The Honorable Bob McDonnell
Governor of the Commonwealth of Virginia
Patrick Henry Building, 3rd Floor
1111 East Broad Street
Richmond, Virginia 23219
Dear Governor McDonnell:
On behalf of more 9,000 members of the National Taxpayers Union (NTU) in the Commonwealth of Virginia, I urge you to sign into law HB 1349, which would create a Virginia Free File Program mirroring that established for federal tax returns between the Internal Revenue Service and private firms.
As you may know, NTU strongly supported the IRS-Free File Alliance arrangement on policy as well as fiscal grounds. During our 40-plus years of serving as the voice for American taxpayers, NTU has backed internal IRS reforms alongside privately offered services that have made tax filing a smoother process. The Free File Alliance advances the interests of taxpayers while maintaining an important distinction of the IRS as a tax collecting – not a tax preparing – institution.
Nonetheless, some critics of HB 1349 contend that its enactment would be harmful to Commonwealth taxpayers. NTU disagrees. The impact statement accompanying HB 1349 projects an administrative cost savings of nearly $50,000 annually once the law is implemented. Although the statement noted that the savings could be less if the Department of Taxation is required to process more paper returns from citizens who might otherwise have used the Commonwealth-funded iFile system, we find such an argument less than persuasive.
According to calculations from NTU's most recent annual study, "A Taxing Trend," more than 90 percent of all individuals used a computer or a professional tax preparer in filling out their federal income tax returns. This percentage has been climbing for several years, even as the Free File Alliance was established. We would contend that paperless filing for Commonwealth tax returns is likelier to follow a similar trajectory.
In any case, HB 1349 recognizes an important principle: that government should only provide those services the private sector cannot deliver. It should be incandescently clear that private tax preparation products and services already exist in abundance. Moreover, as a 2005 NTU Foundation study of California's then-nascent ReadyReturn program warned, the possibility of "mission creep" within such a program was ever-present. Taken to its extreme, ReadyReturn could have morphed into a scheme that provided tax liability estimating services or even bookkeeping.
If policymakers wish to assist taxpayers with the preparation of returns, the best way to do so is to simplify the laws themselves so as to make filing more transparent and less costly. NTU stands ready to provide any assistance you may require in this regard, as we look forward to your implementation of HB 1349.
Sincerely,
Pete Sepp
Vice President for Policy and Communications