Predatory Tax Preparers as Mediators between Citizens and the Submerged State

• In Event: Inequality, Race, and the Politics of the Fringe Economy

Abstract

Low-income households rely on government transfers through refundable tax credits like the Earned Income Tax Credit and the Additional Child Tax Credit, often receiving relatively large tax refunds because of these credits, which lift approximately 16 million Americans out of poverty each year (CBPP 2019). Yet in order to get these credits Americans must file their taxes, and the vast majority do so through a paid preparer or through online filing. This paper examines the tax preparation industry as both a site of predation and political learning for low-income Americans. While much of the submerged state literature assumes that submerged benefits are hidden from view and not recognized by citizens as deriving from government, refundable tax credits provide a somewhat different case both because they are usually received as part of a highly visible (and highly anticipated) tax refund, and because credits are often emphasized in advertising and in the actual process of tax filing. Yet the fact that it is for-profit, often predatory companies behind the filings shapes interpretation in ways that obscure the details of the policies and perverts a clear path of policy feedback.

This paper examines the messages sent through examining the tax preparation practices, advertising, and communications included in returns for the three largest tax preparation companies. Overall, tax preparation companies likely make refundable tax credits more salient, and send messages that these benefits are deserved and earned by tax filers. However, the messaging from tax preparation companies is misleading and unclear on policy details in ways that could distort understanding of eligibility and broader policy goals underlying refundable credits. The paper underscores the important mediating role of tax preparers in delivering submerged benefits, while questioning what is actually revealed to filers through the process of tax filing.

Author

• Serena Laws, Trinity College, Hartford CT