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Viewpoints: Intuit uses clout to stymie state innovation

Published: Tuesday, Oct. 6, 2009 - 12:00 am | Page 11A
Last Modified: Monday, Oct. 19, 2009 - 10:36 am

It's one thing for a corporation to pursue every last dollar of profit. It's quite another for it to violate the public trust and to strangle a state and its citizens at a time when neither can afford it.

Intuit, the maker of the tax preparation software TurboTax, sells its products on the promise to make paying taxes easier. But for the last several years, it's been doing everything in its considerable power to make that process more difficult for hardworking Californians.

Five years ago, the state of California figured out a way to make taxpaying less painful. It rolled out ReadyReturn, a free online service that provides taxpayers their completed tax return by using information from wage and withholding data. Rave reviews followed, and user satisfaction hit 99 percent.

For Intuit, the program was too successful. The company viewed ReadyReturn as a threat because it thought ReadyReturn users would otherwise buy TurboTax. Intuit doesn't understand its own market. ReadyReturn users - taxpayers with income only from wages and no itemized deductions - are precisely the consumer group least likely to need TurboTax.

So what did Intuit do? It poured $1 million into the campaign coffers of a ReadyReturn opponent, Tony Strickland, in an attempt to influence the 2006 race for state controller. Strickland lost. ReadyReturn survived.

But Intuit persisted, opening its wallet still wider. It has been reported that Intuit has spent $618,000 on lobbying in Sacramento since 2007 and, since 2005, has donated additional amounts to 29 state senators. Intuit's money appears well spent.

Republicans in the Senate, with Strickland leading the way, blocked 20 bills at the end of the legislative session, primarily because Democrats would not let ReadyReturn die.

Despite Intuit's expensive lobbying, its arguments for abolishing ReadyReturn are as specious today as they were three years ago.

First, Intuit says the state can't afford ReadyReturn. Intuit is wrong. ReadyReturn saves the state money, netting $80,000 annually. California's free online filing system, CalFile, nets another $440,000. Intuit wants to abolish that program, too.

Second, Intuit says ReadyReturn threatens taxpayer privacy. Intuit is wrong again.

The state completes a taxpayer's return using information already in its possession and which the taxpayer - in the taxpayer's prior year's return - and his or her current employer provide. The program is voluntary rather than compulsory. Taxpayers can choose to sign and submit their ReadyReturn; they can use it to help fill out a regular return; they can make changes if they get married or add a dependent; they can give it to their accountant; they can throw it away.

Third, instead of ReadyReturn, Intuit wants California taxpayers to use Free File, software provided by private sector providers, including Intuit. Once again, Intuit is thinking of itself rather than California. Free File is inferior to both ReadyReturn and CalFile in every respect: coverage, capability and cost. Free File faces withering criticism from national leaders on both sides of the aisle at a time when participation last year dropped by 30 percent. U.S. Sen. Max Baucus, D-Mont., has opposed the program from the beginning, while Sen. Chuck Grassley, R-Iowa, has argued that taxpayers would "be better off with a pencil and an abacus" than Free File.

If that weren't enough, a recent study by the nonprofit organization Tax Analysts showed that Free File fails to catch simple mathematical errors and calculates disparate refunds for identically situated taxpayers. Also, fewer Californians would qualify for Free File than currently qualify for ReadyReturn (2 million) and CalFile (6.5 million). According to the Franchise Tax Board, 45 percent of this year's ReadyReturn and CalFile users would be ineligible for Free File.

Finally, abandoning ReadyReturn and CalFile would cost California a lot of money. Beyond the above forgone net savings - more than $500,000 annually - switching to Free File would create $350,000 in administrative costs. Worse, taxpayers would bear an additional $4 million to $10 million in software product costs and tax preparation fees.

Intuit wants to kill ReadyReturn and CalFile, two programs that save Californians considerable money, time and anxiety. I have a better idea. Let's show Intuit that Californians don't like corporations that act in this manner. Tell your legislator not to let Intuit win.


Dennis J. Ventry Jr. is a law professor at the University of California, Davis, School of Law.


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