David Sirota From the Lever’s reader supported newsroom this is Lever Time. I’m David Sirota. I hate paying taxes. I don’t mean that I hate how much I have to pay. What I mean is - I hate the insanely complex morass of red tape and paperwork that’s now required to pay taxes. It’s a flood of forms and calculations and impenetrable fine print, which ultimately ends up stealing from me and you. Our time is stolen because we have to spend hours compiling all this paperwork, and then our money is stolen. It’s not the taxes that are stolen - taxes aren’t theft, they’re what we pay for a civilization. What’s stolen is the additional money we have to pay a company to help us comply with the complexity, and then file our taxes with the government. I recently finished all of this year’s taxes, and I’m already getting angry thinking about the next year – and I’m angry because the thing is: It doesn’t actually have to be this horrible. In fact, it is only this way because powerful corporations WANT it to be this way - and make money off it being this way. For 40 years, there’ve been calls for the government to make it easier, and most importantly, free for Americans to file their taxes and get the refunds and tax credits they’re rightfully owed. And there have also been calls for the government to do what other countries do: send you your tax forms all filled out, since for most people, they already know what you owe! But up until now, that hasn’t happened in America because giant tax prep companies like Intuit and H&R Block lobby Congress to keep things as messy and impenetrably complex as possible - so that you have to pay them to do it for you. This is a huge multibillion-dollar business for these companies - a business built off of making us all miserable. But here’s some good news: Things look like they’re finally going to change. After a successful and wildly popular pilot program, the IRS has created a portal that does what TurboTax should have been doing for years – letting you file your returns at no extra cost. And next year, the IRS have plans to expand that program to all 50 states. This may seem incremental, but it’s a big deal - it could end up saving millions of Americans huge money and lots of time. The question now: Will the IRS’s new changes stick, or will lobbyists succeed in fighting them off and keeping the system insanely complex? That’s the question senior podcast producer Arjun Singh explores on today’s Lever Time. He sits down with an investigative journalist who exposed the 20 year battle that TurboTax waged to make taxes more expensive. He also talks to a technologist to understand how the government built its new, free tax-filing platform, and why it can easily expand it. Ronald Reagan Fellow citizens. I'd like to speak to you tonight about our future about a great historic effort to give the words freedom, fairness and hope, new meaning and power for every man and woman in America. Specifically, I want to talk about taxes about what we must do as a nation this year, to transform a system that's become an endless source of confusion and resentment into one that is clear, simple and safe for all. Arjun Singh In May of 1985, Ronald Reagan, the conservative president, who's become an emblem of the American right and corporate power addressed the nation. listeners have heard Reagan come up a lot on this podcast, and for good reason. His administration was the start of a new chapter in America where he enacted budget cuts and slashed taxes. And as President, he did do those things. But another thing Reagan mentioned in this address was that the tax system was just too complicated. Ronald Reagan Over the course of this century, our tax system has been modified dozens of times and in hundreds of ways. He had most of those changes didn't improve the system. They made it more like Washington itself, complicated, unfair, cluttered with gobbly gook and loopholes designed for those with the power and influence to hire high priced legal and tax advisers. Arjun Singh Ironically, the man who decried taxation and one said the nine most terrifying words are I'm from the government and I'm here to help propose that night to American something radical, especially for a conservative, he proposed that the government could do your taxes for you. Ronald Reagan We envisioned a system where more than half of us would not even have to fill out a return. We call it the return free system, and it would be totally voluntary. If you decided to participate, you would automatically receive your refund or a letter explaining any additional tax you owe. Should you disagree with this figure, you would be free to fill out your taxes using the regular form. Arjun Singh Return free filing never happened in America, though it is used in several other countries. Instead, right around spring most of Americans begin to dread the thought of doing their taxes. If you're savvy enough, you might do it on your own. Or maybe you know someone who can help. For most of us, though, it means paying someone to do it. And for a lot of people, their taxes are actually pretty straightforward. But knowing how to file them is 90% of the battle. And that's where companies like Intuit and h&r Block come in Intuit in particular has become a name brand around tax season because of its software Turbo