IRS tax preparation system is bad for Arizona

Por: Carlos Ruiz

It was a difficult holiday season for small businesses and working families. The inflation rate increased by 7.1 percent in November, making it harder for families to buy everyday essentials and holiday gifts. The Federal Reserve also raised interest rates, making it even more difficult for Arizonans to purchase a home, or for local small businesses to take out a loan to expand or hire new workers. 

Unfortunately, politicians in Washington have responded to these challenges by pushing a proposal that would make the upcoming tax season even more challenging for Arizonans. Last year, Congress passed a bill that included an additional $15 million to study the feasibility of the Internal Revenue Service (IRS) preparing and filing tax returns on behalf of all taxpayers. Although this may not seem like much, it is the first step in establishing a government-run tax preparation system that would make tax season even more of a headache for working families and small businesses.

As the former Chairman of the Tucson Hispanic Chamber of Commerce, I have advocated for policies that promote and advance the general welfare and prosperity of the Hispanic community in Arizona. And as a small business owner myself, I understand the unique challenges that the drivers of our local economy face. It is with that perspective that I must also oppose well-intentioned but misguided proposals that would make it harder for Hispanic communities and businesses to share in the American dream. A government run tax preparation system is one such proposal.

Current Tucson Hispanic Chamber President Rob Elias correctly argues that giving the IRS the mandate of preparing tax returns and collecting revenue would create a “clear conflict of interest.” The IRS has the mandate of maximizing revenue for the federal government. How can the same agency be expected to maximize deductions and refunds for taxpayers?

When I first started my small business, I did not have the time to wait on hold to get answers from the IRS. But under a government run tax preparation system, entrepreneurs and small business owners may not have a choice. According to the Washington Post, in 2021, “IRS employees had answered just 2 percent of the more than 70 million taxpayer calls to the 1040 telephone line … on average, people spend 20 minutes on hold, although many taxpayers have reported much longer wait times.”  

Hardworking families would also lose out under this system. Families would find it more difficult to take advantage of different tax credits and deductions for which they are eligible. A government-generated return likely won’t be able to capture whether a taxpayer purchased a house, had a child, got married, made charitable donations, or engaged in other activities which entitle them to a deduction. As a result, they could easily lose out on their full refund.

A study from the National Bureau of Economic Research found that if such a system was implemented and taxpayers simply accepted their pre-populated returns from the IRS, tax receipts would rise by more than $96 billion. It certainly seems like implementing a government-run system that results in the government collecting billions in additional taxes is a conflict of interest. But, beyond that, this is money that Arizona families and small business owners need to put food on the table and afford everyday goods, especially amid historic inflation. 

An IRS-run tax preparation system is not just bad policy, it’s also bad politics. A 2022 poll from the Taxpayers Protection Alliance found that 78 percent of Arizonans opposed having the IRS prepare taxes and returns on behalf of all taxpayers. Furthermore, 58 percent of voters said they would oppose any elected official who championed such a proposal. 

Sen. Kyrsten Sinema is not afraid to stand up to both parties, and Sen. Mark Kelly recently won re-election as a pragmatic advocate for Arizonans. I urge them both to stand up to Washington special interests and oppose a misguided and unnecessary government-run tax preparation system.

Carlos Ruiz is the former Chairman and Treasurer of the Tucson Hispanic Chamber of Commerce and is the founder of HT Metals, which is a distributor of ready to manufacture custom transformed raw materials operating across Arizona.