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Nanny State of the Week: Happy Tax Day! Now get ready to pay more to file

By   /   April 18, 2016  /   News  /   No Comments

Part 78 of 121 in the series Nanny State of the Week

The overlords of the Internal Revenue Service already make it their business to dig through Americans’ financial lives every year. Now Congress is considering limiting who taxpayers can turn to for help.

Thanks to a federal tax code that is endlessly confusing and frustrating, an estimated 80 percent of Americans needed assistance filling out their returns this year.

Shutterstock photo

HAPPY TAX DAY: Citing a need to crack down on fraud, two Republican members of Congress have proposed a new licensing system for tax preparers. If passed, it likely would put more small tax preparers out of business and help big companies that profit off the complexities of the U.S. tax code. Oh, and it would make tax preparation more expensive, too.

But citing a need to crack down on fraud, two Republican members of Congress have proposed a new licensing system for tax preparers. If passed, it likely would put more small tax preparers out of business and help big companies that profit off the complexities of the U.S. tax code.

Under the legislation authored by Reps. Diane Black, R-Tennessee, and Pat Meehan, R-Pennsylvania, tax preparers would have to register with the IRS, submit to a background check, pass an exam and complete continuing education classes each year.

The two lawmakers say the licensing rules are intended to cut down on $15 billion in improper earned income tax credits handed out in 2013.

Critics say the proposal is a case of government making worse a problem government created to begin with.

“With a tax code so unwieldy and complicated that nearly every American needs help complying, how would regulating preparers make things easier? It won’t,” says Chris Koopman, a research fellow at the Mercatus Center, a free-market think tank. “The problems with tax compliance have little to do with who is preparing returns. Making it more difficult for individuals to get the assistance they need will help no one.”

Well, that’s not entirely true.  It will help one specific group: the companies that make their money during tax season, like H&R Block, Jackson Hewitt (which owns the Turbo Tax software brand) and CPAs.  As the Wall Street Journal reported, the professional tax preparing industry is cheering for the new licensing rules because they would reduce competition and force taxpayers to use their services.

Isn’t that just grand?  Businesses that exist solely because of the complexity of the federal tax code (in other words, businesses that wouldn’t exist if it wasn’t for the federal government’s interest in every aspect of your financial life) are lobbying for the federal government to create even more rules so they can make even more money off taxpayers.

And in some cases, they’re not just lobbying for the new rules – they’re actually writing them.

A former CEO of H&R Block, Mark Earnst, oversaw the creation of a licensing system in 2010 while he was deputy commissioner of the IRS.  The new rules proposed by Black and Meehan would raise the bar even higher.

And we already know what happens when these types of restrictions are put in place.  The people who get hurt are the small-time tax preparers. People like Elmer Kilian, an 81 year old resident of Eagle, Wisconsin, who does his neighbors’ tax returns every year for a small fee.

After the IRS pushed through its licensing rules in 2010, the number of tax preparers in the country declined by an estimated 200,000. According to data from the Institute for Justice, it was mostly small tax preparers who were driven out the market, while large companies such as H&R Block got a bigger share of business in the years that followed.

The other loser, as is so often the case with licensing schemes: consumers.

“Licensing reduces competition in the tax preparation market, which is bad for consumers,” Dan Alban, an attorney with the Institute for Justice, recently told the Senate Finance Committee. “Between reduced competition and increased regulatory compliance costs, licensing is expected to artificially drive up the prices consumers pay for tax preparation.”

The Nanny State isn’t always about telling you what is illegal and what is mandatory.  Sometimes it’s about changing the rules, ever so slightly, to help the powerful (or at least those who make their money by helping the powerful avoid paying taxes) at the expense of everyone else.

Tax preparers such as H&R Block and TurboTax are facilitating the Nanny State by their very existence. In return, the Nanny State helps keep them in business.

