On Not Judging Ideas by Their Proponents

Everyone is familiar with the notion that the Nazis came up with the concept of a nation-wide system of high-speed, limited access, heavy-capacity highways.  The story about Eisenhower being so impressed with them that he decided to cover Atlanta in concrete may or may not be apocryphal.  But just because a bunch of guys up to their eyebrows in innocent blood came up with the idea that we now know as the interstate highway system doesn’t mean it was or is a bad idea.  By like token the observation that the road to hell is paved with good intentions reflects the flip side of that coin.

It’s now breathlessly reported that Intuit, the folks who brought us Tim Geithner TurboTax, which permits millions of Americans to navigate, more or less successfully, a tax code that may as well have been designed to thwart that purpose, has spent quite a bit of money lobbying against having the IRS send you a “free” pre-filled-out tax return for you to amend, or not, sign, and send back with your money.  I don’t think anyone with more than just walking around sense is going to suggest that Intuit’s motivations here are anything other than stifling competition for its products.  If the government were to — on the pretext of reducing “greenhouse gases” — open a nation-wide chain of oil-change and tune-up boutiques, what do you think JiffyLube, Speed Lube, and the other major operators are going to do?  Just sit there while a taxpayer-subsidized competitor destroys their business model? 

Remember that “taxpayer-subsidized” means your competitor is not exposed to the vicissitudes of having to Get It Right.  That’s not an unfounded concern, either.  Part of my ability to stay in business is through knowing my job and my industry better, and delivering a better product at a lower cost to my customers, when my ability to set my cost to my customers is a direct function of how low I can keep my own costs.  Taxpayer-subsidization means that my competitor’s ability to beat me fair and square is not contingent upon his knowing his shit better than I do.  It doesn’t matter if he’s an idiot and his costs are sixteen times mine; he can still offer his products and services for half what I have to charge to make payroll and keep the lights on (let alone take something home to make the house payment and put a can of baked beans in front of the chillerns).  And because I’m a taxpayer too, my taxpayer-subsidized competitor is subsidized . . . by me.  And by the way, once he’s driven me and all the other un-subsidized competitors out of business, what’s the likelihood that his products and services are going to continue to answer the customers’ needs in a positive manner?  To put a more concrete face on it, what if Congress said that it was going to underwrite the entire cost of USPS package and parcel delivery service?  What’s going to happen to FedEx, UPS, Averitt, and the rest?  What’s going to happen to customer service in the package and parcel trade, once USPS is the only provider because no one else can match its prices?

But it gets better:  Notice how the putative IRS service is touted as “free”?  Well, it’s only “free” to the people who use it to file their tax returns.  It’s anything but “free” to the taxpayers who are paying for it.  Paul Caron, who blogs over at TaxProfBlog and whose ruminations on tax-related subjects are generally stellar (he regularly is voted by the ABA membership, with reason, as one of the top 100 law-related blogs), notes that this “free” service could be a good fit for up to 40% of all filers.  Well isn’t that grand?  I can’t say with certainty how much overlap there is between the 40% of all filers who would be suitable to use this Countrylawyer-subsidized tax-preparation service and the over 40% of the population that pays zero income tax, but I’d wager there’s quite a bit.  Let me get this straight:  I, who every quarter have to sweat how I’m going to pay my quarterly tax hit and pay the mortgage at the same time, get to subsidize a “free” service for the principal benefit of a bunch of folks who have either little, zero, or negative tax liability (the EITC crowd).  And kindly don’t suggest to me that the subsidy won’t be all that much.  California is at $910 million and counting (they asked for just over $940 million, by the way) on setting up their Obamacare exchange, when a private company — Esurance — that performs exactly the same functions as these “exchanges” for all sorts of personal lines insurance (not just healthcare, in other words) all over the country got off the ground for less than $50 million.  And in fact the linked article even mentions that the jury’s not back on whether this wonderful “return-free” system would save or cost the IRS money, on net.  Sorry, guys, this “free” stuff just ain’t gettin’ it for me.