Tax. Here's the thing though, even though the tax prep industry is now a multibillion dollar industry, it wasn't supposed to be that way. For a couple decades now, the government has wanted tax filing to be easy and free. But the reason it hasn't until recently is because the makers of TurboTax waged a 20 year war to prevent it from happening. Paul Kiel So in the 90s, Intuit bought a company called chip soft, that had created TurboTax, and you know, this was like CD ROMs, back then the ideas, you would buy a CD ROM which has tax software and then use the program to, to file through your computer. Paul Arjun Singh Kiel is a reporter for the investigative news outlet ProPublica. And he's been reporting on Intuit, the parent company of TurboTax, and their lobbying efforts for years, our understanding Paul Kiel is that they really got into the game, when they realized that things are pivoting online. And there were some rumblings in Congress. And and later in the Bush administration of, you know, there's a big enthusiasm for some people call the E government or you know, or online services, you know, that tech optimism of like the late 90s, and early 2000s of this is gonna change the world. So the big hinge point comes when the Bush administration, you know, part of this general push to increase, you know, government services through the internet. They say, you know, why don't we just build like a simple tax program. This is only for low income people who have very simple taxes, like a sort of people who just have a W two, you know, and maybe they have a kid they need to put in there. Arjun Singh In the early 2000s, the George W. Bush administration got really interested in modernizing the government. And one of their ideas was to just let people file directly with the IRS to intuit though that was seen as a direct assault on their business. Paul Kiel So the Bush administration is talking about do it, they just kind of really float the idea, but it totally freaks out into it. And they start lobbying on the Hill Arjun Singh to push their agenda on Capitol Hill, Intuit enlisted the help of Bernie Mackay, a heavy hitter lobbyist and former Carter administration official who did a full court press on lawmakers. The every business has a mission and, and a phrase or a statement that describes it. Ours is powering prosperity around the world. That's actually how we view our purpose, why we develop our products and offer them and it's really to help people whether it's TurboTax, to allow you to do your own taxes, and including for free. Paul Kiel They found a lot of sympathetic years, the idea of like, you know, the IRS is just gonna mess this up because the IRS didn't really exactly have the rap of being the sort of place that created great customer service experiences, I guess is the way to put it. Arjun Singh That was especially true on the Republican side of the aisle, particularly in the era when Intuit started lobbying the government taxes were one thing, but in the 90s people like Newt Gingrich, the former Speaker of the House, frequently painted the IRS as a villain in dismantling the agency was a major theme of Republican Senator Richard Lugar's 1996 presidential campaign. Here he is campaigning, Sen. Richard Lugar I want to abolish the individual, the corporate, they inheritance taxes, the gift taxes, all of it and all the elements of the IRS and enforce it. Arjun Singh By the time the Bush administration had proposed a free filing system, intuits lobbying work had helped to keep those ideas embedded, particularly amongst Republicans, Paul Kiel there was even almost conspiratorial theories floated like, you know, maybe they the government will use like key tracking, you know, when you're entering your taxes, and they'll know that you're changing stuff, and then they'll use that data. There's no evidence that was ever the case. But these sorts of arguments are put out there to sort of, you know, poison the idea that having the IRS do your taxes would be a good idea. So the compromise that comes out of this is essentially Intuit organizes the industry, and they say, you know, we will do for free the taxes of low income people you were thinking of, you know, serving as government service. In exchange, the IRS will sign document a contract saying we're not going to build any sort of tax prep, that's three free through the government. So it's sort of like a non aggression pact. And the private insurer is going to do it for you. So that's that's the birth of free He files was called. And that that is why the government didn't build anything for decades. Arjun Singh That non aggression pact Paul's talking about led to the creation of something called the Free File Alliance launched in 2003. This was a partnership between the IRS and tax prep companies, one of the largest being Intuit, in exchange for the IRS backing off from creating their own version of TurboTax, these companies agreed to allow some taxpayers to file their taxes for free. The catch, if you use TurboTax, they seem to make it as difficult as possible for you to know you didn't need to pay them, the potential Paul Kiel was for it to be sort of transformative, at least on paper. But the way it worked was always you don't just go to tax to TurboTax and start filling out their, you know, their, you know, your