From Pro-Publica: TurboTax Maker Linked to ‘Grassroots’ Campaign Against Free, Simple Tax Filing

Just in time for tax day, a story that points out how interests groups can try to influence public opinion.

- Click here for the full story.

Over the last year, a rabbi, a state NAACP official, a small town mayor and other community leaders wrote op-eds and letters to Congress with remarkably similar language on a remarkably obscure topic.

Each railed against a long-standing proposal that would give taxpayers the option to use pre-filled tax returns. They warned that the program would be a conflict of interest for the IRS and would especially hurt low-income people, who wouldn't have the resources to fight inaccurate returns. Rabbi Elliot Dorff wrote in a Jewish Journal op-ed that he "shudder[s] at the impact this program will have on the most vulnerable people in American society."

"It's alarming and offensive" that the IRS would target the "the most vulnerable Americans," two other letters said. The concept, known as return-free filing, is a government "experiment" that would mean higher taxes for the poor, two op-eds argued.

The letters and op-eds don't mention that, as ProPublica laid out last year, return-free filing might allow tens of millions of Americans to file their taxes for free and in minutes. Or that, under proposals authored by several federal lawmakers, it would be voluntary, using information the government already receives from banks and employers and that taxpayers could adjust. Or that the concept has been endorsed by Presidents Obama and Reagan and is already a reality in some parts of Europe.

So, where did the letters and op-eds come from? Here's one clue:

Rabbi Dorff says he was approached by a former student, Emily Pflaster, who sent him details and asked him to write an op-ed alerting the Jewish community to the threat.

What Pflaster did not tell him is that she works for a PR and lobbying firm with connections to Intuit, the maker of best-selling tax software TurboTax.

"I wish she would have told me that," Dorff told ProPublica.

The website of Pflaster's firm, JCI Worldwide, had listed Intuit among its clients, but removed it after ProPublica contacted them. Pflaster said Intuit had been listed by mistake, but added that the firm does work for the Computer & Communications Industry Association (CCIA), a trade group of which Intuit is a member. Pflaster also said her firm has reached out to multiple groups and encouraged them to share information about the "flaws" of return-free filing.

Update on the story from Slate.

Theoretically, it should be far easier for Americans with simple finances to file their tax returns. Instead of making tax filers putz around W-2s and tax prep software, the IRS could electronically prepopulate their paperwork with the information it already receives from banks and employers, and tell filers how much they owe. If the final figure looked about right, you’d have the option to file. As Matt Yglesias wrote here last year, the whole process could be a five-minute snap.

Theoretically. But for years now, Intuit, the maker of TurboTax, has fought tooth and nail to prevent automatic tax filing from becoming a reality, lobbying against bipartisan legislation to introduce it with the help of a powerful tech industry trade group and conservative anti-taxers like Grover Norquist. Intuit and its competitors in online tax prep don’t want the government cutting its market share. The tax-crusaders want to ensure that paying the government remains as much of a painful, resentment-generating slog as ever. And thus a potent alliance has been born.

Today, ProPublica, which published a great report on this subject last tax season, explains that the Computer & Communications Industry Association, which counts Intuit as a member, has been sponsoring an astroturf campaign to convince Congress that easyfiling would end up hurting the poor. A public relations firm working on the trade group’s behalf has been luring unsuspecting spokespeople to join its cause—reaching out to them without mentioning any lobbying ties.

Co-Founder of Texans for Lawsuit Reform dies

The Houston Chronicle details the life of Leo Linbeck Jr. a recently deceased construction company executive who founded one of the more consequential interests groups in Texas: Texans for Lawsuits Reform.

He co-founded Texans for Lawsuit Reform to overhaul the state's tort laws and Americans for Fair Taxation to lobby for reform to the federal tax structure.


"Leo was a gentleman and a scholar whose knowledge, wisdom and vision have been gifts to his family and friends," said Dick Trabulsi, president of Texans for Lawsuit Reform. "His contribution to his community and to public policy cannot be calculated, nor expressed adequately."