Thus, while I’m not going to take Intuit’s arguments against “free” government tax statements, I’m also not going to write those arguments off as being invalid because selfishly advanced.

Other opponents of the notion point to the government over-reach angle of it.  Get a “filled-out tax return” from the government, based on information it claims already to be in possession of, and what does Joe Citizen do?  “Gosh, they say this is the information they have; if I deny it, am I just asking to get audited?”  Or the folks who think they’re signing up for a free tax filing service and who think that what the government sends them is an actual tax bill, which they then have to pay, and so they do.  Let’s think about this in an analogy to another situation in which a government agency not known for its friendliness to and accommodation of those citizens it does business with — your local DA’s office and police department — sits an arrestee down and shoves a bunch of papers in front of him:  “Son, this is what we’ve got on you.  You don’t have to sign this confession; you’re free to mark it up if you want.  But we’ve got you on this.”  Arrestee doesn’t have a lawyer.  Does he sign?  Is anyone going to argue that’s a really neat way to do business?  Does anyone fail to see how the IRS dealing with taxpayers in the same fashion parallels the objectionable elements of this hypothetical?

Oh but the IRS would never, ever do something like this, would it?  I’ll simply observe that this is a governmental agency which officially takes the position that a taxpayer may not rely, in preparing his tax return or paying his taxes, on the answers given to him on the IRS’s own customer service lines, established for precisely the purpose of giving taxpayers assistance with complying with their tax obligations.  I’m supposed to accept, blindly, this outfit’s goodwill and promise not to dress up its “free” pre-filled-out tax return to look like a tax bill?  Not to put its thumb on the scales and overstate citizens’ tax liability, on the theory that not one in four will be willing to check their numbers or pay a third party to do a reality check?  Not to flag for audit the returns that come back to them with disputed numbers?  I may be dumb as a box of hammers, but I’m not dumb as a quarter-box of hammers.

On a more value-neutral matter, having the government <nudge-nudge> fill in your tax return for you has the effect of concealing from the taxpayer the complexity and burden of the tax laws.  What would be the public reaction if local jails routinely kept prisoners rotting in their own filth, but drugged to the point of unconsciousness?  Is it a violation of my 8th Amendment rights if I have no idea where I am, who I am, what day of the week it is, or anything else?  One of the more salubrious side-effects of making citizens grind their own way through their annual tax returns is that it rubs our noses in just how buggered up our tax laws actually are.  It serves as an annual dose of outrage at what goes on in Washington.  I will state here as a categorical proposition that anything which fails to heighten Americans’ sense of outrage at how badly managed our country is can be nothing but bad policy.

Finally, there is a point to be made as to which I am of two minds.  For starts, I am entirely opposed to rent-seeking behavior, such as much of that engaged in by the legal system.  There’s a reason, after all, that you’ll seldom see the ABA get behind any legal reform which is likely to reduce the amount of lawyering that ordinary Americans and American business need to get from one day to the next.  You’ll never see the ABA’s monthly trade magazine ask whether Issue X is something that the law and the court system really need to get involved with in the first place.  A number of years ago one of the senior judges on the Second Circuit Court of Appeals (can’t recall his name, now, alas) let the cat out of the bag at some law-related conference.  He observed that if you pay close attention to how courts decide cases, you’ll almost never see an opinion cast in a way which fails to maximize the power and influence of lawyers and judges.  The notion that there even exists a multi-billion dollar tax preparation industry out there, which has no human purpose at all other than satisfying a gratuitously complicated and confiscatory system of tax laws, offends me. 

On the other hand, we do in fact have a gratuitously complicated and confiscatory tax system.  So long as we do, citizens are going to require help to navigate it.  There are private people and companies willing to do that, for a fee.  While the necessity for that service is an abomination, the fact remains that it is a necessary and valuable service which one private party may provide to another private party, to their mutual advantage.  And the other side of me has a serious problem with the government undertaking to do, and shifting the cost of doing to unknown third parties, anything which private citizens can accomplish in an orderly, efficient fashion.

I have to say, on the balance I’m with Intuit on this one.

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