Ad blitz on IRS free filing system hits key GOP districts

Presented by Consumer Brands Association: Delivered every Monday by 10 a.m., Weekly Tax examines the latest news in tax politics and policy.

Aug 07, 2023 View in browser   By Benjamin Guggenheim Presented by QUICK FIX PUNCHING BACK: Tax prep companies have spent tens of millions on lobbying the federal government over the years and recently brought on a slate of lobbyists, including former tax counsels for Congress’s tax writing committees, just as the IRS is preparing to launch a pilot program for an agency-run system that would make the same services offered by those companies available to taxpayers for free. We've seen similar battles in the past, and tax prep companies certainly have the resources to mount fierce lobbying campaigns on Capitol Hill. However, a new campaign called Better IRS, which was created by the liberal Groundwork Action advocacy group, has a message for the powerful tax prep industry: We’re not going down without a fight. Better IRS has launched a six-figure digital ad blitz — which is being reported for the first time here in Weekly Tax — on Facebook, Instagram and other targeted websites highlighting the developing plans for an IRS-run filing system, as well as recent reports that tax prep companies shared reams of taxpayers’ personal and financial data with Meta and, in so doing, potentially violated taxpayer privacy laws. “Tax prep companies don’t want you to know about Direct File because it’s free and secure,” one ad states of the IRS’ plans to experiment with a free filing system. Short video ads launched by the campaign also feature new efforts by the IRS to clamp down on wealthy individuals and large corporations that don’t pay their fair share, now that the agency is able to beef up its auditor ranks with its funding windfall from the Inflation Reduction Act. “Thanks to the Inflation Reduction Act, the IRS has recovered enough money from rich tax cheats to provide free lunch to 70,000 kids (for a year!),” one of the videos says. MORE IN A MOMENT. Thanks for starting your week with us. Got any thoughts on a free tax filing program run by the IRS? Email: bfaler@politico.com, bguggenheim@politico.com and teckert@politico.com. Or Twitter: @tobyeckert, @brian_faler, @ben_guggenheim, @POLITICOPro and @Morning_Tax.   A message from Consumer Brands Association: New taxes in the form of tariffs on tin mill steel could substantially increase prices for canned food and household essentials and jeopardize nearly 40,000 U.S. food and can manufacturing jobs. More expensive canned food will impact vulnerable consumers and those who rely on food assistance programs and food banks the hardest. The Biden administration must reject these tariffs. Learn more.   Despite the Better IRS ad launch and vocal support from Democrats on the issue, proponents still face something of an uphill battle, first and foremost from Republicans dead-set against the idea. However, there's also the matter of getting the IRS all the way from zero to having its own fully equipped filing system, with a customer service force capable of helping taxpayers navigate complex returns, while the agency has just started to secure adequate funding and get up to speed on fulfilling its basic mandates like processing returns in a timely fashion and thoroughly enforcing the tax code. “The Direct eFile program will cost all taxpayers hundreds of millions of dollars to create, and even more in the future. But it will be an inferior and incomplete product rushed into service and may not have state tax returns, or the security and privacy features that the private sector tax industry meet," the American Coalition for Taxpayer Rights, which represents the nation's leading tax prep and software companies, said in a statement. EYEING VULNERABILITIES: Better IRS has scheduled the ads to run in D.C. and a handful of Republican districts, including those represented by lawmakers most vulnerable to getting their seats flipped by Democrats in 2024. For instance, the campaign will run ads in the California districts represented by Reps. Mike Garcia and Ken Calvert, which were labeled as the most vulnerable “toss ups” according to a July ranking by The Cook Political Report. Better IRS has also homed in on constituents of New York Reps. Nicole Malliotakis and Claudia Tenney, who, as new members of the House Ways and Means Committee, have jurisdiction over tax policy and oversight of the IRS. “I think we felt it was important to remind members who have the jurisdiction that this is an issue that folks really care about,” said Igor Volsky, executive director of the liberal Groundwork Action and manager of the BetterIRS campaign. “Their constituents really deserve to have the choice to not go through a private middleman.” Constituents represented by Ryan Zinke of Montana, Doug Lamborn of Colorado and Mike Simpson of Idaho will also be seeing the new ads hit their screens. THE CHESSBOARD: Despite ever-widening divisions in the House GOP caucus, it's worth noting that Republicans have generally been united on IRS oversight issues. They have railed against the IRS’s new funding ever since the agency originally received $80 billion under the IRA, voting to cleave most of it as part of Speaker Kevin McCarthy’s first order of business in the House. And when the IRS released a report assessing the feasibility of a direct filing system and announced the launch of a pilot program, House Ways and Means Chair Jason Smith (R-Mo.) immediately