As tax season gets underway today, we are happy to say that now about half the country will benefit from the IRS’ free Direct File program, which lets people with relatively straightforward income tax returns get their refund or make their payment via an online portal. New York was one of the initial 12 states included in last year’s pilot that has doubled to 25 states. We used it last year. It works, and it works well. The obvious path it to double it again to all 50 states for next year.
Unfortunately, no good deed goes unpunished, and the free Direct File program is in the crosshairs of GOP lawmakers who are pushing the new Trump administration to take action against it. Trump Treasury nominee Scott Bessent said that the administration would look at the program after this tax year, taking no stand in favor or opposed. We’ll tell the president the same thing we’ve said on other matters: people elected you on the belief that you’d deliver a better economy and lower costs, and that’s what they’re expecting.
There is fortunately at least one built-in defense against the targeting of the free Direct File program, which is that it’s not so politically easy to take away from people things they’ve come to rely on. Policymakers can endlessly debate giving or not giving the public certain benefits and services, but once people have become accustomed to a cheaper and easier way of doing things, trying to wrest that away tends to have immediate blowback, which at least some of the detractors seem to understand.
It’s pretty clear why anyone wants free Direct File on the chopping block, and it’s got nothing to do with big government or waste or the usual excuses; this is a relatively inexpensive program to run in the scheme of the federal government and helps save people a lot of money. The real reason is quite simply that private actors are making a buck during tax season, when millions across the country fork over their hard-earned cash for people or programs to help them navigate the quagmire that is U.S. tax filing.
Among the biggest of these interested parties is Intuit, the company behind TurboTax, which led a decades-long fight against a government-sponsored free file program and which a few years ago wound down their own participation in the IRS-sponsored Free File Alliance. It and other companies, like H&R Block, which also quit the Free File Alliance, want to keep their customers. We’ll note, though, that Intuit is still around, as are its various big competitors as well as thousands more little mom-and-pop tax shops.
Nothing about the existence of the free Direct File program prevents filers from availing themselves of these private services, especially if they have more complex tax needs or simply want and can afford more personalized service. We have a market system and all these providers are more than entitled to continue competing for consumers’ business if they can provide a cost-effective product that provides a better experience or better results than free Direct File.
Giving consumers additional choice and one fewer thing to have to fork over money for is good for everyone except the businesses that want a free ride themselves.