After healthcare mess, do you want D.C. doing your taxes?
The launch of the Obamacare online exchanges this month has been a disaster for the White House.
Even the Washington Post’s Ezra Klein, one of MSNBC’s favorite liberal pundits and a prominent proponent of Obamacare, has described the rollout as an unmitigated failure.
“I really don’t think people should soft pedal what a bad launch this is,” Klein said on Morning Joe this week. “They’ve done a terrible job on this website. We’re a couple of weeks in, and people can’t sign up. People have tried 20, 30, 40 times. I mean it’s one thing for that to be true the first three or four days, it’s another thing for it to be true two or three weeks in.”
In light of this display of gross incompetence from the federal government — paying nearly half a billion dollars for an unworkable website that they had three years to prepare for — Americans should ask themselves: “Is it a good idea to put these bureaucrats in charge of doing our taxes?”
There are perennial calls in Washington for tax returns to be prepared by the Internal Revenue Service. Every April 15, like clockwork, a host of policy analysts take to the airwaves and op-ed pages to opine on how great it would be if the IRS prepared tax returns for most Americans.
There are a number of problems with this proposal, however.
For starters, having the IRS serve in the dual roles of tax collector and tax preparer presents an inherent conflict of interest. The main function of the IRS is to collect taxes, as much as possible. That is how the agency defines success and failure.
To put the government entity responsible for maximizing tax collections in charge of preparing returns would result in a clear conflict of interest — one that would work to the disadvantage of ordinary taxpayers. In our court system, we separate the role of prosecutor from that of judge for a reason.
Second, as demonstrated by the rollout of the Obamacare exchanges, the federal government does not have the bandwidth or the competence to be trusted with the added responsibility of preparing tax returns. The IRS is an unwieldy bureaucratic behemoth that is already under congressional investigation for stifling the First Amendment rights of President Barack Obama’s political opponents and making Star Trek videos at taxpayer expense.
Just this week, the Treasury Inspector General announced that $11.5 billion in fraudulent earned-income tax credits were paid out during the 2012 fiscal year. The IRS also announced that the 2014 tax filing season will be delayed by a week or two.
Aside from not having the capacity to handle the task, a proposal that the IRS prepare tax returns is a solution in search of a problem. For a decade now, 16 private-sector tax software providers have joined to provide free tax preparation services to low- and middle-income households. Over these 10 years, 37 million tax returns have been processed by this private option — saving taxpayers $129 million in administrative costs.
According to Jeffrey Eisenach, managing director of Navigant Economics, having the IRS prepare taxpayers’ returns would require “the largest and most ambitious information technology upgrade in the agency’s history.”
Eisenach also points out that the IRS has a less-than-stellar track record of designing and implementing technology modernization programs. Typical problems include delays, projects going over budget and basic failure. While implementing a tax return preparation system would cost hundreds of millions of dollars and take several years, history suggests it could actually take a decade or more and cost billions.
Computerworld put out a report this week that analyzed the last decade of government IT procurements costing more than $10 million. It found that 96 percent fail. These procurements usually “come in over budget, or vastly too late, or they don’t work at all” Clay Johnson, founder and chief executive officer of the Department of Better Technology, told the Washington Post this week. “If you’re going to spend a whole bunch of money on a process with a 96 percent failure rate,” Johnson said, “it pretty much guarantees it won’t work out that well.”
Requiring the IRS to prepare tax returns for millions of Americans would impose significant demands on its resources. James Maule, a tax law expert at Villanova Law School, describes the headaches this would create for taxpayers.
“Assuming such a system became operational,” Maule said, “what happens if a taxpayer finds a discrepancy between what the IRS puts on the return and what the taxpayer knows is correct? Would the IRS have the resources to change the inaccurate data on information returns imbedded in the system? Under current procedures, the IRS sends notices if there are mismatches with its information, and yet far too many of these automated notices are already incorrect.”
This month’s Obamacare launch provided a preview of the problems that would result from a government tax return preparation initiative. Those who have sought to enroll in Obamacare through the online exchanges have to contend with incorrect data, duplicate enrollment and other errors — such as spouses being counted as children. Sorting these problems out, come tax time, will not be easy
Conflicts of interest aside, the federal government’s plate is already too full. The IRS is responsible for implementing 47 different Obamacare provisions — including the 20 new or higher taxes that are to pay for this new entitlement program.
Starting next year, the agency will begin intrusively asking Americans for personal health identification information. The last thing that the federal government — the IRS, in particular — should be put in charge of, or that taxpayers should trust it with, is preparing tax returns for individuals, families and employers across the country.
PHOTO (Top): A busy screen on the laptop of a certified application counselor as he attempted to enroll an interested person for Affordable Care Act insurance, known as Obamacare, at the Borinquen Medical Center in Miami, Florida, October 2, 2013. REUTERS/Joe Skipper
PHOTO (Insert 1): A general view of the Internal Revenue Service Building in Washington, May 14, 2013. REUTERS/Jonathan Ernst
PHOTO (Insert 2): A man holds his envelopes as he waits in line to mail his family’s income tax returns at a mobile post office near the Internal Revenue Service building in downtown Washington, April 15, 2010. REUTERS/Jonathan Ernst