The Internal Revenue Service has proposed new regulations on paid tax-preparers, and the biggest companies in this business have quickly responded — roundly endorsing the new regulations, whose primary effect may be to kill off their smaller competitors.
H&R Block’s recent CEO, appointed deputy commissioner of the IRS by President Barack Obama, participated in crafting these new regulations, which benefit his company.
The proposed rules would require all paid tax-preparers to register with the IRS, pay fees, pass government tests, and fulfill continuing education requirements.
So the regulations add to the cost of doing business, but the big guys can afford these higher costs, and, in fact, are already paying to comply. If these added efforts are valuable to consumers, then H&R Block should just publicize how careful and thorough they are in training their preparers.
But maybe the market doesn’t value H&R Block’s efforts so much. What to do then? Well, you lobby Washington to regulate your lower-cost competitors out of business.
UBS, a major investment banker, issued an analysis this week describing how good the rules would be for H&R Block:
“The new regulations should help Block by: 1) reducing fraudulent preparers [that generate oversize refunds dishonestly], 2) add barriers to entry [or continuation] for small preparers, 3) provide revenue as Block may sell their continuing education and competency tests to others, and 4) perhaps boost paid prepared share.”
This is yet another example to dispel the media myth that regulation is about curbing the excess of big business. As with Obama’s tobacco regulations, Teddy Roosevelt’s meat inspections and George W. Bush’s toy-safety laws, big business is the supporter and the beneficiary of big-government regulation.
In such cases, regulation supporters typically respond by either denigrating the small businesses who would suffer, or by counting their loss as a necessary evil of protecting the consumer. And there are unscrupulous, fly-by-night tax-preparers out there. But taxpayers have plenty of access to trained, tested, registered and regulated tax-preparers.
Of course, however accredited a tax-preparer is, they could still be sued or prosecuted for incompetence and fraud. So this regulation isn’t primarily about rooting out bogus claims, it’s about shutting down smaller operations.
Also at play is the confidence game. IRS regulation would add a government stamp of approval to paid preparers, helping them bring in new clients. UBS posits, “it is possible that regulation may boost the public’s perception of the value provided by paid preparers.”
It’s not hard to see the big tax-preparers’ fingerprints on these rules.
This is how Washington regulation works. Government imposes costs on businesses, big businesses welcome the costs, and small businesses crumble. This drives up costs for consumers and profits for the well-connected.
Timothy P. Carney is The Washington Examiner’s Lobbying Editor.