VICTORY! New Free File rules ban tax-prep firms from hiding their offerings, allow IRS to compete with them (a love-letter to Propublica)

Six months ago, Propublica began beating the drum about "Free File," a bizarre, corrupt arrangement between the IRS and the country's largest tax-prep firms that ended up costing the poorest people in America millions and millions of dollars, every single year.

The scam is one of those baroque, ultimately boring and complex stories that generally dies in the public imagination despite its urgency, because "boring and urgent" is the place where the worst people can do the worst things with the least consequences.

With that warning, here's a short summary: in most wealthy countries, the tax authority fills out your tax return for you, using the information your employer already has to file every time it pays your wages. If all the numbers look right to you, you just sign the bottom of the form and send it back, without paying a tax preparer. If, on the other hand, you want to claim extra deductions, or if something complicated is going on with your finances, you can throw away that free tax return and fill in a form from scratch, either on your own or with the help of a professional.

When Americans asked to have the same courtesy extended to them -- a move that would save the vast majority of Americans millions and millions of dollars they were currently paying to the likes of HR Block and Intuit/Turbotax, every single year of their entire working lives -- the tax-prep industry mobilized to kill the proposal. The industry (which is highly concentrated and dominated by a small handful of firms whose top execs have mostly done time in all their competitors' board rooms, making them into essentially one giant company whose different divisions have different shareholders) lobbied the IRS very hard, and won a resounding victory.

That victory is called "Free File." Under Free File, each tax prep company is required to serve a slice of working Americans with free, online tax-preparation. The arrangement was hailed as a victory for public-private partnerships, harnessing the efficiency of the private sector to perform this public duty of the state. Importantly, it meant that the IRS would not expand its headcount or budget, both of which had been slashed by successive right-wing presidents and their legislative enablers. The move was cheered by anti-tax extremists like Grover Nordquist, who was delighted by the "efficiency" of you saving a bunch of pieces of paper the government already had, typing them into an online form, and hoping that a company's website came up with the same calculations that the government had already made about your tax-bill.

Part of the Free File deal banned the IRS from creating a competing offer and it banned the IRS from advertising the existence of the program or telling people where to find the free offering.

As soon as the ink was dry on Free File, the tax-prep companies set about to sabotage it. Intuit -- a massive company led by a bizarre cult figure -- and its competitors hid their Free File offerings deep in their sites, and used the "robots.txt" system to instruct search engines to hide them. They took out search ads for the phrase "Free File" that directed users to paid offerings with the word "free" in their names. They created "Free File" systems that would make you go through hours of work entering your data before surprising you with a notice that you didn't qualify for Free File because you'd paid interest on a student loan (or some other normal thing) and then ask you if you wanted to pay to keep your work and finish your tax-return in the non-free system.

There's a simple name for this kind of activity: fraud.

But it was a fraud in plain sight, one that went on for years and years, and which created a stealth tax on the majority of Americans, which they had to remit not to the IRS, but to the tax-prep companies, which used the money to lobby to make it even harder to get away from handing them your money every year.

Enter Propublica, whose relentless reporting did the seemingly impossible: it made a complicated, boring important thing into something that millions of Americans cared about. Something they cared about so deeply that they actually managed to shame the IRS into taking action.

Remember, the IRS is an administrative agency, under the direct control of the Trump administration. That means its commander-in-chief is a guy who said dodging his taxes means that he's "smart." While the IRS has many good, hardworking staffers, it has also been demoralized and gutted by the right, who have convinced millions of poor people that it's somehow in their interests if it's easier for rich people to duck their taxes.

Despite all this, the IRS has enacted new Free File rules: first, these rules ban tax-prep companies from hiding their Free File offerings, and it bans them from using deceptive names for non-Free File offerings (Turbotax will no longer be allowed to confuse Americans by offering "Turbotax Free" -- which is not free -- as a competitor to "Turbotax Free File," which is).

Second, the rule allows the IRS to develop its own competing Free File product, which means that the government agency that already knows how much tax you owe will allow you to review its findings each year and then either challenge them, or simply click OK, without paying a single cent of tax to Intuit or HR Block, and free you from filling in lengthy, bureaucratic forms.

This outcome is nothing short of miraculous: it did not come as the result of Congressional action. It did not come as the result of the Trump administration's inattention (the release came out the same day that the Trump administration revised its tax rules to allow money launderers to retain billions in the loot they've stashed offshore).

It came about as the result of fucking journalism. Propublica wrote its way into a better world, with relentless, deep, accessible reporting that made this boring, important thing come to life.

I am sympathetic to the idea that talking about politics isn't doing politics, but that's not entirely true. Learning about what's going on and telling the people you know about it and getting them to tell others is part of how we make change. Propublica's excellent reporting wouldn't have mattered if people hadn't read it -- and talked about it.

