NCPA - National Center for Policy Analysis


April 19, 2005

It's being touted as a way to make income tax filing easier, but California's state-funded "ReadyReturn" program is a boondoggle, not a bargain for taxpayers, concludes the National Taxpayers Union (NTU).

This year California's Franchise Tax Board (FTB) initiated a test program in which 50,000 taxpayers were sent government-completed tax returns based on previous filing and income data. The recipients may then sign and accept the return, make adjustments, or file their own taxes.

But according to NTU, aside from a paltry 3.6 percent participation rate as of mid-March, other problems plague the program:

  • ReadyReturn's cost ultimately falls on taxpayers because the taxpayer-funded FTB prepares the returns: these resources could instead be committed to providing relief from the state's notoriously-high income taxes, or for encouraging more electronic filing (which actually saves the state, and taxpayers, $1 for every return processed).
  • The FTB's Web site alone lists 14 private firms that help prepare and submit returns, eight of which offer some sort of free filing option (not including the state's "CalFile" option); taken to its extreme, ReadyReturn could lead to "mission creep" at the FTB (such as offering bookkeeping services or estimating tax liabilities).
  • Since eligibility for ReadyReturn is based on a backward-looking analysis, taxpayers whose personal situations have changed (i.e., marrying, moving out of state, switching to better-paying jobs) might not actually qualify for the program this year..

NTU suggests that another motive behind the possible expansion of the ReadyReturn program -- to 4 million taxpayers next year -- might be the FTB's own institutional interest. Bigger workloads from the program could justify higher staffing levels and even greater budgets.

Source: "California's 'ReadyReturn' Filing Program Could Trap Taxpayers, Citizen Group's Study Warns," National Taxpayers Union Issue Brief 153, April 15, 2005.

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