taxes, and they say, oh, you know what, you qualify for free tax prep, because you know, you qualify for this government program, that never never worked that way. It was always what I was called, like a secret door, you had to go to the IRS website, which already like looked a little less shiny than the homepage for any of these tax prep companies. And you had to find the page for free file. And then you had to look okay, the qualifications were a little bit different. State to State in terms of what income ranges would qualify what different aspects of your, you know, your financial situation was? Well, it was always complicated. And if you went through that secret door, then yeah, you could run the pilot, and you could get your taxes done for free. Arjun Singh So even if you knew about the program, the page would still be incredibly difficult to find, leading a lot of people to just opt for the paid version. Paul Kiel Intuit was purposely like hiding their free file page, the government program page. So what we found is that when you Googled like free file, intuits, like free, their their paid free with a call free edition would come up that's like the, you know, it's the bait and switch version, not the government program. And they were actually like putting something on their webpage to prevent, like what bots like to prevent, you know, Google from crawling their page and find in a lot of people to easily Google, you know, government Free File and finding their page, you couldn't do it because they prevented it from happening Arjun Singh by offering free filing TurboTax wasn't doing the government a favor. In fact, it was a good way to lure in unsuspecting customers. Think about this, if you've ever seen a TurboTax commercial, you might notice they usually mentioned the word free. Like a lot. Marcus Commercial is a connoisseur of anything that's free. So he was happy to read the disclaimer on Turbo Tax Free Edition, roughly Commercial 37% of taxpayers qualify, form 1040 and limited credits only see how@turbotax.com. Paul Kiel you're seeing like how you could actually bring people in with the promise of free tax prep. If you just went out and you advertised people, you can, hey, you can get take free tax prep with us. That was not something that we're really doing that much. In the mid 2000s, they sort of figured out this is a great way to bring in customers. And then of course, some people will run the gauntlet, you know, as they meet all the qualifications, most people will not. And then once they've got their info and your data, you know, they've taken the time to fill out their taxes, they're not going to jump to somebody else, they're gonna pay like 50 bucks or whatever, to file their taxes. And it could be like $100, it's included like a state filing, as well. Arjun Singh ProPublica is reporting led to a massive scandal for both Intuit and TurboTax, multiple state attorneys general filed lawsuits against Intuit for allegedly deliberately hiding their free program from Google search that eventually led to the process of the government finally launching their own direct file program. And we'll get into the details of that later in the show. But there's one last thing I want to address about TurboTax I reached out to intuit to ask what they felt about direct file. And their spokesman told me the program was a quote solution in search of a problem, unquote. Another defense of TurboTax. I've heard however, is about fairness, after the news that the IRS would expand direct file more broadly. And 2025, Intuit stocks fell and I was talking to a person, a software developer who I'm very close with, and he said he was unsure how to feel about the government essentially replicating software TurboTax had spent years fine tuning. So I asked Paul, how sophisticated turbo taxes tech is. Paul Kiel Yeah, I mean, my favorite thing is there's always if you do your taxes, there's all these animations of like, you know, we're working we're calculating, refining all the deductions for you. Like it's, you know, we live in an age of like aI like, the computers can do this stuff like in in a blink of an eye, but they they add all these kinds of things that make it appear they're doing something special or complicated when when they're not. It's actually not that hard to build, like a basic, you know, tax portal, the real value add, the thing that I think makes TurboTax really attractive to people is they've struck all these deals. With like payroll providers and other, you know, investment companies like Vanguard or whatever, where you can easily import your data, so you don't have to cut and peck your way through your W two or your 1099 or whatever. And, you know, that just saves time for people. I mean, so that that's, that's one thing that they've, and then the thing that used to be popular was, you know, they would automatically import all your information from years past which, yeah, it's like not technologically the hardest problem to solve, either. I mean, the IRS and the Biden administration, pretty clear, like they're not trying to wipe out the tax prep industry, they're trying to give people like real options to file for free. We have other programs that are, you know, nice, like, there's volunteer tax assistance, which, you know, people should look up, you