And Propublica has done this repeatedly over the past year, deeply reporting on naked, grotesque corruption in ways so vivid and undeniable that they actually changed things, and not in some abstract, boring way, but in ways that matter to the immediate, lived experience of real people who had been brutalized and poisoned and jailed and mistreated with impunity, for years, until Propublica wrote about it.

Here are some examples, just from the stories I paid attention to this year (Propublica does so much good work that I can't manage to cover all of it):

* Reformed South Carolina's "magistrate judge" system that let "judges" with no legal background and less training than barbers sentence poor people (most of them Black) to prison in defiance of their constitutional rights;

* Dismantled Illinois's system of Quiet Rooms where special ed kids were put into solitary confinement, sometimes for days at a time;

* Shamed a "Christian" hospital into ending its practice of suing thousands of patients, many of them its own employees, for inability to pay their medical debts, and forcing it to jettison the private army of debt collectors it kept on its payroll.

* Killed an Illinois scam whereby affluent parents temporarily gave up custody of their own children so they could steal college grants earmarked for poor children;

* Got two Louisiana cops fired for encouraging people to murder Alexandria Ocasio-Cortez;

In addition, Propublica has done lots of reporting that hasn't yet created political transformations, but has changed our debate and laid the groundwork for change to come: called attention to the penniless hero of the ransomware epidemic; discredited a "walking polygraph" system used by police forces to frame their preferred suspects with sheer junk science; documented the link between pharma company bribes and doctors' prescribing; named every former lobbyist in the Trump administration; tracked every penny of the 2008 bailout money; documented Wayne LaPierre's self-dealing from the NRA's war-chests; documented the grifty conservative PACs that scammed millions out of scared old white people with racist Obama conspiracies and then kept the money for themselves; published a blockbuster story on the theft of southern Black families' ancestral lands through a legal grift called "heirs' property"; debunked the "aggression detection" mics being installed in America's classrooms; outed a "ransomware consultant" that was working with ransomware crooks to simply pay the ransom, while pretending that they were able to get you your files back without enriching the crooks who locked them up; named and shamed Alabama sheriffs who lost their re-election bids and then spent thousands of public dollars on frisbees or stole discretionary funds, or destroyed food earmarked for prisoners, or drilled holes in all the department computers' hard-drives in a form of "vindictive hazing"; followed the payday lender industry to a Trump hotel where it staged an annual conference, funneling millions to the president's personal accounts shortly before Trump reversed Obama's curbs on predatory lending; documented how TSA body-scanners single out Black women for humiliating, discriminatory hair-searches; revealed the secret history of wealthy people destroying the IRS's Global High Wealth Unit; and did outstanding work on the Sackler family, a group of billionaire opioid barons whose products kickstarted the opioid epidemic that has now claimed more American lives than the Vietnam war.

2019 was a dumpster-fire of a year and 2020 could be worse -- or it could be the dawn that breaks after our darkest hour. Finding Propublica's victory lap on Free File on New Year's Day was just the sunrise I needed to give me hope for the year to come. Sometimes, simply finding the truth and telling it to the people can make a change.

I'm a Propublica donor, and an avid reader. I admit that sometimes when I see that PP has published another 15,000-word expose, I am slightly dismayed at the thought that I'm about to lose 1-2 hours of my life to digesting and writing up the new story, but that dismay is always overcome by excitement at the thought that they have turned over a new rock and found something genuinely awful beneath it, and that, with all our help, we can sterilize that foetid sludge with blazing sunshine.

The addendum to the deal, known as Free File, comes after ProPublica’s reporting this year on how the industry, led by TurboTax maker Intuit, has long misled taxpayers who are eligible to file for free into paying.

Under the nearly two-decade-old Free File deal, the industry agreed to make free versions of tax filing software available to lower- and middle-income Americans. In exchange, the IRS promised not to compete with the industry by creating its own online filing system. Many developed countries have such systems, allowing most citizens to file their taxes for free. The prohibition on the IRS creating its own system was the focus of years of lobbying by Intuit. The industry has seen such a system as an existential threat. Now, with the changes to the deal, the prohibition has been dropped.

The addendum also expressly bars the companies from “engaging in any practice” that would exclude their Free File offerings “from an organic internet search.” ProPublica reported in April that Intuit and H&R Block had added code to their Free File pages that hid them from Google and other search engines, diverting many users to the companies’ paid products.

IRS Reforms Free File Program, Drops Agreement Not to Compete With TurboTax [Justin Elliott and Paul Kiel/Propublica]

(Image: Phil Catterall, CC BY-SA, modified)