Let’s face it: When it comes to doing our taxes on time, Americans are the ultimate procrastinators. Like a college student putting off a term paper, millions of Americans waited until the last minute to file. With this kind of track record, it’s no surprise approximately 60 percent of Americans hired someone else to do their taxes. Enter big businesses here to save Americans from the horror of their tax return.
Large tax preparing firms hire tens of thousands of seasonal employees to protect Americans from the leviathan of our tax code and the frighteningly powerful bureaucrats at the IRS. What is often forgotten, however, is that the majority of those who prepare taxes aren’t the larger firms, but rather smaller “mom and pop” tax preparers.
Unfortunately, adding to the already massive headache of tax season, an unholy alliance between Congress, IRS bureaucrats, and special interests is considering a rule that would make life even harder for those small seasonal tax preparers.
The push started in 2011 when the IRS adopted regulations requiring all preparers to register with the IRS if they wanted to continue to their practice. This of course meant paying the IRS an annual fee for the privilege of receiving a preparer tax identification number, which was to be put on all tax forms they completed. Additionally, the IRS wanted to require all preparers to pass competency testing or continuing education, essentially creating a new occupational license for tax preparers.
Even without the education or testing provisions actually going into effect, these new regulations created a precipitous drop in small tax preparers from over one million to 800,000 in just two years.
When it comes to expensive government red tape, the story remains the same: small businesses suffer while larger businesses thrive. Big government and big business feed off of one another.
Worse, the court ruling that the IRS couldn’t require additional education for tax preparers has hardly deterred the IRS from trying to obtain this power anyway.
Last Wednesday, senators such as Ron Wyden (D – OR) argued in favor of granting the IRS the power to regulate tax preparers, saying it would protect low-income taxpayers. “The well-off are fine. They’re safe. The less fortunate end up getting thrown to the wolves,” exclaimed Wyden, apparently believing that what we really need to help the poor is to give more power to IRS bureaucrats.
What Senator Wyden doesn’t realize is that these regulations will disproportionately hurt the individuals he is trying to protect.
With small time tax preparers out of business, larger firms will increase their prices in the face of less competition. Meanwhile, those who can’t afford these higher costs will move to black market tax preparers who don’t follow any of the current protections, or will be forced to do their taxes by themselves and potentially make errors or miss opportunities to reduce their tax burden.
Thankfully, Senate Republicans voted against this proposed rule for fear of granting the IRS additional powers. Unfortunately, Senators Orrin Hatch (R – UT) and Daniel Coats (R – IN) supported the underlying idea behind the legislation.
Like America’s tax code itself, this proposal represents the worst intersection of special interest politics, agency overreach, and government paternalism. Conservatives should oppose this and similar proposals for free-market reasons to avoid further empowering the corrupt, unaccountable IRS. Democrats should oppose it for its outsized negative impact on the very people they constantly claim to be trying to protect.
Congress should oppose all efforts to licenses tax preparers, as most Americans can agree that when it comes to taxes, Congress has done more than enough damage already.
Eric Peterson is a State Policy Analyst at Americans for Prosperity