decried the report as an instance of the Biden administration “cook[ing] the books to get exactly the outcome it wanted.” Specifically, Smith and other Republicans insist that the IRS cannot possibly be a fair administrator of tax returns when it has an interest in collecting as much revenue as it can as the enforcer of tax laws. But part of Better IRS’ strategy seems to hinge on a bet that Republican animus towards the idea has less to do with its popularity and more to do with toe-the-line party politics. Volsky told Weekly Tax: “There are members out there who, some of which were targeted here... can really hear that message: that this is a lot less to do with partisan politics and the way things are interpreted in D.C. and a lot more to do with ensuring that American taxpayers are able to easily to do what’s required of them.” Stay tuned.   YOUR TICKET INSIDE THE GOLDEN STATE POLITICAL ARENA: California Playbook delivers the latest intel, buzzy scoops and exclusive coverage from Sacramento and Los Angeles to Silicon Valley and across the state. Don't miss out on the daily must-read for political aficionados and professionals with an outsized interest in California politics, policy and power. Subscribe today.     LAST BUT NOT LEAST: Canadian Prime Minister Justin Trudeau and Sophie Grégoire Trudeau’s recent split isn’t the only news out of our northern neighbor causing shockwaves in D.C. Something far juicier and more salacious has gotten the Biden administration in something of a tizzy: That’s right, digital services taxes. Kidding aside, our Brian Faler has a new article out this morning on how officials, including Treasury Secretary Janet Yellen, are furiously lobbying the Canadian government against its plans to impose a new digital services tax on Big Tech companies next year. If Canada were to move forward, the new tax would almost certainly derail a framework, years in the making at the Organization for Economic Cooperation and Development, that would reorganize international taxing rights over the digital economy. While the project, otherwise known as Pillar One of the global tax deal, has proven an extraordinarily delicate undertaking, more than 130 countries agreed in July to delay unilateral digital services taxes until 2025 so that the OECD could continue ironing out wrinkles in the framework. But Canada broke ranks and decided to forge ahead, publishing a lengthy document on Friday outlining how exactly its new tax would work. And that has several business groups in both the U.S. and Canada fretting about the fallout, including the distinct possibility that the Congress would decline to renew a vital free trade agreement with the U.S. and Mexico out of bipartisan anger over the tax. Around the World Reuters: “US should extend EV tax benefits to Vietnam, says business lobby” Bloomberg: “Putin Orders Windfall Tax on Russian Companies to Help Fund War” The Guardian: “Labor launches crackdown on tax adviser misconduct following PwC scandal”   A message from Consumer Brands Association:   Around the Nation WSJ: “Congress Ended a Tax Break. How That May Help Higher Earners” Accounting Today: “IRS loses track of tax info between processing centers” Forbes: “IRS Lists Monetized Installment Sales As Abusive Transactions” Also Worth Your Time CNN: “Senate Democrats ask for Alito to be recused from Supreme Court ethics and tax cases” Marijuana Moment: “Maine Governor Signs Bill Allowing State-Level Marijuana Business Tax Deductions That Are Prohibited Under Federal IRS 280E Code” The Telegraph: “This Mediterranean country offers an EU passport and low tax rates – but it won’t come cheap”   HITTING YOUR INBOX AUGUST 14—CALIFORNIA CLIMATE: Climate change isn’t just about the weather. It's also about how we do business and create new policies, especially in California. So we have something cool for you: A brand-new California Climate newsletter. It's not just climate or science chat, it's your daily cheat sheet to understanding how the legislative landscape around climate change is shaking up industries across the Golden State. Cut through the jargon and get the latest developments in California as lawmakers and industry leaders adapt to the changing climate. Subscribe now to California Climate to keep up with the changes.     On The Calendar All clear. Let Morning Tax know about your future events: taxcalendar@politicopro.com. Did you know? A new tax system on alcohol in the U.K. will tax drinks according to their ABV content.   A message from Consumer Brands Association: Tariffs on tin mill steel are a tax on consumers, causing prices to soar on canned food and household essentials that vulnerable communities rely on. The last thing American families need is another increase in prices that these tariffs would bring in an already tough inflation environment. This “can tax” will also endanger nearly 40,000 jobs in the food and can manufacturing industries across the nation. We urge the Biden Administration to invest in domestic tin mill steel manufacturing without harming consumers and risking well-paying jobs. Learn more.     Follow us on Twitter Toby Eckert @tobyeckert Bernie Becker @berniebecker3 Brian Faler @brian_faler Benjamin Guggenheim @ben_guggenheim   Follow us

To change your alert settings, please log in at https://www.politico.com/_login?base=https%3A%2F%2Fwww.politico.com/settings This email was sent to rouf@idiot.cloudns.cc by: POLITICO, LLC 1000 Wilson Blvd. Arlington, VA, 22209, USA Please click here and follow the steps to unsubscribe.