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Tax Reform Plan Would Shift Tax Return Preparation To The IRS

Publication Date: 
March 23, 2008
Pittsburgh Post-Gazette
Mark Roth

Joe Bankman, who spearheaded ReadyReturn in California, was interviewed for this story on the "simple return," which according to the Pittsburgh Post-Gazette, is backed by several tax experts including Barack Obama's chief economics adviser. Mark Roth reports:

We are three weeks away from one of the most dreaded times of the year: the federal income tax filing deadline.

With almost visceral aversion, millions of taxpayers haven't even touched their W-2s and tax forms yet. Millions more have eased the psychological burden by giving their paperwork to a paid tax preparer.

But what if, instead of this annual rite of revulsion, taxpayers could get a mailing from the Internal Revenue Service each year with their income and tax amounts already filled in, and all they had to do was sign it and return it?


And a lot of those fees are paid not just because people have trouble figuring out how to do their taxes, but because they simply hate having to do them, said Joseph Bankman, a Stanford University law professor who is one of the nation's leading simple-return advocates.

"If you said 'How much would you pay never to have to fill out a tax return again?' " Dr. Bankman said, "some people would say 'I'd pay $500 a year.' People are dying to get rid of this burden."


California pioneered a limited but highly successful simple return program three years ago, known as Ready Return, and several other nations have different versions of such simplified national tax systems.

In 2005, California sent out 50,000 forms to single taxpayers with the income and tax amounts already filled in. Despite almost no publicity, 27 percent of those who received the Ready Return used it, and another 22 percent indicated they would have, but they had already filed their taxes.

State tax officials also studied the returns of a control group, and found that not only did the control group taxpayers spend an average of $30 on tax preparation fees, compared with no fees for the Ready Return users, but the Ready Return filers took 80 percent less time than the control group to do their taxes.

But it was neither time nor money that mattered most to many people who used Ready Return, said Dr. Bankman, who spearheaded support for the experiment.

"We got back thousands of comments," he said. "It's not just that 99 percent of the people wanted to do it again. It's that people said 'Finally, the government is doing something to make my life easier.'

"I thought people were going to like it," he said, "but I didn't think so many people would write to us saying this is the most wonderful thing the government has ever done."

With that kind of success, you might expect that Ready Return would have been introduced for all single taxpayers in California since then. In fact, though, the program didn't reappear until this year, because of opposition from Republican legislators and intense lobbying by Intuit, the California company that sells the extremely popular TurboTax filing software.

Intuit, which has $2.4 billion in annual revenue and controls more than 70 percent of the tax preparation market, spent more than $1 million in California lobbying against the Ready Return program, Dr. Bankman said.

The company and other opponents made several arguments against Ready Return, but the most emotional one played off the idea that the state tax agency was a greedy bureaucracy that shouldn't be trusted, he said.

Full-page ads showed a bulldog with a steak between its teeth, Dr. Bankman said, with the text: "You wouldn't send a dog to the butcher to pick up your steak. Why would you trust the state to pay your taxes?"


Despite the lobbying against it, the state was able to reintroduce the Ready Return in California this year, although it is entirely online and has no publicity program attached to it, Dr. Bankman said.