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An Open Letter to the United States Senate: Oppose S. 1074

April 11, 2007

Dear Senator:

On behalf of the 362,000 members of the National Taxpayers Union (NTU), I write to urge you to oppose S.1074, the "Free Internet Filing Act" introduced by Senator Daniel Akaka (D-HI).

This bill directs the Internal Revenue Service (IRS) to build and deploy an online "web portal" where the IRS would provide its own electronic tax preparation and e-filing services. Contrary to the title of its enabling legislation, this proposed program is anything but "free" and will actually hurt the American taxpayer.

Such an expansion of the IRS puts the government in direct competition with the private sector tax preparation software industry. Given that this is a thriving and fiercely competitive line of business, there is absolutely no market-related justification for government intervention. Today millions of consumers are benefiting from a great amount of choice in who can assist them with filing their taxes.

In any case, thanks to the Free File Alliance, a coalition of private tax preparation providers already offers free e-filing and tax preparation services to anyone with an adjusted gross income of $52,000 or less (approximately 70 percent of taxpayers). And unlike a government tax preparation service, the Free File Alliance prepares every tax return as a representative of the taxpayer.

Government and private estimates of the cost of building and operating a system such as the proposed IRS web portal start at several hundred million dollars. Given the IRS's long history of underperforming, over-budget information technology programs, it is certainly reasonable to assume that the final costs may be much higher.

In 2005, NTU issued a report on a similar proposal for the state of California. Many of the same problems we found with that scheme are replicated in S. 1074. If you'd like to read that report, it is available online here:

The bottom line is that S. 1074 would waste hundreds of millions of tax dollars to substitute a government program in place of both for-profit and charitable activity in the private sector that is now admirably serving the American public. Therefore the National Taxpayers Union strongly urges you to vote against S. 1074.


John Berthoud