Imagine there's a division in a company that is operating so efficiently and taking up so few administrative resources that it's saving money for the whole firm. The demand for its products is predictable and constant, and customer feedback is overwhelmingly positive. Would anyone close down that department?
No one would, certainly not someone with experience running, for example, the Internet's largest auction site. In the private sector, if you eliminated such a program you would get fired. Sacramento legislators should be held to the same standard. But right now they are being barraged by lobbyists and lies in a backroom plot to ax the state's free-to-use, free-to-operate tax filing programs, CalFile and ReadyReturn.
These two programs are the policy equivalent of that money-saving department. They're in the unglamorous business of filing taxes, but have been well-honed with online features that are easy to use. They do their jobs so well that they save the state $500,000 annually in reduced processing costs.
ReadyReturn auto-fills the user's state return based on their W-2, and it's free for single filers with income less than $240,000 a year. CalFile, for those with slightly more complicated returns, is free for filers with incomes up to $320,000. A study showed that more than 98 percent of those who used the current online version ReadyReturn wanted to use the program again the next year.
So who's trying to talk legislators into the bad business move of cutting these programs? It's the software maker Intuit, manufacturer of Turbo Tax. Intuit wants the state to use Intuit's own program, called Free File, which along with being less user-friendly would be free to fewer Californians. Policy-makers in other states, after wising up to this issue, have publicly denounced Free File. Forbes magazine and the nonprofit tax group Tax Analysts have publicly criticized the program's features as well.
Intuit's Free File does handle both the state and the federal return, a convenience not available with the state's programs. This in turn lets Intuit claim that ReadyReturn and CalFile hurt low-income filers, since as state returns they don't include lines for federal tax credits. But they do direct filers to the appropriate federal filing sites.
A closer look at Intuit's claims reveals which programs ultimately reach more people. Though Intuit claims it will cover more taxpayers, a tax analysis report by UC Davis School of Law associate professor Dennis Ventry states that the company in fact extends free service only to users with incomes up to $31,000 a year. The result is that Californians will pay millions more for the privilege of filing their taxes online.
It is nonsensical to make more people pay to use the state's e-filing system, particularly during an economic downturn. This will just push people to file paper returns that cost the state seven times as much to process.
Like businesses, the state needs more streamlined programs that reduce bureaucracy and make things simpler and less expensive for taxpayers. Intuit's Free File is welcome in the marketplace, and there's room for it, but not at the expense of ReadyReturn and CalFile.
In a budget that is likely to include massive cuts to the safety net that protects women, children and the disabled, this may all seem like peanuts. But it's precisely because it's below the radar that corporate lobbyists believe they can succeed in strangling these effective programs while we sleep.
Intuit has spent more than $4 million on campaigns and lobbyists in California since 2005, but there's no specific legislation cutting ReadyReturn and CalFile. If they disappear, it would be buried within the budget. Holding a specific legislator accountable will be difficult, and getting back the programs that work would be nearly impossible.
California is not a business, and the business model is not always applicable to policy decisions. But eliminating two successful, money-saving programs is one scenario where bad business and bad policy coincide.