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| Tax help: Carmine Sodora (l.) prepared Peter Marafioti's tax documents at a N.J. tavern April 9, 2008. joshua lott/reuters |
Will the Simple Return end April 15 tax agony?
Thousands of Californians will use the program, which provides taxpayers with filled-in statements.
from the April 15, 2008 edition
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Reporter Ben Arnoldy talks about the tax-collection systems of other countries.
The ease of ReadyReturn, however, hasn't drawn in the public in droves yet. During the pilot phase in 2004-05, California officials mailed out 100,000 ReadyReturns and got back 22,000. This year, the state made the program permanent, but opted not to mail out returns. As of last week, slightly more than 6,500 Californians had taken part.
Members of the tax board see no downsides so far and will look at ways to boost participation, says a spokesperson.
Three-phased rollout
Simple Return would be rolled out in stages that would gradually include more taxpayers. In a 2006 paper published by the Brookings Institution in Washington, Mr. Obama's adviser Austan Goolsbee outlined three phases. The first looks like the ReadyReturn and would include joint filers. Phase 2 allows for the reporting of other kinds of income such as interest and dividends. The final step would incorporate those who don't itemize.
The later stages cut into territory staked out by tax-service providers. Only 10 percent of taxpayers fill out their own forms on paper these days, says Bankman. There are now an estimated 1.2 million tax-return preparers. And TurboTax, the dominant tax-preparation software, brought in $813 million for Intuit last year.
Intuit spent $1 million in 2006 trying to unseat a ReadyReturn proponent in California, and the Computer & Communications Industry Association raised objections to Simple Return systems in a 2006 report.
Suggesting the process would be redundant, the report decried the government investing in and developing "competitive electronic commerce initiatives, launching products and services that use public funds to duplicate those offered by the private sector."
The report also noted that cost savings to individual taxpayers "may be trivial," since it involves those with the simplest returns that cost the least to fill out. Many would qualify for free e-filing under a program offered by the federal government and software-makers including Intuit. "There's no up-sell to it, it's just a free offering," says Intuit spokeswoman Diane Carlini.
Ellis with Americans for Tax Reform says the IRS would calculate returns to its advantage, and Congress could more easily raise taxes without people noticing.
"It's a nice way to get people completely disengaged from the tax-policy process," he says.
The program has also met opposition from the California legislature, which, under intense lobbying, was moving toward killing the ReadyReturn program in 2006 when the tax board did an end-run around them.
Bankman says the voluntary system empowers taxpayers by showing them information the government has.
And taxpayers? Polling contracted by the Internal Revenue Service in 2000 found that just 39 percent of eligible US taxpayers were interested in a system like Simple Return and would be impatient if it delayed refunds by two months or more.
Refund delays would be likely for those who file in January or February, according to a 2003 Treasury Department study. There are also dueling federal estimates on whether Simple Return would cost the government or save it money.
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