Part of 121 in the series Nanny State of the Week
  1. Nanny-state state of the week: MD may become first to ban Vaportinis
  2. Nanny-state city of the week: Minneapolis wants to ban take-out trays
  3. Skim is in: CT lawmakers want to ban whole milk in day cares
  4. Nanny state of the week: Fairfax, VA, wants to limit the right to assemble
  5. Nanny state of the week: SC — and Schumer — for duplicative efforts to ban powdered alcohol
  6. Nanny of the Week: Virginia hoses down car wash fundraisers
  7. Nanny of the Week: Even a summertime trip to the beach can’t be nanny-free
  8. Nanny of the week: Federal authorities think feral cats can read signs
  9. Nanny of the week: Cambridge wants to ban ride-sharing services like Uber and Lyft
  10. Nanny-stater of the week: NY lawmaker wants to ban photos with tigers
  11. Nanny-stater of the Week: Who needs cupcakes and candy? Here, have a pencil
  12. Nanny-stater of the week: Fargo limits kids to less than four shots of juice per day
  13. Nanny-stater of the week: Wisconsin towns fight repeal of bow ban
  14. Nanny of the week: No fun in the sun, thanks to Congress and FDA
  15. Nanny-stater of the week: DOT to ban cell phone use on planes
  16. Nanny of the week: The out-of-control trend of arresting non-helicopter moms
  17. Nanny of the Week: Vermont city could ban ‘human activity’
  18. Nanny of the Week: Mississippi makes bird feeders illegal – by accident
  19. Nanny of the week: MO town bans breastfeeding near pools
  20. Nanny of the Week: School bans lip balm, 11 year-old girl fights back
  21. Watchdog.org blows lid off Vermont’s bake sale brownie ban
  22. Nanny of the Week: Seattle imposes fine on residents who throw away food
  23. Nanny of the Week: California bans plastic bags
  24. Nanny of the week: Maybe this time it will be different for Chicago
  25. Nanny of the Week: Florida growls at craft breweries’ growlers
  26. Nanny of the Week: Massachusetts town seeking to ban tobacco faces uprising from residents
  27. Nanny of the Week: Proposed bans on Thanksgiving Day shopping
  28. Nanny of the week: U.S. government bans ‘Comfyballs’ underwear
  29. Nanny of the Week: Better take down those holiday decorations
  30. Nanny of the week: Towns ban sledding
  31. Nanny of the Week: New York City plans to ban out-of-state cars
  32. Nanny of the Week: Snow-shoveling teens get in trouble with the law
  33. Nanny of the Week: Get caught wearing yoga pants three times, go to jail for life
  34. Nanny of the Week: Georgia lawmaker wants to ban mermaids, werewolves, other fictional creatures from real life
  35. Nanny State of the Week: Endangering manatees in Florida
  36. Nanny of the Week: Christie caves to protectionist gravestone proposal in N.J.
  37. Nanny of the Week: Don’t mix beer and ice cream – because of the children
  38. Nanny of the Week: Is the minimum wage a nanny state policy?
  39. Nanny of the Week: Republican in NY backs cat declawing ban
  40. Nanny of the Week: NJ continues ban on self-serve gasoline, because sometimes it snows
  41. Nanny of the Week: Bernie Sanders is coming for your deodorant
  42. Nanny of the Week: Will babies confuse beer for their binkies?
  43. Nanny of the Week: Weeds will prevail in Maryland lawn care ban
  44. Nanny State of the Week: FDA bans trans-fats
  45. Nanny State of the Week: L.A. plans to jail unlicensed street vendors
  46. Nanny ST8 of the Week: Anti-government messages not allowed on license plates
  47. Nanny State of the Week: Helicopters, horses and New York City
  48. Nanny State of the Week: Lawsuit challenges Seattle trash snooping
  49. Nanny State of the Week: Town officials mandate mowing
  50. Nanny State of the Week: Florida county sends environmental specialist to investigate BBQ
  51. Nanny State: Despite menu nannies, Americans still fat!
  52. Nanny State of the Week: New York City’s ban on Styrofoam hurts businesses, consumers
  53. Nanny State of the Week: Colorado Springs may ban sitting in public places
  54. Nanny State of the Week: New York’s soda ban could be back — but for kids only
  55. Nanny State of the Week: D.C. flexing licensing muscles at personal trainers
  56. Nanny State of the Week: Hammock bans mean no hanging out on college campuses
  57. Nanny State of the Week: County can use same lawn treatments it banned residents from using
  58. Nanny State of the Week: Pols want to ban daily fantasy sports
  59. Nanny State of the Week: Bay Area bureaucrats ban fireplaces, wood stoves
  60. Nanny State of the Week: Halloween for the politically correct only
  61. Nanny State of the Week: Governments lag behind the public on orca captivity ban
  62. Nanny State of the Week: New York might accidentally ban makeup
  63. Nanny State of the Week: California could be first state to apply no-fly list to guns
