Taxes & Politics

Contrary to the Thoughts of the Average Bear…

Even Yogi and Boo Boo think defunding the IRS is stupid.

The IRS rolled out an agreement (Free Tax Assistance) for free tax services 20 years ago for those who can’t afford to pay companies to do their taxes every year. This agreement was with an alliance of tax preparation companies led by Intuit.

The Free File Alliance, a coalition of tax prep companies, had reached a deal with the IRS in 2003 to offer free tax prep services to a larger portion of taxpayers. This agreement allowed companies to sell other related services to a broad band of citizens. This program, as well as a new pilot program (Free File Program) are now in jeopardy. Guess by whom, and why?

Lets start with this. Corporate lobbying. Millions of dollars in lobbying by for-profit tax prep service providers seem to have found deep pockets in the Republican members of Congress (shocked?) who are now attempting to sidetrack all of this program.

Approximately $15 million was earmarked by the government and approved by both parties in 2021, specifically for this program.

Now Congressional Republicans, succumbing to these lobbying efforts, and the cash, are calling for these funds to be used to offset the cost of military aid to Israel. Surprise. There’s more. It’s now reported that this same strategy will be used to block Ukrainian funding, tying any funding for Ukraine to the funds allocated to hire more agents and update the computers and tech for the IRS.

This is yet another step in Republican efforts to defund the IRS and protect their wealthy benefactors from audits.

Republican efforts to sidetrack additional funding (defunding the IRS), which they initially approved in 2021, is due to Republicans’ fears the funding will be used to audit the top 1% of earners in an effort to catch the cheats. This was known when passed. But now Republicans simply cannot allow their wealthy benefactors to be audited by the IRS.

Back to this Free Tax Assistance Program for the poor, the new House speaker, MAGA Mike Johnson, framed the proposed cut of $15 million as an attempt to offset the cost of the military aid package and reduce the national debt.

Between you, me, and that tree over there, this $15 million expenditure for the new pilot program has Republican House members with their panties in a twist.

The absurdity of this is that Republicans spent almost $8 Trillion over 4 years and now they want Americans to believe cutting this free tax assistance pilot program for the poor will reduce the national debt.

Right. And Intuit has beachfront property they are willing to give anyone for spending a minimal amount of money on their products next year.

But there’s a catch here (isn’t there always a catch?) that Republicans don’t want you to know. It has to do with Republican plans to defund the IRS. A new report from the (CBO) Congressional Budget Office found that defunding the IRS would increase the federal deficit by $12.6 billion over the next decade.

As usual, this is again a case of large corporate interests bribing members of Congress, typically Republicans in this case, with millions upon millions of dollars… over $90 million over the past 20 years, and 3 million to date this year.

This is the continuance of a multiyear fight pitting the IRS against for-profit tax prep companies, an industry that makes billions of dollars helping Americans file taxes each year.

In fact, the tax prep services industry has poured over $90 million into lobbying on the Free File Program and other issues since the program’s inception in 2003, a new OpenSecrets analysis found.

Where do these millions in lobbying efforts go? Follow the money. Who’s trying to undermine this program and who is trying to defund the IRS? The answer to this is obvious.

Intuit, the parent company of Quickbooks and TurboTax, has alone spent just under $3 million in the first nine months of 2023 to fight this free government program, and over $46 million over the past twenty years, fighting this proposed program for the poor.

The crux of these efforts by the tax prep corporations and Republicans in Congress is an agreement (reached by The Free File Alliance, a coalition of tax prep companies) with the IRS in 2003 to offer free tax prep services to a larger portion of taxpayers.

The deal was negotiated by Intuit lobbyists and required companies to provide some tax filing services at no cost to certain individuals. In turn, the IRS promised not to develop its own tax prep software or e-filing services.

But under Trump and Republicans, a December 2019 addendum to the public-private partnership’s original memorandum of understanding lifted that restriction. This was despite tax prep companies spending heavily on lobbying to bar the government from creating its own e-filing software,” per Open Source records.

Passage of the Inflation Reduction Act and a December 2021 executive order instructing Treasury Secretary Janet Yellen to consider expanding electronic filing options, Direct File, a pilot program to provide government-run tax filing services was initiated.

Now there is another side issue with the original “Free File System”. Over the past 20 years, the IRS seems to have targeted blacks and minorities at a higher rate than whites for audits. Presented with these findings the IRS is said to be investigating how and why this happened.

I’m guessing it’ll be a cold day in you-know-where before this is ever reported on.

Despite this and heavy lobbying by Intuit and other tax industry lobbyists, the government will roll out to 13 states, on a limited basis next year, the Direct File initiative.

According to Open Source records, “in August, Intuit announced that its annual revenue was over $14.3 billion for its 2023 fiscal year, which ended July 31, 2023 — a 13% increase from 2022.

H&R Block’s annual revenue was around $3.5 billion for its 2023 fiscal year, which ended June 30, representing a more modest increase of $9 million — or 0.3% from the prior year.”

So what we have here is a failure to communicate this story to the public by the mainstream media (unless you subscribe to “Open Source” as I do).

This is a now typical case in this country, one of large corporations making huge profits and fighting the government with the assistance of Republicans and possibly a few Democrats, to maintain the status quo… of huge profits.

The more things seem to change, the more they remain the same.