You may have seen the new TurboTax commercial with a song that exclaims “all people are tax people” over and over (and over) again. The commercial aired during the Super Bowl and it features people from all walks of life dancing excitedly about getting their tax returns. If you haven’t seen it yet, don’t bother. You’ll wish you hadn’t. Besides the fact that the commercial features the most impossibly obnoxious song of all time, the thing that bothers me the most is the idea that people should hop out of their chairs and dance with joy whenever they receive a big tax return. Let’s make one thing clear. The key word in “tax return” is return. The government is returning your own money back to you because you overpaid your taxes throughout the year. They are giving you your own money. If you get a big tax return, that means you overpaid your taxes by a lot. And don’t count on the government to figure out how much you overpaid them. You have to figure that out, and if you’re wrong, it’s tax fraud, and you can get fined or sent to jail.
I get what Intuit (the company that makes TurboTax) is doing. They want to make tax returns seem like free money. They want tax returns to be exciting and fun so people will buy TurboTax to get as big of a return as possible. The message of the commercial is: “Hey, you can make thousands of dollars when you do your taxes! Isn’t that awesome? Let’s all dance and go crazy!”. To be fair, if there was any software that would guarantee me thousands of dollars instantly, I would download it right now. Who wouldn’t? The problem is, no matter how much Intuit wants you to think of it that way, a tax return isn’t free money.
To talk about tax returns, we really need to start with how taxes work in the United States. I specify the United States because once we start talking about how other countries do it, I think you’ll realize just how stupid our system is. Taxes work like this: imagine if you had a landlord who said “I’m not sure how much rent is, but you might be able to figure out how much you owe me if you read through this book of regulations that’s over 70,000 pages long. At the end of the year, if you overpaid me, you have to tell me how much I owe you back, and if you get it wrong I’m calling the cops.”
Taxes don’t have to be this complicated. In Japan for example, people don’t “do” their taxes. They just receive their tax return in the mail — already done for them. The United Kingdom and Germany do it the same way. Of course, citizens can look over their tax returns, find mistakes, and argue their case if they find anything wrong. In Sweden, New Zealand, Chile, Denmark, Spain, and Estonia the government populates the tax returns of their citizens for them, all the people have to do is look over it and submit it. Imagine that, imagine a world where you know how much you owe in taxes. Where it is simple and straightforward, and if you overpay, the government will just send you back the amount you overpaid with a simple explanation. This could easily be a reality, the IRS could do this because they know how much you owe every year, so they already have the numbers you use to file your tax return.
The reason we don’t have this, and honestly the reason we don’t have a lot of nice things, is because of lobbying. Yes, there are good uses for lobbying, but there are also a lot of bad uses. In fact, in some cases, it comes pretty close to downright bribery, and it definitely doesn’t always represent the interests of the American people.
You may think “well, at least we have good tax software that makes it easy”. This is exactly what companies like Intuit want you to think. Intuit has positioned itself to seem like a friendly company that will help you navigate the complications of the tax code for free. The fact is, not only are they not innocent, they are one of the main driving forces behind why the tax code is so complicated. Intuit has lobbied like crazy to keep the tax code complicated so that they can continue to sell their products. In the past decade (2010–2019), Intuit has spent just under $25 million on lobbying. $2.5 million of that was just in 2019.
I’m sure Intuit started out as a company with good intentions, but corporate greed took over at some point and they started caring less about the people they’re supposed to be helping and more about their own profits. Just like when tobacco was discovered to be extremely unhealthy, tobacco companies didn’t just back off and take the best interests of society into account. No, they doubled down on advertising, trying to make cigarettes cool instead of trying to make them seem healthy. That’s what Intuit is doing with TurboTax. They want taxes to seem fun, like you’re getting free money. They don’t want you to know how unnecessary it is for our taxes to be such a difficult mess, and they definitely don’t want you to know how they’re lobbying politicians behind the scenes to keep the tax code complicated.
Just to be clear, TurboTax definitely isn’t free either. They advertise it as free and then pull a switcheroo when you actually go to file your taxes. Seemingly random things will trigger the software to tell you to upgrade to the premium version to continue, and most people will do it. I’ve done it! When you’re filing your taxes, with a tax return of potentially thousands of dollars looming over your head, 80 bucks doesn’t seem that bad. When I say the return is “looming over your head”, it is literally one of the most obvious things on the screen. Your tax return is in giant green numbers at the top of the screen, like it’s a massive prize that you’ll get if you just shell out a little money. That carrot they’re dangling in front of you is your own money.
The reason Intuit has had to lobby so hard to keep taxes complicated is because there’s actually no good reason for them to stay complicated anymore. In an increasingly partisan society, this is a surprisingly non-partisan issue. Democrats, Republicans, and Independents all want a simpler tax code. But it’s not about what people want. It’s about how society perceives taxes. Intuit pays absurd amounts of money to control the narrative about taxes. They want you to think that taxes are just complicated, and there’s nothing we can do about it, as if that’s the way they’ve always been, and that’s the way they’ll always be. Intuit wants you to see them as your savior. They want you to think that they’re generously offering you TurboTax to help you with your troublesome taxes so you can get a bunch of free money.
In the grand scheme of things, the tax code being complicated is a pretty small issue compared to all of the problems facing our country, but that’s part of why it’s in that perfect sweet spot for Intuit to get away with it. If it were a bigger problem, everyone would be talking about it. As it is right now, it’s just a big enough problem to be annoying but not big enough for people to take action. That’s why they can get away with having a Super Bowl commercial with an annoying song where people are getting excited about doing their taxes and getting big tax returns. If the commercial were closer to real life, the people in it would be moaning about how awful the process of doing taxes is. They would be wondering why it seems like a total guessing game as to how much their tax return is going to be, or why sometimes instead of getting money back they actually owe money. The sad thing is, even knowing how bad Intuit is, I will probably still end up using it to do my taxes this year* because they’ve positioned themselves in a place where I don’t know what else I could do. There are other tax programs, but most of them are just as much to blame for these issues. In fact, H&R Block spent over $3.7 million on lobbying in 2019.
The fact remains that change is possible. A simpler tax code is something that people want, and that is one great thing about this country. For better or for worse, when enough people want something in this country bad enough, they usually end up getting it.
P.S. By the way, if you want to see a good Super Bowl commercial, the one with Jason Momoa is actually hilarious. That is not an endorsement of the company running the ad. I just liked the commercial.
* Update 3/31/2020: After doing some more research, I came across the IRS free file site. I don’t know if this is new this year, but I appreciate that they lay out all the free ways to file. I ended up doing my taxes with TaxSlayer (affiliate link) because they have some of the most accepting requirements for free e-file and I was able to file a Schedule D (capital gains) for free with them while TurboTax wanted to charge me $90. Here are the requirements for free e-file with TaxSlayer:
- Your Adjusted Gross Income is $69,000 or less AND your age is 51 or younger, OR
- You are eligible for the Earned Income Tax Credit, OR
- Free for Active Military for Adjusted Gross Income of $69,000 or less
- Same criteria apply when filing with a foreign address
- Free state return, for some states, if you qualify for the federal return