Sen. Gerald Hocker is a Republican representing Ocean View.
It’s no secret that times are tough for consumers and small businesses these days. With a looming recession and a persistently high inflation rate, Delawareans are certainly feeling sustained financial pressure.
And now, with tax season underway, it brings additional stress for families and small-business owners, especially for filers in the First State. After all, according to the Tax Foundation’s State Business Tax Climate Index, Delaware has the 44th-highest individual income tax burden in the nation. When you mix that with the larger economic conditions, it’s no wonder that Delawareans are feeling pinched.
Unfortunately, officials at the state and federal level are not making things any easier for taxpayers. Let’s start right here in Delaware. While the residents of the First State are getting squeezed for every penny, our state has a budget surplus exceeding $1 billion. But, unlike 24 other states with similar budget surpluses, Delaware has failed to enact any meaningful tax cuts for its citizens or businesses. Accumulating massive surpluses is rather meaningless if we don’t use those surpluses to create a more fair, less burdensome environment for those who call Delaware home and for those who will in the future.
At the federal level, the story isn’t much better for taxpayers. Despite repeated leaks, data breaches and poor customer service, far-left politicians have decided that we should be giving the IRS unprecedented new authority to let the agency be your accountant. If leaders like Sen. Elizabeth Warren, D-Mass., get their way, the IRS will be in charge of determining how much you owe the federal government each year and also how much you get back in your refund.
If that strikes you as a blatant conflict of interest, you are absolutely correct. We all know that the job of the IRS is to maximize revenue for the federal government. How can that same agency possibly be trusted to look out for the best interests of taxpayers and businesses who all have unique financial situations and rely on different credits and deductions each year? This is especially concerning for middle- and low-income Delawareans, who often count on savings from the child tax credit and the earned income tax credit. A prepopulated form from the government is not going to be designed to ensure those Delawareans get every penny they are owed.
What’s more, building this massive, government-run tax-preparation system at the IRS would be an extreme waste of money. By conservative estimates, it would cost tens of billions of dollars to build, maintain and protect this system. And what results do we get for this exorbitant price tag? A report released in October 2022 found that a government-run system would only generate accurate returns for 42%-48% of filers. Those are not odds that any of us should be willing to take with our hard-earned money.
Finally, even the IRS itself has said that it does not believe such a system “would significantly improve the taxpayer experience and that it did not have sufficient funding to” implement it.
Additionally, former IRS commissioners — who served under President Donald Trump and President Barack Obama — have said implementing such a system would be “unwise” in the face of other critical challenges facing the agency.
This proposal for a government-run tax-preparation system would be laughable, except it’s far too close to actually becoming reality. Last year, in the Inflation Reduction Act, Congress authorized an additional $15 million to study the feasibility of such a system. That study is set to be released in just a few short months, and I see it likely that the liberal groups behind the study will push to greenlight a government-run system, despite its clear and obvious pitfalls. Additionally, would the IRS even be able to find the adequate, qualified workforce needed?
The Senate Finance Committee just held a hearing to consider the nomination of Daniel Werfel to serve as the new IRS commissioner at the same time that the administration is considering a disastrous government-run tax-preparation system. Sen. Tom Carper, D-Del., who holds a Master of Business Administration, served as our state treasurer and is now a senior member of the Senate Finance Committee, should see that the math clearly doesn’t add up here. If he wants to look out for Delaware taxpayers this tax season, he should press the IRS to abandon a wasteful and ineffective government-run tax-preparation system.
