EDITORIAL: Donald Trump’s push to simplify the tax code will run into special interests
Sometime later this year, expect the White House and congressional Republicans to wade into the muck that is the Internal Revenue Code. Whether they’ll sink and drown is a matter for debate.
There’s a reason the federal tax code has ballooned to 75,000 pages, triple what it was just 30 years ago: Powerful people like it that way. Politicians view the tax laws not only as a means of funding the government but also as a mechanism to influence behavior — a massive social engineering tool. Meanwhile, influential special interests — financial professionals, attorneys and the like — profit immensely from the code’s complexity.
Consider a recent story by ProPublica, a nonprofit investigative journalism outfit. Turns out H&R Block and Intuit, which makes TurboTax, have spent millions of dollars attempting to derail legislation that would allow the government to offer taxpayers pre-filled returns.
Under such a system, which has been proposed by U.S. Sen. Elizabeth Warren, D-Mass., taxpayers would have the option of satisfying the filing requirement by simply signing the government document. They would also be free to file their own returns, as they do now.
Such an initiative could make things more convenient for millions of taxpayers — particularly those who don’t itemize yet now purchase tax software or use the services of tax preparation firms. It might also be a boon to about 1 million Americans who forgo refunds each year because they fail to file a return.
But Sen. Warren’s bill now lives on life support.
“Intuit spent more than $2 million lobbying last year, much of it spent on legislation that would permanently bar the government from offering taxpayers pre-filled returns,” ProPublica reported last week. “H&R Block spent $3 million, also directing some of their efforts” toward scuttling that proposal.
There may indeed be legitimate fears about empowering the IRS to complete returns for individual taxpayers with information provided by employers. But you can bet the tax-prep lobbyists are far more concerned about the threat to the bottom line than they are about an expanding government.
“Simply put, the tax return industry, now worth $10 billion a year, is one of the most effective lobbying powers — on Capitol Hill, inside the executive branch and in state capitals,” wrote Jeremy Scott in Forbes magazine last year.
And that, in a microcosm, is one reason tax reform and simplification will likely make the current battle over health care seem like a refreshing breeze.