He also had a hand in creating Americans for Fair Taxation.

In 1995, Linbeck joined forces with Robert McNair, owner of the Houston Texans, and investor Jack Trotter to create a grassroots group that advocates replacing federal income tax with a national consumption tax, repealing the 16th Amendment and eliminating the Internal Revenue Service.

The Politics of Tax Reform

Bruce Bartlett explains - among other things - why its tough getting rid of tax exemptions:

Both 2301 and 2302s should consider this in light of the problems public opinion presents for bringing budgets into balance. We liek low taxes and high spending:

Politicians hide behind grandiose plans for wiping the slate clean because they know that support for every specific tax expenditure is very high. In practice, saying that one would eliminate all tax expenditures is meaningless, nothing more than a gesture that avoids confrontation with the constituencies supporting tax expenditures.

Perhaps the worst offender, in this regard, is Paul D. Ryan, Republican of Wisconsin and chairman of the House Budget Committee, who promises a sharp reduction in tax rates while still balancing the budget. He says that his tax cuts, which would reduce revenues by $10 trillion over the next decade over current law, according to the Tax Policy Center, would be paid for with base-broadening and loophole-closing.

But Mr. Ryan steadfastly refuses to name a single loophole that he would eliminate; he ordered the Congressional Budget Office to assume that federal revenues would rise to 19 percent of gross domestic product from 15.5 percent by 2030 under his plan.

Mr. Ryan’s political calculation is simple. He knows that taking away the tax exclusion for employer-provided health insurance would greatly increase its cost and probably cause most businesses to drop coverage; repealing the mortgage-interest deduction would raise the cost of housing for homeowners and would very likely cause a further drop in home prices; abolishing the charitable-contributions deduction would decimate churches, universities, museums and every other tax-exempt organization; and rescinding the deduction for state and local taxes would vastly raise the tax burden in most states.

Mr. Ryan knows perfectly well that the most popular tax expenditures will never be repealed but pretends that they all will in order to make his phony-baloney numbers add up. The fact is that the vast bulk of tax expenditures, in dollar terms, are immensely popular and deeply imbedded in the economy and society.

Proposals made to lower corporate tax rates

President Obama suggests lowering the corporate rate from 35% to 28% while removing tax breaks in the code, while adding some for manufacturing and renewable energy.

Andrew Sullivan has a links to various responses to the proposal.

No one seems to think that fundamental tax reform is likely to happen in an election year.

Blueprint for Basic Tax Reform

In a link buried below, Bruce Bartlett points to a 1977 report on tax reform. Here's a link to it. This might make a good subject for a 2302 written assignment when we touch on fiscal policy.

Tax Reform and the State of the Union Address

Romney's revelation that he paid a 13.9% effective tax rate on his recent taxes may spur attention to tax reform. Both former TX Rep. Martin Frost and Andrew Sullivan think Obama should highlight tax reform (Bruce Bartlett's suggestions are here) in his State of the Union message tonight. This article reports that it will be a major component of the speech. Frost suggests that he can argue for lower rates, while cutting back on exemptions, and end up with a system that is both more equitable and collects more revenue.

In a related post, Sullivan wonders how and why the capital gains tax rate is so low compared with rates applied to earned income. The how should be interesting to us, and might be the subject of a written assignment some time in the near future. What political forces were able to drive down the capital gains rate at the expense of other tax rates?

Neat symbolism: Obama supports the "Buffet Rule" which simply states that the tax code should not force Warren Buffett's secretary should not have to pay a higher rate than her boss. Buffett's secretary will be at the speech tonight.

Predictions: What Can the 112th Congress Do?

Some folks go at it over at Politico.

Tax Reform on the Horizon

A topic we will discuss next semester. According to Ezra Klein:

On Tuesday, I asked Glenn Hubbard, one of the architects of the Bush tax cuts, how he'd reform the tax code. That was the wrong question to start with, he said. "First, you need to figure out the size of government."
Easy enough