Research Group Blames Politics for Tax Filing Problems

The U.S. tax filing system is among the most complicated in the world -- outdone by countries like Denmark and Spain, which have recently passed bills to refine and simplify their tax processes.

And it isn't like Congress hasn't been aware of this: Since at least 2011, the two houses have been called upon to pass a bill that would simplify Uncle Sam's filing processes by allowing for return-free tax filing. An automated form process provided by the Internal Revenue Service would speed up filing and reduce costs on all sides, proponents argue.

A bill submitted in 2011 by Rep. Jim Cooper (D-Tenn.) would have done just that, but it was never voted on in the House Ways and Means Committee (which, coincidentally, has oversight when it comes to the IRS).

The problem, says the nonpartisan research group MapLight, isn't a lack of discourse on this issue, but the considerable pushback by lobbyists who stand to lose if the filing process is changed.

"[A] few powerful companies have a large financial stake in ensuring long, complicated tax returns continue to be the norm," charges MapLight, which has published data that suggests getting a tax filing bill passed has become complicated by corporations that gauge their service fees based on the complexity of filing processes.

It named H&R Block, Intuit (owner of the online tax service TurboTax) and American Institute of Certified Public Accountants and other accountancy organizations as opponents in the effort to simplify the tax filing system, investing more than $30 million in lobbying efforts since 2011.

Most of that funding has come from the AICPA ($4.48 million in 2014), Intuit ($2.83m) and H&R Block ($1.99m), while the National Society of Accountants ($70k)  and Jackson Hewett ($45k) have represented the lighter end of the lobbying effort.

MapLight also looked at the stock holdings of Congressional members and discovered that eight senators and representatives -- plus Secretary of State John Kerry -- owned stock in Intuit, H&R Block and Jackson Hewitt. Interestingly, the investors cut across partisan lines, with both Democrats and Republicans in both houses holding stock in the three companies. Rep. Mike Conaway (R-Texas) owned as much as $15,000 in stock, while Rep. Alan Lowenthal (D-Calif.), Rep. Curt Clawson (R-Fla.) and Rep. Thomas MacArthur (R-N.J.) hit the top end at a maximum of $50,000 in stock investments.

"The U. S. tax code is one of the most complicated revenue raising schemes ever devised. We must pass fundamental, comprehensive tax reform to sweep away this mess," says Conway on his website, referring to the ongoing call for tax code reform.

The research also identified the top 10 recipients of campaign contributions on this topic, according to their leadership roles. Again, the recipients spanned both sides of the aisle. The recipients included one member of the Senate Finance Committee, four members of the House Ways and Means Committee, and two members of the House leadership, including Rep. John Boehner (R-Ohio). If there is any relief to be found in this data, it's the fact that none of the campaign recipients appear to own stock in the tax preparation companies.

"Congress has failed to consider any other return-free filing proposals since Rep. Cooper’s bill died. Instead, members have introduced bills to prevent return-free filing from spreading," says MapLight.

And the problem seems to be growing in complexity. Calls for more stringent certification processes for paid tax preparers means more more operating overhead -- and that will likely get passed on to consumers. Sen. Ron Wyden (D-Ore.) and Sen. Steve Cohen (D-Tenn.) both introduced bills directed at authorizing the IRS to certify tax preparers earlier this year. H&R Block threw its weight behind this bill, testifying before the Senate Finance Committee that "it is too easy to be a tax return preparer."

Lead image: 401(K) 2012

MapLight graphs: MapLight