Law professor Dennis Ventry has accused Intuit of trying to kill ReadyReturn, California's free, state-provided service that simplifies filing by giving taxpayers a completed version of their state tax return (using information already in the state's possession). The Tax Foundation has jumped to Intuit's defense and joined the attack on ReadyReturn (also here and here). That's too bad, because ReadyReturn is the kind of program the Tax Foundation should like, not loathe.
I'm all for making taxes a little painful. The annual ritual of filing a return keeps people focused on the cost of government -- and by extension, its scope, nature, growth, and social utility. That's all to the good. But promoting tax consciousness by maintaining (and even extending) a filing requirement is one thing. Making that requirement needlessly onerous is something else entirely.
It's important to keep people tuned in to taxes. But we can accomplish that goal while still easing the process of completing a tax return. ReadyReturn does exactly that. Taxpayers still get confronted with their fiscal responsibilities. They still get a chance to see (and gripe about) their share of the collective price we pay for living in a civilized society. But they don't have to struggle with complex forms or the run the risk of careless errors.
The Tax Foundation points out that many Californians included in early trials for ReadyReturn chose not to use the state-provided forms.
- What neither Prof. Ventry nor Prof. Caron [moderator of the TaxProf blog who posted a link to Ventry's article] mention is that when the state mailed out 50,000 filled-out state income tax returns (the simplest single-person, wage-earner returns), 39,000 thousand recipients threw them out and filled out their own.
Well yeah. But what the Tax Foundation fails to mention is that pretty much everyone who used the program actually loved it: 98.5 percent said they were "satisfied" or "very satisfied," and 97.5 percent said they would use it again.
Sure, participation was modest in the early trials. But as ReadyReturn champion Joe Bankman explained in Tax Notes, the program was brand new and poorly advertised. Some taxpayers, moreover, had already filed by the time they received their ReadyReturn from the state. Ultimately, participation actually exceeded official projections made by the state and the U.S. Treasury Department.
All that being said, ReadyReturn supporters should drop the pose of surprised indignation when it comes to Inuit. The company's opposition to ReadyReturn is predictable and even understandable. As the Tax Foundation points out, try to "name a company in any industry that wouldn't oppose a government plan to provide their product 'for free.'" (I like the ideologically charged quotation marks in that challenge. Presumably, the arched eyebrows are meant to suggest that "free" programs are not "free" to develop, nor "free" for the taxpayers who have to foot the bill for their creation and operation. Point taken. But ReadyReturn actually makes money for the state: $80,000 annually, according to Ventry. Doesn't that mean that ReadyReturn really is, in the final analysis, free?)
Let's stop pretending that we're shocked to discover Intuit is looking out for Intuit. Putting faith in the social conscience of a corporation -- any corporation -- is just an exercise in naivete. But by the same token, taking companies to task for pursuing a self-interested political agenda is also fair. If you want companies to behave responsibly, then you have to make them do it.
What's striking about the opposition to ReadyReturn is not its corporate sponsor. Rather, it's the support from places like the Tax Foundation. The foundation does a lot of great work, and I especially like their support for tax transparency. As they say in their statement of sound tax principles:
- Transparency is a must. A good tax system requires informed taxpayers who understand how taxes are assessed, collected and complied with. It should be clear to taxpayers who and what is being taxed, and how tax burdens affect them and the economy.
ReadyReturn serves this principle. Unlike various tax reform plans that would make taxes "simpler" by exempting more and more people from filing requirements, ReadyReturn keeps them engaged. As the Tax Foundation says, we need informed taxpayers, not ignorant non-taxpayers.
(By the way, let me head off right now the predictable objection that most people exempt from income tax filing are already heavily taxed in other ways. That point is hereby stipulated, granted, and dismissed as irrelevant; this is not an argument about distributional equity, but about fiscal citizenship and political participation.)
The best thing about ReadyReturn is that it keeps people engaged while also making their lives simpler. And simplification, too, is one of the Tax Foundation's top priorities:
- Keep it simple. The tax system should be as simple as possible, and should minimize gratuitous complexity. The cost of tax compliance is a real cost to society, and complex taxes create perverse incentives to shelter and disguise legitimately earned income.
So I, for one, hope the Tax Foundation will change its mind. ReadyReturn is not the problem -- it's part of the solution.