Comment: To The Hon. Connie Mack and The Hon. John Breaux: We are writing today to comment on testimony that the Tax Reform Panel has heard in the process of determining the recommendations for reform that you are submitting to the Secretary of the Treasury. Citizens Against Government Waste (CAGW) is a private, nonpartisan, nonprofit organization representing more than one million members and supporters nationwide. At the May 17 public meeting, the third panel discussed the perceived benefits and disadvantages of pursuing a “Return Free” tax model. CAGW has been watching a pilot “Return Free” program move forward in California and have strong concerns about such a program being pursued on a broader scale. Programs like “Return Free” represent major conflicts of interest within government agencies. The same agency that collects taxes, writes tax regulations, performs audits, and enforces compliance should not also serve as tax preparer. While program proponents point to it as an example of government facilitating and streamlining a process for taxpayers, it is clear that the taxpayers’ interests and the agency’s interest are not the same. The government’s interest in maximizing revenue will completely override citizens’ interest in minimizing their tax liability. The “Return Free” model threatens the American tax system, which was built on and continues to rely upon the concept of voluntary compliance. Direct, hands-on involvement in the preparation of one’s taxes encourages basic awareness of the cost of government and stimulates accountability, both for the taxpayer and the tax collector. A “Return Free” system is not “reform.” In order not to be held liable for any mistakes made by the government, taxpayers must still calculate their taxes in order to compare them to the government’s calculations and ensure an accurate return. After all, the sole responsibility for accuracy and completeness, not to mention the potential liabilities associated with inaccuracy, continue to rest with the taxpayer. “Return Free” does not ease that burden. In addition, some taxpayers will overpay by missing out on credits or deductions because they will feel compelled to accept the government’s calculations. Others who earn non-wage income or had a recent life change, such as a home purchase or birth in the family, may use the government-sent form, and inadvertently underpay, or even open themselves up to accusations of tax evasion. The system is likely to be riddled with inaccuracies, and since the onus is on taxpayers, these inaccuracies will only be corrected if taxpayers take the unprecedented step of turning over large amounts of sensitive, financial information to the government. That is not an acceptable option. There are no compelling reasons for the government to insinuate itself into the tax preparation business. A “Return Free” model will generate unnecessary expenditures and new expansion of government bureaucracy. “Return Free” does not ease the burden on taxpayers, nor does it address any discernible crisis in tax preparation. Instead, it gives the government increased control over every level of the taxation process, where its interests will trump taxpayers’ interests. We respectfully urge the Commission to reject the “Return Free” model. Sincerely, Tom Schatz President Citizens Against Government Waste |