Strange Coincidences

Right now, crypto scammer Sam Bankman-Fried, the Millennial Bernie Madoff, is wearing an ankle bracelet and cooling his heels in his parents’ $4 million house on Stanford University’s leafy campus. People who know a thing or two about crypto are divided on whether his fall marks a temporary reset for the market or a sign of a broader problem with the asset class. But people who know a thing or two about fraud agree on a couple of things. One: SBF is headed for a place where his arbitrage and trading opportunities are limited to cigarettes and commissary scrip. And two: we’ll be planting tomatoes on Mars before he gets out.

Right now is also the start of tax season, America’s annual exercise in financial self-flagellation. (Last week, Punxsutawney Phil crawled out of his hole, saw his shadow, and predicted six more weeks of red tape.) And would you believe there’s a strange coincidence between SBF and those IRS forms we love to hate?

Filing taxes may not feel like going through “several bear attacks” to get Taylor Swift tickets. But for millions of taxpayers, it’s way more complicated than it needs to be. That’s because the government already has all the information, from the W-2s, 1099s, and other forms, that they need to get it done. So why not just let the government prepare the return, let the taxpayer check for any mistakes, and have the taxpayer sign off? It works fine in places like Denmark, Sweden, Spain, and the U.K., and it would cut out a lot of pricey middlemen that help taxpayers with simple returns.

SBF’s father, Joseph Bankman, teaches tax at Stanford Law School. He says, “Our filing system is the worst.” And he’s not wrong! In 2004, he helped create a pilot program called ReadyReturn that let the California Franchise Tax Board prepare state returns for 11,000 residents. Users loved it—99% of them said they would do it again. One user even commented that the “government’s finally doing something to make my life better for a change.” That’s something you really don’t hear much in California.

Bankman and his colleagues went to the Legislature to turn their popular, proven idea into law – and found one constituent that didn’t like it at all. How surprised will you be to learn that it was Intuit, the California-based company that makes TurboTax? Bankman even dropped $35,000 of his own money, hiring a lobbyist to push it through. But he was no match for Intuit’s might, and the program failed by a single vote.

Don’t worry. It gets worse. It turns out Intuit has spent millions stifling tax simplification everywhere. (Internally, they call it “encroachment.” Orwell would be proud.) They joined the IRS’s Free File program only so they could stop the Agency from creating a government-run competitor. At one point, their website included code to hide the Free File landing page from search engines. And even today, they use “dark pattern” design tricks to exploit fear, uncertainty, and doubt over the tax system to upsell customers into more expensive services.

Of course, if you ask Intuit, they’ll say they’re all for tax simplification. They just think programs like ReadyReturn minimize taxpayer engagement. That sounds a lot like your 8-year-old saying, “I’m all for broccoli, I’m just saving room for dessert.” Minimizing engagement was the whole point of the program!

Unfortunately, none of this will help taxpayers with more complicated returns who need to report information the government doesn’t already have. That’s not Intuit’s fault, either – blame the Congress that writes the tax laws. The good news is that complication creates opportunity. So think of us while you’re watching TurboTax ads during the Big Game this weekend, and remember that we’re here to help you pay less!