Dear Congressman Roskam and Congressman Kind:
I write to offer the enthusiastic support of the 362,000-member National Taxpayers Union (NTU) for H.R. 2569, the “Free File Program Act of 2011.” Your legislation, which has deservedly earned cosponsorship from 61 of your colleagues, would recognize the vital importance to taxpayers of the Free File Alliance by permanently authorizing the program.
As you know, NTU has been a strident advocate for the Free File Alliance, a public-private partnership for federal tax return preparation and electronic filing. Our position has been informed by four decades of experience with income tax administration policies at the federal and state levels. During that time, we have observed a steady rise in the income tax compliance burdens that governments have heaped upon taxpayers, particularly in the past 10 years. Since 1999, NTU has tracked this complexity through its ongoing “Taxing Trend” research project. Alarmingly, Americans spend at least 7.64 billion hours on meeting the demands of the federal personal and corporation income tax – an increase of nearly 1.5 billion hours since the year 2000. In NTU’s estimation, the value of this time alone exceeds $227 billion. Unfortunately, Congress has displayed a persistent penchant for adding complexity to the tax laws, even as Government Accountability Office reports continue to show variable progress at the IRS in providing timely, consistent, and accurate advice to citizens with questions about those laws.
In this daunting environment, taxpayers need the best advice and service they can possibly obtain in preparing and filing their returns. Unlike federal- and state-level proposals to put government into the tax return preparation business, the Free File Alliance has amply demonstrated the capacity to fulfill such requirements. The results from this program have yielded impressive metrics: 33 million returns have been processed through Free File since the program was launched in 2003, at no cost to taxpayers. In fact, official federal estimates show a savings to the government from Free File. According to estimates acknowledged among several executive and legislative branch agencies, nearly $92 million in paper-return handling costs have been avoided so far. In 2008, the tax advisory and filing services that Free File offered to middle- and moderate-income taxpayers (comprising 70 percent of the taxpaying population) was supplemented with “fillable” forms that permit Americans of all incomes to enter data and file electronically on their own.
Using very stringent standards that prohibit tactics such as pop-up advertising, the private-sector partners who facilitate Free File have proven remarkably adroit at responding to the constant barrage of tax-law changes and making certain that customers are happy with their choices. This is reflected in consumer surveys showing near-100 percent satisfaction rates with Free File services – a phenomenon whose likelihood of being replicated by a government agency seems exceedingly small. To note just one ironic contrast, the IRS asked some itemizers to delay their returns during the 2011 filing season due to last-minute computer-retooling the agency had to make after passage of the Tax Relief, Unemployment Insurance Reauthorization, and Job
Creation Act of 2010. Meanwhile, 22 states have embraced this model as well, recognizing, as then-IRS Commissioner Mark Everson observed in 2006, that it “provides taxpayers with high-quality services” while maximizing consumer choice and promoting competition “at the least cost to taxpayers.”
Your legislation would give the acknowledgement that the often-unsung Free File Alliance has long lacked, by ensuring its permanence in federal law.
Clearly, systemic tax reform and simplification should be top goals on Congress’s fiscal policy agenda. Until that time, taxpayers should have every possible avenue of assistance open to them, and H.R. 2569 would ensure that such avenues are accessible at no cost to consumers and at a savings to the federal government (no minor consideration in the current economic and fiscal environment). Indeed, the Free File Program Act would also help to serve the cause of tax reform, by demonstrating the importance and feasibility of a system that respects the “firewalls” that must exist between government (which administers and processes tax returns) and the private sector (which prepares and enables the filing of tax returns). Without such boundaries, Americans might become less aware of the truly burdensome nature of the tax laws, and thus less able to effectively weigh the costs and benefits of the government they are required to fund.
According to the IRS Oversight Board’s annual report on e-filing released early this year, roughly 70 percent of all 2010 individual income tax returns were submitted electronically. Return-preparer mandates may soon push that figure above 80 percent. NTU believes, however, that any further progress in e-filing will be the result of individual taxpayers having sufficient confidence in the online advice they receive, along with the convenience of multiple online filing options. To our members, only the private sector-driven approach that H.R. 2569 affirms – not a government-driven “return-free” scheme – can properly reflect these two qualities.
Because of the numerous other advantages outlined here, it is imperative that your colleagues in the House cosponsor and pass H.R. 2569 now. You may rest assured that NTU stands ready to assist you in moving this legislation toward swift enactment. Any roll call votes in favor of the Free File Program Act will be significantly weighted as pro-taxpayer votes in NTU’s annual Rating of Congress.
Sincerely,Pete SeppExecutive Vice President