March 27, 2002

March 27, 2002 | Commentary on

"EZ" Government Help

Jokes about government inefficiency are such an ingrained feature of our national psyche that when White House officials say they're working to make government "more focused on citizens and results"-as they do in a new report, "E-Government Strategy"-it should be reason to applaud.

But consider something they've proposed as part of this new "strategy." The Internal Revenue Service and the Office of Management and Budget (OMB), home of the president's accountants and efficiency experts, want to help people prepare their taxes via the Internet. They say their plan, "E-Z Tax Filing," offers taxpayers several advantages: faster refunds, better customer service, and free "basic, automated tax preparation."

To be sure, help is often needed. It takes more than a calculator and a pile of receipts to figure out what you owe under a tax code that takes up about 17,000 pages, is seven times longer than the Bible and comes with more than 700 different forms. And, at first glance, it's a nice idea … unless you work for H & R Block, TurboTax or other tax-preparation businesses. Then it's the worst idea since the Edsel, New Coke or the Xtreme Football League.

It's essentially a matter of good intentions gone bad. The federal government under President Bush is trying to act more business-like and less bureaucratic. It's trying to be more efficient. It's trying to respond to "customer" demands. And so, like many companies, it's trying to do more of its "business" online.

That's great. But problems start when the government stops acting like a business and starts acting as a business-especially for people in the real businesses that government is horning in on.

Take Federal Express and United Parcel Service (UPS). For years, they and other delivery companies have been competing with the U.S. Postal Service. But they can never win because the Postal Service a) can get millions from Congress even when it's losing money, as it has for decades, b) gets its money partly from the taxes its competitors pay, and c) sets its competitors' delivery rates. (Yes, you read that correctly, and yes, it's legal.)

If the proposal by the IRS and the OMB becomes reality, the stage is set for another unfair tug-of-war between government-run business services and private ones, this time between the IRS and tax accountants. The numbers are already stacked in the tax agency's favor: More than 102 million people either called, wrote or walked into an IRS office to get tax help in 2000, according to the agency. H & R Block, by contrast, serves about 19 million worldwide.

Those numbers likely would drop under the IRS-OMB plan, especially when more people realize the government's services are free while people have to pay private firms to do their taxes. And you know what happens next: Fewer people will go to the private firms to have their taxes done. The private firms get less business and lay off employees.

Meanwhile, at the IRS, taxpayers likely will get the service they pay for: According to the agency, people who called their toll-free tax-assistance telephone number in fiscal year 2000 got wrong answers more than 25 percent of the time. That's not good, considering how much money, time and grief it can cost if you file your taxes incorrectly.

We must have an efficient government but a limited one. That means government must stick to those things that it alone is meant to do, from regulating interstate commerce to defending our borders. It may not be the "EZ" solution, but it's the right one.

Edwin Feulner is president of The Heritage Foundation, a Washington-based public policy research institute.

About the Author

Edwin J. Feulner, Ph.D. Founder, Chairman of the Asian Studies Center, and Chung Ju-yung Fellow
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