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News Release
November 6, 2002
CONTACT: David Fish
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Keep Gov't Out of Online Tax Prep
Lassman Makes the Case to National Convention

WASHINGTON, D.C. - The widespread adoption of electronic government initiatives at both the state and federal levels is increasing efficiency and making information and services more accessible to citizens. And that is good. But one of e-government’s most energetic supporters – Progress & Freedom Foundation Research Fellow Kent Lassman – warns there are some functions that must be left to the private sector. One of them, he told a Washington conference today, is online tax preparation.

At the annual meeting of the Council for Electronic Revenue Communications Advancement – the trade group for high-tech tax collection – Lassman told an audience including numerous IRS and Treasury officials that providing tax forms on line and enabling citizens to file and pay taxes electronically is fine, but that getting into the business of tax preparation raises a number of questions.

“There is a clear distinction between the provision of government services online and the electronic provision by the government of what are essentially commercial services such as tax preparation, telecommunications and Internet services,” Lassman said. Entering the online tax preparation market would “be an expensive proposition” and government “does not have a good track record entering new markets.” Moreover, Lassman pointed to “conflict of interest problems.”

Those problems and others with government entry into online tax preparation were the subject of a study and official comments to the IRS produced earlier this year by Progress & Freedom Foundation Senior Fellow and Vice President for Research Thomas M. Lenard. Lenard told the IRS “there is a conflict of interest between government acting as both a preparer of tax returns and an enforcer of tax laws.” That conflict “compromises the privacy of information” and pits government’s interest in collecting tax revenue against taxpayers’ interests in learning how to minimize their tax liability. Moreover, Lenard cited “difficult security issues, which the government is less well-suited than the private sector to address.”

Lassman, who directs PFF’s Digital Policy Network, is the author of the annual Digital State Survey.

The Progress & Freedom Foundation is a market-oriented think tank that studies the digital revolution and its implications for public policy. It is a 501(c)(3) research & educational organization.



The Progress & Freedom Foundation