President Joe Biden’s Treasury Department recently announced that the Internal Revenue Service (IRS) will begin testing a pilot program for Americans to file their taxes directly with the IRS. The idea may seem benign, but it’s actually quite insidious.
The effort would trust bureaucrats to become America’s tax preparers and filers. Rather than easing Americans’ headaches over filing their taxes, this new government-run method would only worsen their filing woes.
Without knowing the details of the Direct File proposal, taxpayers should be skeptical given how the IRS and Treasury Department started the initiative without having the proper authority from their elected representatives.
In May, Deputy Treasury Secretary Wally Adeyemo sent a letter to IRS Commissioner Daniel Werfel instructing him to “pilot a Direct File option in the 2024 filing season.” However, he sent his letter one day after the Washington Post reported that the agency had already “quietly built its own prototype system.”
Although the IRS is the largest of the Treasury Department’s bureaus, the department must approve all new programs the agency seeks to undertake. It is unclear whether the IRS built this tax-filing prototype behind the Treasury’s back, or Treasury collaborated with the agency from the beginning. Either way, this Direct File pilot program poses a problem because neither the IRS nor the Treasury Department has the authority to greenlight an initiative as expansive as this one. Only Congress does, and it’s only given them very narrow authority to explore this idea.
The Inflation Reduction Act set aside $15 million for the government to study Direct File. The bill came with the understanding that the IRS must first notify Congress of the study’s results before creating a prototype. The IRS ignored this obligation and made its prototype system before releasing that report.
This has understandably angered and frustrated members of Congress on key tax-writing committees. Sen. Mike Crapo (R-Idaho), who served on the Senate Banking Committee, is one of them. After hearing the news, he remarked that it “suggests a pre-determined outcome and flies in the face of previous commitments Commissioner Werfel made…for the IRS to not act without explicit legal authority.”
Indeed. Even the data the IRS is using to advance the Direct File pilot program suggests the agency has already pre-determined that it will become the nation’s tax preparer.
To comply with Congress’s mandate to study the feasibility of Direct File, the IRS hired the New America Foundation, a center-left think tank that called for creating “a modern, government-run tax filing option” a year earlier, and a California professor who similarly publicly endorsed the idea before conducting the study. So, unsurprisingly, their joint, IRS-commissioned study looked favorably upon Direct File.
The New America Foundation’s findings flew in the face of a nonpartisan analysis conducted by MITRE Corporation, a non-profit frequently hired by the government, which made it clear that the American public lacks demand for Direct File. Only 15 percent said they would use such a program, with most finding that the IRS option would be far more of a hassle than tax preparation service alternatives on the market. “Lack of trust in the government” was a key reason for their hesitance.
American taxpayers have every reason to believe that the IRS — a revenue agency — would attempt to keep their tax liability as high as possible, unlike a market service, whose incentive is to look for ways to save taxpayers money. Moreover, the government isn’t renowned for its effectiveness in operating technology.
The Government Accountability Office found that 33 percent of IRS applications, 23 percent of IRS software and 8 percent of IRS hardware are defined as “legacy” systems — meaning they’re at least 25 years old. It gets worse — 13 percent of the federal agency’s applications are greater than 55 years old. It’s unwise to trust systems old enough to collect retirement to operate an advanced tax filing service for millions of Americans.
As a former U.S. treasurer, I understand the problems with our country’s tax system. Everyone would like a system that makes filing taxes easier and ensures that government efficiently collects what’s owed. But the Direct File program is not the solution to these problems. We cannot trust a politicized and backlogged IRS to run such a service effectively. It is more likely to follow the sad path of too many government initiatives designed to help us, which have ended up making our lives worse.
Bay Buchanan served as the 37th treasurer of the United States.