Occupational Licensing

Biden Wants To Resurrect Obama-Era Occupational Licensing Plan for Tax Preparers

Like all licensing schemes, this one will raise prices for consumers, hurt entrepreneurs, and protect the interests of the big guys in the market.

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Buried inside President Joe Biden's $1.8 trillion American Families Plan is an attempt to resurrect a failed Obama-era effort to regulate tax preparers.

The renewed push for licensing tax preparers is wrapped around the idea that Americans are defrauded by unprofessional assistance during tax time, even though the administration seems to offer little more than anecdotal evidence that this is a serious problem.

"Taxpayers often make use of unregulated tax preparers who lack the ability to provide accurate tax assistance," the Treasury Department said in a statement. "These preparers submit more tax returns than all other preparers combined, and they make costly mistakes that subject their customers to painful audits, sometimes even intentionally defrauding taxpayers for their own benefit."

That's the same argument that the Obama administration made in 2012 when the IRS unilaterally declared that tax preparers would be subject to new licensing and continuing education requirements. That effort was eventually stymied by federal courts after a group of independent tax preparers sued over the rules with the help of the Institute for Justice, a libertarian law firm.

In that instance, the IRS had bizarrely tried to use a law from the 1880s governing compensation for horses killed during the Civil War to justify the expansive new licensing rules. Both the district court and the U.S. Court of Appeals for the District of Columbia Circuit rejected that idea. The D.C. Circuit said the IRS had tried to "unilaterally expand its authority through such an expansive, atextual, and ahistorical reading" of the underlying law.

But while the courts killed that mechanism for implementing tax preparer licensing, the idea has not died. Sen. Ron Wyden (D–Ore.), chairman of the Senate Finance Committee, has been pushing Congress to consider a licensing scheme for years, and the American Families Plan provides the perfect opportunity to make it happen.

The new rules, which would include fines for anyone caught providing tax help without the proper credentials, would create a huge new barrier for small businesses and entrepreneurs. At the same time, it would further entrench the major tax preparing providers—like H&R Block and TurboTax—as the dominant players in the market, as they would more easily be able to absorb the added costs of getting licensed and following other regulations.

As Dan Alban, an attorney for the Institute for Justice, which helped overturn the Obama-era tax preparer scheme, noted on Twitter, Biden's plan would have the same effect as other occupational licensing schemes: "Raising prices mainly to benefit political insiders."

The White House says the new rules are necessary for "helping many taxpayers claim the newly-expanded credits" that Biden is also proposing in his American Families Plan. But killing small businesses and robbing some taxpayers of their most readily available tax help won't help anyone—except the TurboTaxes and H&R Blocks of the world, of course.

Instead of making the tax code more complex and then using that increased complexity to justify even more complicated regulations on who can help Americans navigate it, the Biden administration ought to try to simplify things so most people don't need such extensive tax help in the first place.

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  1. “Instead of making the tax code more complex and then using that increased complexity to justify even more complicated regulations on who can help Americans navigate it, the Biden administration ought to try to simplify things so most people don’t need such extensive tax help in the first place.”

    That is never going to happen and you know it. And the GOP did make the 1040 simpler and got roasted for it by the bootlicking media for some dumb reason. Oh yeah because the rich were getting a tax break hur hur. Which was once again a lie because leftists don’t know how to do anything except lie and gloss over crises and problems.

    1. the Biden administration ought to try to simplify things so most people don’t need such extensive tax help in the first place.

      Didn’t Trump try to do that and got called an evil racist orange hitler for it by this very publication?

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      2. Where did they do that?

    2. Out of curiosity, what is simpler about the current 1040 compared to the 1040s from a few years back? I don’t see it as simpler; mostly a change in format on what is pretty much the same level of complexity.

      1. I think the biggest change to make things simpler was increasing the standard deduction so fewer people need to itemize deductions

        1. It’s not simpler. In fact, the rules around what’s deductible, and how much, for itemized deductions are more complex. And while it’s true that more people should take the standard deduction, a taxpayer will only know that by doing the calculations both ways.

  2. “Like all licensing schemes, this one will raise prices for consumers, hurt entrepreneurs, and protect the interests of the big guys in the market.

    Good! Koch / Reason libertarianism is all about protecting the interests of the powerful. IOW Biden is doing exactly what we hoped for when we overwhelmingly endorsed him.

    #LibertariansForBiden

  3. What’s the difference? Any mistakes are usually corrected caught by the IRS anyway.

  4. If we must have an income tax, there is no reason the IRS couldn’t simply send you a bill, which you could then dispute with your own return if you found it necessary. This is what is done in nearly every other country with an income tax. Many western countries you can go online and pay it or claim your refund. Simple. And it gets rid of the multi billion dollar industry of filling out government forms.

    This is being done to us to force us into paying for nonproductive work, and as a means for politicians to bribe and favor certain citizens over others.

  5. “Instead of making the tax code more complex and then using that increased complexity to justify even more complicated regulations on who can help Americans navigate it, the Biden administration ought to try to simplify things so most people don’t need such extensive tax help in the first place.”

    Not going to happen with any President from any “big-government” party.

  6. Christ, what assholes seems appropriate here.

  7. Sounds like the hope is to get better enforcement by barring less scrupulous tax preparers, with no license to lose, from preparing frivolous tax returns. I find it hard to believe that this would help taxpayers in any meaningful way.

    1. Helping taxpayers is definitely way down on the priority list for him

  8. How about a tax code that does not need “professional preparers”?
    Like no deductions, no exemptions, and a flat rate around 3 to 5 percent?
    2018 real median household income (USA) $63,179. 127,590,000 households.
    2014 mean household income (USA) $72,641.

    1. “Like no deductions, no exemptions, and a flat rate around 3 to 5 percent?”

      Yes. Make the 50% of people who don’t pay taxes pay their “fair share”.

    2. Even a standard deduction would be fine, if that was the only modification.

  9. 80 million people voted for Biden so this is exactly what they want.

  10. Having your tax preparer much more beholden to the same government that is stealing your money than to you for her career success does not bode well for your interests being fully and fairly protected.

  11. Let’s not forget Reason supported Biden during the election campaign.

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