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NTU writes in support of H.R. 2528, the “Taxpayer Freedom to File Protection Act.”
December 5, 2011
The Honorable Sam Johnson The Honorable Dave Reichert United States House of Representatives Washington, DC 20515
Dear Congressman Johnson and Congressman Reichert:
On behalf of the 362,000-member National Taxpayers Union (NTU), I write to offer our endorsement for H.R. 2528, your “Taxpayer Freedom to File Protection Act.” This legislation, which 32 of your colleagues have cosponsored, would prevent the Secretary of the Treasury from imposing a costly and counterproductive “return-free” tax system administered by the Internal Revenue Service. Such a step is vital to maintaining an important boundary in the federal income tax system that helps hard-working American households to keep more of their own money and helps to encourage accountability for tax policy.
Over the course of several decades, NTU has worked as the leading advocate for taxpayers’ rights legislation. Indeed, NTU’s then-Executive Vice President David Keating was a member of the congressionally- and presidentially-appointed panel whose recommendations provided the foundation for the IRS Restructuring and Reform Act (RRA) of 1998. As with any comprehensive package subject to the legislative process, the 1998 bill could, in NTU’s opinion, have benefitted both from additions of salutary provisions and deletions of harmful ones. Sitting squarely in the “harmful” category is Section 2004 of the RRA, which authorizes the Secretary of the Treasury to “develop procedures for the implementation of a return-free tax system under which appropriate individuals would be permitted to comply with the Internal Revenue Code of 1986 without making the return required under section 6012 of such Code for taxable years beginning after 2007.” Such a scheme would necessitate completion of a de facto tax return by the IRS itself for a qualifying individual.
As NTU has long argued, allowing a tax collection agency to also become a competitive return preparation and filing agency is fraught with dangers for taxpayers. One of our more recent testimonies on systemic tax reform, offered to the President’s Economic Recovery Advisory Board in 2009, captured the overriding concern on policy grounds:
This truly appalling idea, in the state-level stage with California’s Franchise Tax Board, would turn tax reform on its head. Taxpayers would be discouraged from maximizing the savings that the laws may allow them under individual circumstances; and to the convenience of politicians, taxpayers would be disconnected from yet another process that reminds them of the high price they pay for government.
Yet there are other flaws, as NTU’s 2005 examination of the California “ReadyReturn” initiative mentioned above, explained in detail. Beyond making the obvious point that “there is no such thing as ‘free’ tax help from the government,” the NTU study noted that “program eligibility is based on a retrospective analysis,” meaning that potential filers whose financial or personal situations change in a given year might not receive a particularly accurate pre-completed return from the taxing authority. The analysis concluded that the potential for mission creep, greater access to citizens’ private financial information, and increases in tax collection agency budgets might be motivations for bureaucracies to support the return-free concept – certainly not outcomes that would improve the plight of overburdened taxpayers at a time of severe deficits.
Ironically, such a venture is completely unnecessary, thanks to a public-private partnership known as the Free File Alliance. Since its creation in 2003, the Free File Alliance has facilitated the electronic preparation and filing of some 33 million returns, ably providing middle- and working-class taxpayers with the services they need to navigate the complex maze of the tax system at no charge to them or the federal government. Indeed, the Free File Alliance has saved the federal government nearly $92 million through avoided paper-return processing costs. Recently the initiative expanded to allow self-preparation and filing for all taxpayers, regardless of their incomes.
Thus, it is extremely troubling that top officials in the Obama Administration – including Secretary Geithner and IRS Commissioner Shulman – would seek to reverse these successes and insist upon advancing the inferior return-free program. Clearly, Congress must provide affirmative statutory guidance in order to protect against schemes that would set back the cause of a simpler, fairer tax system. H.R. 2528 precludes the possibility of a return-free effort emanating from Section 2004 of the RRA.
One overarching goal of fundamental tax reform should be a system that allows all Americans to understand how their individual tax liabilities are calculated and allows them to hold their elected officials accountable for such liabilities. Return-free subverts the concept of transparency by further placing the machinery of the tax laws away from public view – in the process condemning informed debate over the proper size of government 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 cosponsor and join you in passing the Taxpayer Freedom to File Protection Act. Time is of the essence in avoiding a debacle for taxpayers, which is why a “Yes” vote on H.R. 2528 would be significantly weighted in NTU’s annual Rating of Congress as the pro-taxpayer position.
Sincerely,Pete Sepp Executive Vice President