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Stanford Professor Loses Political Battle To Simplify Tax Filing Process

ARI SHAPIRO, HOST:

This year, Americans will collectively spend billions of dollars and many hours filing tax returns. Turns out, it does not have to be this hard. Stacey Vanek Smith from our Planet Money podcast brings us the story of one man's quest to simplify the system.

STACEY VANEK SMITH, BYLINE: Joseph Bankman is a tax law professor at Stanford. And he says paying taxes in the U.S. is way more complicated than it should be. He says in other countries, paying taxes is much easier. But here?

JOSEPH BANKMAN: Our filing system is the worst.

SMITH: Like objectively?

BANKMAN: Yeah, objectively.

SMITH: Back in 2004, Joe tried to change this. He and some people from the state of California put together a pilot program to improve taxes. They rolled it out to about 11,000 taxpayers. And it was based on this very simple idea.

BANKMAN: Why don't we start off giving them a tax return that's already filled out with the income we know they have and then they can make corrections on it?

SMITH: This is how taxes work in most countries. The government knows what you earned, and they fill out your tax forms for you. Joe and his team called it ReadyReturn. And 99 percent of the people who filed their taxes using ReadyReturn said they'd use it again. A bunch of them also wrote in comments. And one of the comments really stuck with Joe.

BANKMAN: Finally government's doing something to make my life better for a change.

SMITH: What did you think when you read that?

BANKMAN: I was really touched. I mean, I was really moved. Filing taxes each year, it's one of the most important interactions you've got with your government. And how does it make you feel? It makes you pissed. You can't understand it. You're anxious. You're worried about screwing up.

SMITH: If we improved that, did you think it would, like, help improve people's relationship with the government?

BANKMAN: Absolutely.

SMITH: ReadyReturn was a hit. Other states started asking about it. And Joe and his team got ready to roll it out statewide. Before that could happen though, Joe had to get the OK from the California state legislature. So Joe started making meetings with lawmakers. But the meetings were not going that well.

BANKMAN: Well, one meeting somebody said, I've been warned about you.

SMITH: (Laughter).

BANKMAN: That was what it started with. And I knew what that meant, that the Intuit lobbyists had already been in.

SMITH: Intuit is the company that owns TurboTax. Intuit did not want to talk with us for this piece. But they sent us a statement saying that they have long advocated for tax simplification, but they felt that ReadyReturn minimized taxpayer engagement. Joe, though, discovered that Intuit had been very busy lobbying against ReadyReturn - meeting with lawmakers, giving money.

BANKMAN: So that's the point where I decided to hire my own lobbyist.

SMITH: (Laughter) I've never even heard of someone hiring their own lobbyist.

BANKMAN: It was really fun. I really enjoyed hiring a lobbyist.

SMITH: How much did that cost?

BANKMAN: They gave me a deal because they thought it would be kind of fun to work for this crazed professor. So I paid $35,000 I believe.

SMITH: Like of your own money?

BANKMAN: Of my own money.

SMITH: Like your savings?

BANKMAN: Yeah.

SMITH: Why did you spend that money that way?

BANKMAN: This was a cause that was really good. And nobody else was going to do it but me.

SMITH: The investment paid off. Joe started getting meetings. And he was getting close to having the votes he needed to pass ReadyReturn. Closer and closer, finally tied. And then with just a couple of weeks before the vote, it happened - one last politician said yes. And it looked like ReadyReturn was going to happen in California. The day of the vote, a politician friend promised to call Joe with updates. At about 10 a.m., his phone rang.

BANKMAN: I could tell by the tone in his voice what the answer was before he said anything. And he said so and so - I've even forgotten the legislator's name - is not with us. Looks like we're going to be one vote short.

SMITH: One vote short. Joe had lost. And all the other states that had been calling Joe asking how they could implement a plan like this in their state, they kind of dropped away.

How much time had you invested in this?

BANKMAN: You know, in a way it was a year of my life. It was a pretty big blow.

SMITH: Joe went back to teaching full-time. But he says one of these days, some kind of tax simplification plan will pass. And we will no longer have to spend billions of hours and billions of dollars filing our taxes every year. Stacey Vanek Smith, NPR News.

(SOUNDBITE OF FOOL'S GOLD SONG, "SURPRISE HOTEL - MAD DECENT TOADZ REMIX") Transcript provided by NPR, Copyright NPR.

Stacey Vanek Smith is the co-host of NPR's The Indicator from Planet Money. She's also a correspondent for Planet Money, where she covers business and economics. In this role, Smith has followed economic stories down the muddy back roads of Oklahoma to buy 100 barrels of oil; she's traveled to Pune, India, to track down the man who pitched the country's dramatic currency devaluation to the prime minister; and she's spoken with a North Korean woman who made a small fortune smuggling artificial sweetener in from China.