can have volunteers do your taxes for free, but that's never going to reach like 10s of millions of people just you know, from, there's only so many volunteers, right. So, this will continue to be a fight, for sure. But it's definitely reached, you know, a new stage, that's very different from, you know, what it was, like 20 years ago, or even 10, or five years. Arjun Singh Direct file is a big advocate for the cover, but it's unlikely to destroy TurboTax, much less its parent company into it, though, the company could stand to lose a lot of potential customers. According to one statistic from Fox 90% of tax filers use tax prep. So it stands to reason, good amount of probably eligible to file for free. And in one way, this was a long time. And the government's really just following through on the Bush era goal. One could even say, Reagan's call for return phrases, that all being said, just because the government built it, does that mean it's actually going to work? That's what I'm going to dig into after the break. How feasible is for the government to create a sustainable tech platform like direct fine? Arjun Singh Okay, so what is direct file, the program that two decades of tension was building up to this year, the IRS rolled out a pilot program in 12 states 140,000 people used it and the associated press estimates user saved roughly $5.6 million in fees. According to research by the think tank, the economic securities project, direct file could also help people, especially low income households actually get the refunds and tax credits they've earned. Here's Adam Rubin, the ESPs, Vice President of campaigns and political strategy, we Adam Rubin need to shift the burden from making an individual low income people's job to jump through one hoop after a time after another, to making it the government's job to get people the money that they're eligible for. And the little fiddling around the edges. changes have been there have been some helpful things, but they've been quite limited. And so we've known for a long time that we really need to move towards a system where the government is taking all the data that it has, and filling in your tax form for you. And so the direct file program is really an important first step on that path. So we put out a report that estimates that it will help taxpayers access $12 billion in tax credits for families that qualify and are currently missing out. And so that's for folks who are missing out on these tax credits. In addition, it could save taxpayers $11 billion a year in tax filing fees, and time saved. So altogether, that's $23 billion, that it's putting back in working and middle class families pockets. That's real money, and the kind of benefit that makes a real difference in a family's life. So we're not saying that people shouldn't be able to use into it, if you like into it great. If you like TurboTax if you like your local tax preparer, you should have that option. But what we finally have is a free and simplified public tax filing option that gives people the opportunity to really get their taxes done for free. One Arjun Singh thing Adam is hoping for is an eventual transition to something similar to the return free system that Ronald Reagan described at the beginning of the show. Adam Rubin The interesting opportunity is to move to the place where the IRS is filling in most of your tax form for you, they already know what you made, your employer has to report it to them. So they have your W two, they have your 1099. If you're a gig worker, they have information from your bank or mutual fund account about how much interest you might have earned. So they don't know everything, but they knew a lot. They know a lot of the basics to fill out your tax form. And studies have found that for about half of taxpayers, the IRS knows enough to fill in your tax form completely for you. And they could just send it to you and say, Does this look right? Is there anything we don't know? Did you have another kid we didn't know about. And you just check it, sign it or correct it and send it back in. And it's free, and it takes less than 10 minutes. And there are a number of other countries around the world, Japan, Germany, and others where taxes work exactly that way. It just doesn't have to be a painful experience that unites Americans every April, it could just be something that takes 10 minutes on your way to they were on your way to the office. Beth Noveck So look, everybody can build bad tech right into it knows how to make a really, really bad tax filing platform that is incredibly difficult for people to use and for people to find. That's an intentional act, to make it extraordinarily difficult for people to use the free version and therefore people are pushed to the paid version. Beth Arjun Singh Simone noveck is a professor of experiential AI at Northeastern University and the director of the burn center for social change and its partner project gov lab. Beth has also helped several tech platforms for the government on the federal and state level. I sat down with her to get a sense of how good the government is at actually building technology. In the last 10 years, there have been several government tech failures that come to mind the most prominent being the Obama administration's botched rollout of healthcare.gov. The