Tag Archives: h&r block

CEI Podcast – November 11, 2010: Taxing New IRS Regulations

This week I switch from host to guest. Have a listen here.

Fellow in Regulatory Studies Ryan Young explains how an IRS proposal for mandatory certification of tax preparers would hurt consumers and taxpayers. It is one more example of how regulation can hurt competition. Large tax preparation firms would benefit at the expense of individuals and smaller firms who can’t afford the added regulatory burden.

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Regulation of the Day 158: Preparing Taxes

The IRS wants to require all tax preparers to register with them, pass an exam, and take continuing education classes. Over at Investor’s Business Daily, Caleb Brown and I explain why that would hurt consumers and taxpayers. Our main points:

-Since the IRS has the power to revoke registrations, tax preparers will have to be careful not to advocate too aggressively for their clients.

-There are at least 600,000 unregistered preparers. Many of them are retirees. Others have jobs, but prepare taxes on the side to help make ends meet. Still others are volunteers. They give their services for free to people who can’t afford a tax preparer. How many will give up, rather than jump through the proposed regulatory hoops?

-Big firms — with more than 500 employees — pay $7,755 per employee per year to comply with federal regulations. Their smaller rivals have to pay a whopping $10,585 per employee per year. That’s a built-in competitive advantage of nearly $3,000 per employee, courtesy of Washington. No wonder so many businesses have D.C. offices these days.

-H&R Block alone spent nearly $1 million on lobbying in the last half of 2009, much of it pushing for these very tax-preparer regulations. It wants the deck stacked even further in its favor.

-The best solution to this problem is simplifying the tax code. There is no legitimate reason for the tax code to be so complicated that most people have to turn to others for help.

 

The Tax Code

According to CNN, the federal tax code stands at nearly 100,000 pages, “with a word length that is about 10 times the size of the standard English version of the Bible.”

Wow.

Surely we can do better than that. Both parties complain about the complexity of our tax code, so why not do something about it?

Turns out they are, just in the wrong direction. Reps. Dreier and Berman are proposing a targeted tax break for filmmakers, and President Bush is proposing a tax break for casinos in the Gulf region.

I’m all for lower taxes, but this is ridiculous. Instead of a cut for a few people here and a few there, why not do away with all exemptions and special treatment and just charge everyone the same rate?

Tax avoidance would be almost impossible. The entire tax code could fit on one page. Imagine that, being able to do your own taxes. Tax rates would almost certainly go down due to popular pressure since everyone would have to pay.

The only downside is that H&R Block would probably go out of business.

Well, that and it probably wouldn’t do a thing about the real problem, which is spending. I noted some of the difficulties with that yesterday.