Public outrage over the financial crisis may have subsided in recent years, but the lasting legacy is a nation that remains acutely aware of exploitative business practices that line the pockets of corporate executives and shareholders at the expense of ordinary working people.
Perhaps this is why H&R Block and Intuit quietly lobbied for a provision currently in the Senate appropriations bill that would make it more difficult for low-income taxpayers to claim the Earned Income Tax Credit. Currently, individuals filing their own taxes have to fill out a one-page form to claim the credit. H&R Block thinks these folks should have to fill out a longer form with repetitive and irrelevant questions. Robert Greenstein of the Center on Budget and Policy Priorties explains why this would be unneccessary and overly burdensome. And an Aug. 24 Vox article by Dylan Matthews brilliantly describes why this measure is ridiculous.
“The only possible reason to change the form, then, is to confuse taxpayers enough that even more of them will pay companies like H&R Block to prepare their returns,” Matthews wrote.
H&R Block, in response to negative publicity, defensively argued in a press release that it is lobbying for this provision to preserve the EITC and cut down on fraud by “do-it-yourself” filers. Nonsense. Someone should tell the company’s crisis communications team that it is not good PR to both brazenly mislead and condescend within the span of five paragraphs. Tax preparers such as H&R Block, Jackson Hewitt and Liberty Tax Service have a long history of exploiting low-income taxpayers, not fighting to preserve and strengthen programs, including the EITC, that lift people out of poverty. Further, implying that low-income taxpayers are deliberately committing fraud is highly offensive.
Erroneous returns are often due to paid tax preparers’ errors. The tax code is extremely complex, but tax preparers needn't undergo special training or certification. A 2014 GAO investigation of 19 tax preparers found that only two–barely 10 percent–properly completed tax forms. The remaining 17 made mistakes ranging from finishing a return that was $57 too little to preparing a return that grossly inflated the refund by $3,718. H&R Block should clean its own house and industry if it is genuinely worried about EITC overpayments. And while it is at it, the company should cease with the paternalistic language that essentially labels low-income people as incapable.
H&R Block’s effort to make it more difficult for consumers to claim the EITC without tax preparers’ help is also highly suspicious given that for years the industry exploited low- and moderate income taxpayers with usurious refund anticipation loans (RALs). The RAL industry flourished in the 1990s and early aughts when electronic filing became commonplace. The loans were an immediate advance against a taxpayer's calculated refund. Tax preparers often charged consumers a preparation fee, electronic filing fee, as well as a fee for the loan advance. By the time tax preparers finished tacking on charges, consumers often paid companies 10 percent or more of their refunds.
According to the National Consumer Law Center, 90 percent of people who received refund anticipation loans were low-income taxpayers. It’s not hard to surmise why. For families living paycheck-to-paycheck, the appeal of immediate cash to make ends meet often, by necessity, trumps concerns about predatory lending rates. Tax preparers know this, and that’s why the industry profited from RALs by more than $1 billion annually during its heyday. In 2010, the IRS passed regulations that made it less enticing for banks to grant RALs and a couple of years later, most big banks got out of the RAL business.
Don’t shed any tears for H&R Block and other tax preparation firms, though. Tax preparers continue to profit off low-income taxpayers through Refund Anticipation Checks. For consumers who cannot pay up-front costs, tax preparers offer to deduct the preparation fee from their refunds. Of course the fees add up. There’s the preparation fee, the federal filing fee, the state filing fee, and other add-ons.
Consumer watchdog organizations continue to highlight how some tax preparers charge excessive fees. The groups are educating the public about how to file their own returns and receive refunds using their own bank accounts or other financial products to avoid copious fees. In addition, a number of local nonprofit organizations will prepare returns for low- and moderate-income people for free. H&R Block and other tax preparation firms know this, but they have a financial interest in keeping consumers dependent upon their services, hence the quiet lobbying to make it more difficult to claim the EITC.
The public doesn’t begrudge corporations earning big profits. But it rightly detests corporations that have a willful disregard for public wellbeing. The EITC does not exist to provide business opportunities that enrich tax preparation firms at the expense of the American public. H&R Block and other corporations’ effort to complicate the EITC for the transparent reason of greasing their corporate palms is nothing short of shameful.