website people use to sign up for insurance plans under the Affordable Care Act. When the site first launched in 2013. It experienced tech issues and outages for weeks, even prompting an irritated Obama to call out those problems. Barack Obama There's no sugarcoating it. The website has been too slow. People have been getting stuck during the application process, we are doing everything we can possibly do to get the websites working better, faster sooner. Arjun Singh Recently, tech problems were behind a major glitch in the FAFSA program, which students use to get financial aid. And due to the error students have delayed college decisions, and roughly a million may have received inaccurate financial aid information. Beth Noveck We have this FAFSA disaster, which is very front and center in people's minds with the inability for people to file for their financial aid for colleges. And then you have this direct file pilot from the IRS. And I think the big question is what's the difference between these two projects. And so whether it's healthcare.gov, or its FAFSA, or its vaccine rollouts, or testing or any one of, you know, innumerable tech failures in government that we've seen, I think the big difference is a couple of things done right, what you're doing and what they did in the direct file case in the IRS is to build incrementally. So they started with a pilot. And they built it in pieces, rolling it out one piece at a time. And I think very importantly, it was not the exclusive way for you to file your taxes, if you weren't one of those 12 pilot states had something gone wrong, you sort of still could have gone to your accountant, you still could have gone to TurboTax, you still could have gone to, you know your paper based form and sent it in as many people do through the post office. So you had options, it was not that we were reengineering the plane while flying it without a parachute, which is what's happening in the case of FAFSA. So you have a single place where people have to go. And we saw this again with healthcare.gov. And with other sites, you have one place where people have to go, there's no alternative. And then when there's a bad design decision, for example, the failure to recognize that somebody's parent might not have a social security number. And that ends up preventing you from applying for financial aid and therefore preventing from applying to college. That's the thing you really want to avoid doing the direct mail to have direct file case, by contrast, you have a phased out rollout, testing each feature as you go rolling it out very carefully, number one, number two, you have extensive user testing, engaging with people and not just the high end, most tech savvy, most tech literate, you know computer users, but people who may be low literacy who may be using the system on their mobile phone who might not speak English as a native language, who might have a disability. So it's testing extensively with users as you go again and again and Again, as you as you try each feature to be able to determine what's clear what's not clear. And often it's not something as complicated as, you know, some technical system, it's the failure to write clear directions, that can make it very difficult for people to use a system. So the idea of more human centered, more agile, more iterative, is what we know about the way to build good software in the private sector or the public sector. And I think there's a real dedication in some places with building that kind of tech in the public sector. And last thing, let me say here, that's the big difference is that public sector is focused on the public interest, the goal is not to make a profit, the goal is not to sell you, you know, a subscription to something or the more number of lines of forms you fill out, the government doesn't get paid any more for that. The goal here is to provide a service and to serve the public. And so I think there are a lot of cases where you really, really want the private scuze me the public sector directing what gets built, which doesn't mean you can't have private people from the private sector involved. And in fact, the direct file case had a blended team, people who worked inside government, people work outside governments, you had really smart computer scientists, data scientists, designers, they may work for companies, but the project is ultimately directed by the public sector, so that the public centeredness the public mission is really where the focus is, Arjun Singh you know, anecdotally, there's this fear that I hear sometimes from people, whenever you talk about the government building a tech platform, whether there was the unemployment system, or, you know, a new digital tool for the DMV, people have told me that they just don't think the government's good at this. They don't think the government can build in house platforms, you spent time inside and outside government, you've worked with the government to build different digital platforms. What do you think of that? Is the government actually good at this? Beth Noveck So I think, look, there are is a good thing and a bad thing to this narrative. I'm all in favor of the narrative to the extent to which it is a swift kick up the backside. For us to get better at building tech and government, we need more projects