Liberals surprised by tax vote vow to kill ‘Free File’ provision

Progressives caught off guard by the House passage of bipartisan legislation overhauling the Internal Revenue Service are now pushing to kill language preventing the IRS from offering its own free tax preparation software.

The software provision put freshman Democrats who campaigned against corporate influence in a tough position, since they see the legislation as helping to prevent competition for TurboTax and other for-profit tax preparation companies.

{mosads}Two Democrats, Reps. Katie Hill (Calif.) and Alexandria Ocasio-Cortez (N.Y.)., complained about the language during House floor debate on Tuesday but cited their support for other parts of the legislation in backing its passage on voice-vote.

Now, Hill, Ocasio-Cortez, Katie Porter (Calif.) and others are talking about introducing legislation to address the issue.

The legislation approved by the House codifies an existing agreement between the IRS and the tax preparation industry in which those companies offer free tax filing services to people below a certain income threshold.

Taxpayers making less than $66,000 have access to the free software, though it’s estimated that only about 3 percent of eligible people take advantage of the program.

Ocasio-Cortez said she didn’t learn about the provision until Tuesday, hours before the bill was scheduled for floor consideration, when ProPublica published an article highlighting the lobbying for the language by for-profit companies including H&R Block and Intuit, the maker of TurboTax.

Ocasio-Cortez and Hill both spoke out in opposition to the bill during House floor debate on Tuesday, but agreed with the legislation’s author, Rep. John Lewis (D-Ga.), to allow it to move forward. They cited other parts of the bill designed to assist low-income taxpayers, including measures to prevent identity theft and protections from private debt collectors. 

“They agreed there are other positive changes in the bill that do help vulnerable members of the public,” said Lewis spokeswoman Brenda Jones. “They felt like we should allow this to move forward on a voice vote and then develop a working group where we can work to ameliorate some of these Free File concerns that people have.”

{mossecondads}Still, Hill underscored her concerns that the language could be seen as a handout.

“In this freshman class, I and many of my colleagues were sent to reject corporate influence and stand up for people. This puts us in a difficult spot,” she said.

Another freshman, Rep. Sean Casten (D-Ill.), said he would have voted against the legislation if it had been put up for a roll call vote.

“I am disappointed that the leadership of my party chose to bring this to the floor and pass it in a way that suggests a false unanimity. I would not have supported this bill as written and am disappointed that I was not given the opportunity to oppose, so as to compel a necessary correction,” Casten said in a statement Tuesday night after the bill passed.

Liberals said it didn’t help that they didn’t learn of the provision until the day the legislation was scheduled to hit the floor. Lawmakers considered the bill under an expedited process reserved for noncontroversial legislation.

Defenders of the provision argue that it merely codifies existing law and point to the fact that previous versions of the bill passed without controversy. The House passed multiple versions of the legislation with the Free File provision in the previous session of Congress with no votes in opposition from Democrats.

Rep. Mark Pocan (D-Wis.), co-chairman of the Congressional Progressive Caucus, said its members have previously opposed the Free File provision but were caught off guard as this week’s legislation came up amid an internal battle among Democrats over budget caps for defense spending.

“We’ve always been against that provision, but it did come up a little quick in the middle of the budget cap battles. And it was a provision of an otherwise good bill,” Pocan said.

Senators handling companion legislation said it would not prevent the IRS from creating its own tax filing system.

“Nothing in the legislation would prevent the IRS from continuing to provide online assistance to taxpayers or develop new online options to help taxpayers. Arguments to the contrary aren’t based in fact and rely on either misunderstandings or misleading special interests,” Senate Finance Committee Chairman Chuck Grassley (R-Iowa) said in a statement.

A spokeswoman for Sen. Ron Wyden (Ore.), the ranking Democrat on the Senate Finance Committee, said his office had confirmed from the IRS chief counsel that the agency can terminate the Free File program and design its own product with 12 months’ notice.

Wyden noted at a Wednesday hearing with IRS Commissioner Charles Rettig that he’s proposed legislation to create an optional system where tax forms are pre-completed so that taxpayers only have to check the numbers.

“Filing ought to be simple, and taxpayers shouldn’t have to use a private company to file their taxes online,” Wyden said.

Naomi Jagoda contributed.