  64. Nanny State of the Week: University may block social media app in futile effort to combat racism
  65. Nanny State of the Week: City fines residents for chipped paint, mismatched curtains
  66. Nanny State of the Week: No Christmas in Bethlehem this year
  67. Nanny State of the Week: Connecticut may outlaw smoking in many cars
  68. Nanny State of the Week: Town inspection checks whether you cleaned your toilet
  69. Nanny State of the Week: Minnesota men facing felony charges for selling beer
  70. Nanny State of the Week: City rewrites law to block theater from getting liquor license
  71. Nanny State of the Week: FDA goes beyond the pale, prepares to ban teen tanning
  72. Nanny State of the Week: Charleston’s storied history is off-limits to the unlicensed
  73. Nanny State of the Week: Feds marketing food stamps with bingo games, TV ads
  74. Nanny State of the Week: No sipping and selling for Alabama winemakers
  75. Nanny State of the Week: Jail time for texting while walking in New Jersey
  76. Nanny State of the Week: In time for Opening Day, cities ban chewing tobacco at ballparks
  77. Nanny State of the Week: Feds send LSD Ale on a long, strange trip
  78. Nanny State of the Week: Happy Tax Day! Now get ready to pay more to file
  79. Nanny State of the Week: A state license for breast-feeding advice?
  80. Nanny State of the Week: School officials bully kids with ban on skinny jeans
  81. Nanny State of the Week: FDA fries family’s potato chip business with new cooking oil mandates
  82. Nanny State of the Week: CFPB knows what is best for your personal finances
  83. Nanny State of the Week: City cracks down on crawfish boils after mayor’s aide complains
  84. Nanny State of the Week: Florida couple still fighting for their vegetable garden
  85. Nanny State of the Week: State lawmakers to decide where you can get an Uber in Boston
  86. Nanny State of the Week: Businesses can’t sell parking spaces to Braves fans
  87. Nanny State of the Week: OK, everybody’s foam toys, out of the pool
  88. Nanny State of the Week: Get out of the pool!
  89. Nanny State of the Week: Common sense goes to the dogs in Phoenix
  90. Nanny State Of The Week: It’s nanny-on-nanny in Portland pot dispute
  91. Nanny State of the Week: Your pool isn’t cool
  92. Nanny State of the Week: You can’t be trusted to rent to your family
  93. Nanny State of the Week: Protecting pub crawlers from themselves
  94. Nanny State of the Week: Government fingerprints on your beer bottle
  95. Nanny State of the Week: Swimming with dolphins? Not if NOAA gets its way
  96. Nanny State of the Week: Keep your kids off the trees
  97. Nanny State of the Week: No property rights without paperwork
  98. Nanny State of the Week: Chicken nannies hatch new regulations
  99. Environmental nannies can’t regulate cow farts — yet
  100. Nanny State of the Week: Silence is golden in Worcester
  101. Nanny State of the Week: Land regulation trampling on cultural history
  102. Nanny State of the Week: New Jersey’s great leaf-blowing war
  103. Nanny State of the Week: New York bans homesharing ads
  104. Nanny State of the Week: Food truck destruction by the health nannies
  105. Nanny State of the Week: Chicago tries again with plastic bag tax
  106. Nanny State of the Week: Butts out in public housing
  107. Nanny State of the Week: Baltimore closes in on toy gun ban
  108. Nanny State of the Week: D.C. nannycrats ‘sting’ Airbnb
  109. Nanny State of the Week: Pursuing porn in the Palmetto State
  110. Nanny State of the Week: Too much summer fun on New Jersey lakes
  111. Nanny State of the Week: Public housing should go to the dogs
  112. Nanny State of the Week: The revolution will not be livestreamed from Congress
  113. Nanny State of the Week: California slow-pedals autonomous cars
  114. Nanny State of the Week: Aspen City Council helps the rich stay rich
  115. Nanny State of the Week: No more taco trucks on Santa Ana corners?
  116. Nanny State of the Week: The Burbank homes are too darn big
  117. Nanny State of the Week: Pesticide regulation full of bugs
  118. Nanny State of the Week: Anchorage’s no-drone zone
  119. Nanny State of the Week: Regulate all the teenagers
  120. Nanny State of the Week: Texas messes with winemaking
  121. Nanny State of the Week: Bad science guides Novato nannies

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Eric Boehm is the national regulatory reporter for Watchdog.org. He lives in St. Paul, Minnesota. His work has appeared in Reason Magazine, National Review Online, The Freeman Magazine, The Philadelphia Inquirer, The Washington Examiner and Fox News. He was once featured in a BuzzFeed listicle. Follow him on Twitter @EricBoehm87 and reach him at [email protected]