpayers Union (NTU), I write to offerour endorsement for H.R. 2528, your “Taxpayer Freedom to File Protection Act.”This legislation, which 32 of your colleagues have cosponsored, would preventthe Secretary of the Treasury from imposing a costly and counterproductive“return-free” tax system administered by the Internal Revenue Service. Such astep is vital to maintaining an important boundary in the federal income taxsystem that helps hard-working American households to keep more of their ownmoney and helps to encourage accountability for tax policy.
Overthe course of several decades, NTU has worked as the leading advocate fortaxpayers’ rights legislation. Indeed, NTU’s then-Executive Vice PresidentDavid Keating was a member of the congressionally- and presidentially-appointedpanel whose recommendations provided the foundation for the IRS Restructuringand Reform Act (RRA) of 1998. As with any comprehensive package subject to thelegislative process, the 1998 bill could, in NTU’s opinion, have benefittedboth from additions of salutary provisions and deletions of harmful ones.Sitting squarely in the “harmful” category is Section 2004 of the RRA, whichauthorizes the Secretary of the Treasury to “develop procedures for the implementationof a return-free tax system under which appropriate individuals would bepermitted to comply with the Internal Revenue Code of 1986 without making thereturn required under section 6012 of such Code for taxable years beginningafter 2007.” Such a scheme would necessitate completion of a de facto taxreturn by the IRS itself for a qualifying individual.
AsNTU has long argued, allowing a taxcollection agency to also become a competitivereturn preparation and filing agency is fraught with dangers for taxpayers.One of our more recent testimonies on systemic tax reform, offered to thePresident’s Economic Recovery Advisory Board in 2009, captured the overridingconcern on policy grounds:
This truly appalling idea, in the state-level stagewith California’s Franchise Tax Board, would turn tax reform on its head.Taxpayers would be discouraged from maximizing the savings that the laws mayallow them under individual circumstances; and to the convenience ofpoliticians, taxpayers would be disconnected from yet another process thatreminds them of the high price they pay for government.
Yetthere are other flaws, as NTU’s 2005 examination of the California“ReadyReturn” initiative mentioned above, explained in detail. Beyond making theobvious point that “there is no such thing as ‘free’ tax help from thegovernment,” the NTU study noted that “program eligibility is based on aretrospective analysis,” meaning that potential filers whose financial orpersonal situations change in a given year might not receive a particularlyaccurate pre-completed return from the taxing authority. The analysis concludedthat the potential for mission creep, greater access to citizens’ privatefinancial information, and increases in tax collection agency budgets might bemotivations for bureaucracies to support the return-free concept – certainlynot outcomes that would improve the plight of overburdened taxpayers at a timeof severe deficits.
Ironically, such a venture is completelyunnecessary, thanks to a public-private partnership known as the Free FileAlliance. Since its creation in 2003, the Free File Alliance has facilitatedthe electronic preparation and filing of some 33 million returns, ablyproviding middle- and working-class taxpayers with the services they need tonavigate the complex maze of the tax system at no charge to them or the federalgovernment. Indeed, the Free File Alliance has saved the federal governmentnearly $92 million through avoided paper-return processing costs. Recently theinitiative expanded to allow self-preparation and filing for all taxpayers,regardless of their incomes.
Thus, it is extremely troubling that topofficials in the Obama Administration – including Secretary Geithner and IRSCommissioner Shulman – would seek to reverse these successes and insist uponadvancing the inferior return-free program. Clearly, Congress must provideaffirmative statutory guidance in order to protect against schemes that wouldset back the cause of a simpler, fairer tax system. H.R. 2528 precludes the possibilityof a return-free effort emanating from Section 2004 of the RRA.
One overarching goal of fundamental tax reformshould be a system that allows all Americans to understand how their individualtax liabilities are calculated and allows them to hold their elected officialsaccountable for such liabilities. Return-free subverts the concept oftransparency by further placing the machinery of the tax laws away from publicview – in the process condemning informed debate over the proper size ofgovernment to an obscure periphery of the public square.
For this and the other reasons outlined above,NTU urges all House Members, regardless of political affiliation, to cosponsorand join you in passing the Taxpayer Freedom to File Protection Act. Time is ofthe essence in avoiding a debacle for taxpayers, which is why a “Yes” vote on H.R. 2528 would be significantly weighted inNTU’s annual Rating of Congress as the pro-taxpayer position.
Sincerely,
Pete SeppExecutive Vice President