Rent Seeking 101

This morning the Internal Revenue Service announced that they would henceforth require people who prepare other people's tax forms to be "qualified" and proposed a new set of regulations to accomplish that. The new regulations will require preparers to pay a fee (surprise) and to take some continuing education. Evidently, the IRS believes that these new requirements will improve the quality of tax advice that each of us gets from preparers. A better solution to the problem of tax complexity would be to simplify the income tax. But that is simply too logical.

The IRS Commissioner this morning said, "In most states you need a license to cut someone's hair," but today "most tax-return preparers don't have to meet any standards when they sit down and prepare a federal tax return for an American taxpayer." Gee Commissioner, in most states we've reduced the regulatory burden on people who cut hair. Many states have abolished their boards of cosmetology based on the simple notion that people can make judgments about who gives good hair cuts.

H&R Block, the nation's largest provider of tax preparation services sought this new regulatory scheme for years. This morning on MSNBC, the head of H&R Block said he saluted the IRS for proposing this new idea - and that all they sought was a "level playing field." Excuse me but this one does not pass the scratch and sniff test. The IRS deputy commissioner for Operations is the former head of H&R Block. Doesn't that make you wonder a bit? Like many of the other things that this Administration has attempted, there is little legal authority for the IRS to make these new rules.

What bothers me the most about this nonsense is whether the Service will require its own people to be licensed. (Don't take bets here.) When the Government Accountability Office did a study of the accuracy of advice from the IRS and found that a large percentage of their advice was wrong. Former congressman J.J. Pickle of Texas once quipped, "Calling the IRS for tax advice is a real crapshoot." Regulations are not likely to improve that situation.