like direct file, we need more resources put into these kinds of agile, human centered data driven pilot projects, that where we test as we go figure out what works, improve it and build something that's actually better for residents, because we're designing it with the public, rather than at people or even for people. So that is a good thing. And we should want to, you know, have a fire lit under us to get faster and better. I mean, we have no excuse for not being able to build better tech. But the part of the story that government should not be involved, or the government should somehow just write a check and walk away. I think that is the problem. What has worked in terms of the projects, at least what I've been involved in and seen and witnessed is these are always collaborations between the public and the private sector, the private sector has the most innovative tech, has the best tech has great tech, you know, has great tools that we can leverage has incredibly talented people, you increasingly have some, you know, very smart people who prefer the pay, they can get in the private sector. So they're gonna go work there. And they're wonderful people, you know, that you can work with and partner with. But that doesn't mean government should just be hands off and walk away. I think it's not an either or of like, either the public sector builds it, or the private sector builds it, that's a totally false antinomy. What we need here is in the public sector to be directing what we build so that the public interest is at the center of what's done. So that there is a mandate to say we need to engage with people who are low income, who may have disabilities who may not be native English speakers, there's gonna be a lot of pressure, for example, on companies to say, instead of going out and talking to citizens, I'm gonna go out and talk to some AI. And that's my version of design. That's my version of engagement. So we need the government to be at the table saying, no, no, you have to actually go out and talk to real humans, and you have to go and talk to the least disadvantaged people in our communities to make sure the tech actually works for them. So I think the collaboration is really where the sweet spot is, so that we're getting the mission driven public interest. Government mindset, along with government's deep understanding of how the institutions work in the processes, together with the best of talent from the private sector. And we also want lots of blending people from the private sector, coming into government to do stints working on public interest, tech, people going out, etc. That's where the magic is gonna happen. And that's where the best projects are really getting done. And I think there is a reason why when I started the Obama administration Fast Company named the White House the best tech startup of the year, because it was such a surprise to people The government could actually go out and build tech and it didn't have to cost a mentor or take forever, I realized Arjun Singh they didn't actually ask you what you thought of direct file. Do you think that this is something that's sustainable? Is it something that we're going to be able to expand given all of the complicated information that goes into taxes? What do you think Beth Noveck taxes are complicated? And that's one of the problems. That's the legal problem. I don't think that's necessarily the technical problem. Look, the big challenge we're starting with in the US is that unlike in many, many other countries where your taxes are filed for you, and all you do is proof the return essentially, we have created a very complex legal system and policy environment that has made this a complicated space to work in. But I think as we've seen, both from the direct file, federal example, and the ready return, pilot that happened in California that preceded it, which was a similar thing for state taxes in California, is a despite how most of us think about taxes with a certain trepidation. It's actually very, very doable. Again, this is not to sell short, the incredible amount of work that this team went to, to put this together and to make this happen. But even in this incredibly complex legal and policy environment, they weren't able to do something. And I think, to their credit, they started with one of the easier cases they didn't they started with this sort of straightforward, let me call it the W two filer as opposed to the very complex business tax return or somebody who has, you know, seven different consulting hustles. You know, that comes next. So doing it incrementally so that you can understand what are the rules? And then how do we put the rules into software? I think they've done a fabulous job in terms of actually building an interface that is intuitive, but don't take it from me. You know, over 90% of people who've used it have said they really liked it and a higher number than that in California for the ready return. It's getting rave reviews, people love it. Arjun Singh Thanks for listening to another episode of leisure time. This episode was produced by me our June saying with help from Chris Walker and editing support from David Sirota, Joel Warner and Lucy Dean Stockton. Our theme music was composed by Nick Campbell. We'll be back next week with more episodes of Lever Time.