Austin: IRS offer to do taxes is a bad deal for Arizona's Hispanic community

As the vice chair of the East Valley Hispanic Chamber of Commerce and as a lifelong taxpayer, I know firsthand how difficult and stressful tax season can be. Families struggle to organize all their documents and receipts. Businesses constantly face the threat of audits and enforcement actions that could hit their bottom line in an unstable economy.

I advocate for policies that promote economic opportunity for Hispanic-owned businesses and create jobs that provide upward mobility for hard-working members of the Hispanic community to achieve the American dream. But part of my job is to also warn lawmakers to oppose well-intentioned but misguided proposals that would disproportionately hurt our friends and neighbors.

That is why I am concerned about an upcoming study examining whether the Internal Revenue Service should prepare and file tax returns on behalf of all taxpayers. Based on the study’s recommendations, Congress could even begin considering legislation to enact this proposal into law.

As a business leader, I have learned the hard way to only pursue ventures that have a reasonable chance of success. A recent study from the National Bureau of Economic Research found that a government-run tax preparation system would work less than half of the time. Specifically, only 42% to 48% of all returns could be accurately pre-populated using only current-year information returns and the prior-year return. Less than 50% are losing odds.

According to census data, there are nearly 6 million Arizonans who claim Hispanic ancestry. Many members of Arizona’s Hispanic community are immigrants who may not have full legal documentation. These individuals and families are rightfully hesitant to trust a government agency with additional personal information or data, which could be handed over to immigration enforcement agents under a different presidential administration.

Having the IRS act as tax preparer and collector is also a clear conflict of interest. The IRS is tasked with maximizing revenue for the federal government, and therefore does not have the best financial interest of taxpayers at heart. Every year, millions of Arizonans utilize low-cost online software or hire accountants to prepare their taxes because these private-sector services have a fiduciary responsibility to maximize deductions and refunds. They ensure that taxpayers get every penny that they are owed.

A recent report from the Tax Policy Center found that many families depend on credits like the Child Tax Credit and the Earned Income Tax Credit to help cover bills, put food on the table, and pay for child care. A government-run tax preparation system would make it much harder for low-income families to claim crucial tax credits and deductions they depend on.

Further empowering the IRS is clearly a bad idea if you look at the agency’s auditing history. A 2022 report from Syracuse University found that the IRS was five times more likely to audit families making less than $25,000 a year.

Fortunately, opposing an IRS-run tax preparation system is a politically popular message. A 2022 poll found that an overwhelming 78% of Arizona voters oppose legislative proposals to give the IRS authority to prepare and file tax returns on behalf of taxpayers. Additionally, 58% of Arizonans said they would be less likely to support an elected official who wanted to increase the IRS’ authorities.

Sen. Sinema has recently cited the contributions of Arizona’s Hispanic community state’s culture, history, and economy, while more than 100 Hispanic elected officials, small business owners, and community leaders from across the state endorsed Sen. Kelly’s reelection bid in 2022. Now is the time for Senators Sinema and Kelly to live up to their campaign promises and oppose a government-run tax preparation system that would disproportionately hurt the Hispanic community every tax season.

Phillip A. Austin is a founder and current Vice Chair of the East Valley Hispanic Chamber of Commerce.