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IRS to begin trial of its own free tax-filing system

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Re: IRS to begin trial of its own free tax-filing system

#331

Post by AnthonyMouse »

smsm42 wrote: post #330
AnthonyMouse wrote: post #325

Earlier quoted context omitted.

> Let's say you get only 10% of those - since you're not the only person on the market - to pay you $100 (if you save a significant amount on taxes, paying $100 for it would make sense, won't it?) - that's $260M, or about as much as the government says their whole system, for all 100% of taxpayers, would cost. TurboTax is ~$39. Also, the cost of developing the system doesn't depend on how many people use it, and thos…

$39 is the cheapest offer (well, beyond free ones). If you want to cover your mortgage, your charity giving, savings, maybe a little stock investments, maybe some side gigs, then you very quickly get to $100. And of course state is extra (my tax return, if I choose to file with Intuit, would be at around $120 with current prices). It's not all people, for sure, but in those 10% that need non-trivial filing, those wou…

> $39 is the cheapest offer (well, beyond free ones). If you want to cover your mortgage, your charity giving, savings, maybe a little stock investments, maybe some side gigs, then you very quickly get to $100. And of course state is extra (my tax return, if I choose to file with Intuit, would be at around $120 with current prices).

That's the right now pricing, which is basically an attempt at price discrimination or bait and switch -- lots of people have common deductions like that and then they get sucked in with a free offer or $39 only to learn it's going to be more. But those are the kind of things a government system would be likely to handle well, because they actually are common deductions.

Whereas what you'd need from a private system then is that they don't phrase the questions in such a way that it pressures you to be unnecessarily fearful and overpay your taxes, and strike the right balance in the interface between simplicity and complexity so that you actually find every deduction you're entitled to without having to spend many hours looking through forms.

So then the customers are the people who have weird taxes, rather than the ones who have some mildly complex but fairly common deductions they can navigate in the free system. And yet not the people whose taxes are so weird or complicated that they end up going to a private accountant.

That's not necessarily a huge market.

> They already have the platform and 99% of stuff implemented.

By "they" you mean an incumbent. What about anybody new who wants to enter the market once the dynamics are different?

Re: IRS to begin trial of its own free tax-filing system

#332

Post by BurningFrog »

Buttons840 wrote: post #314
BurningFrog wrote: post #252

Earlier quoted context omitted.

> It's perfectly possible for a market with 10 or 20 competitors to stop competing for mutual benefit. As I remember it, the empirical research says two competitors can keep a stable monopoly cartel going for a long time. three can maybe do it for a while. With larger numbers things get very unstable.

Source? I would enjoy reading more about this. I wonder if this was a simulation or an observational study of real markets?

I'm not an economist, but I read a lot of what they write, and it seems like an established fact in the field.

Re: IRS to begin trial of its own free tax-filing system

#333

Post by smsm42 »

AnthonyMouse wrote: post #331
smsm42 wrote: post #330

Earlier quoted context omitted.

$39 is the cheapest offer (well, beyond free ones). If you want to cover your mortgage, your charity giving, savings, maybe a little stock investments, maybe some side gigs, then you very quickly get to $100. And of course state is extra (my tax return, if I choose to file with Intuit, would be at around $120 with current prices). It's not all people, for sure, but in those 10% that need non-trivial filing, those wou…

> $39 is the cheapest offer (well, beyond free ones). If you want to cover your mortgage, your charity giving, savings, maybe a little stock investments, maybe some side gigs, then you very quickly get to $100. And of course state is extra (my tax return, if I choose to file with Intuit, would be at around $120 with current prices). That's the right now pricing, which is basically an attempt at price discrimination o…

You are right that cheap lower layers are a funnel to guide people into expensive higher layers. But if the business model would be to cater only for 10% hardest cases, you don't need the funnel, since people coming to you already have a $100 need, so to say. You can't start with $100 price tag because people are going to ask - why would I pay $100 for just basic stuff? If you cater to top 10% then they answer is obvious - because your stuff is the most complex 10%!

That's a different approach, for sure, but a viable one nevertheless.

> That's not necessarily a huge market.

It's not huge, but our tax system being a byzantine spaghetti mess it is, it's bigger than you think. I have relatively simple taxes, yet I certainly wouldn't want to do it all by myself and I do shell out over $100 each year to do it right now - so I probably would at least consider using such a system. The rest depends on how well it works, of course.

> What about anybody new who wants to enter the market once the dynamics are different?

That's no different from entering any other established market right now. Yes, incumbents have an advantage, this is always so, always have been so and always will remain so. It's hard to deal with incumbents - and yet it's possible, I myself am an evidence for it - despite Google being a giant of an incumbent, I am a paying client of Kagi, who are a startup in the space. I don't know if they will survive long term, but that's nothing new too.

Re: IRS to begin trial of its own free tax-filing system

#334

Post by AnthonyMouse »

smsm42 wrote: post #333
AnthonyMouse wrote: post #331

Earlier quoted context omitted.

> $39 is the cheapest offer (well, beyond free ones). If you want to cover your mortgage, your charity giving, savings, maybe a little stock investments, maybe some side gigs, then you very quickly get to $100. And of course state is extra (my tax return, if I choose to file with Intuit, would be at around $120 with current prices). That's the right now pricing, which is basically an attempt at price discrimination o…

You are right that cheap lower layers are a funnel to guide people into expensive higher layers. But if the business model would be to cater only for 10% hardest cases, you don't need the funnel, since people coming to you already have a $100 need, so to say. You can't start with $100 price tag because people are going to ask - why would I pay $100 for just basic stuff? If you cater to top 10% then they answer is obv…

> But if the business model would be to cater only for 10% hardest cases, you don't need the funnel, since people coming to you already have a $100 need, so to say.

Now consider that the people with a $100 need are going to depend on how good the free system is. If the free system sucks, it's a lot.

But if the free system sucks, lots of people are going to be complaining about it because they don't like paying $100, and then it might improve some. The number of people who need something else goes down from 15% to 8%. Then there are fewer complaints, but the paid system has that many fewer customers.

At some point there are few enough people complaining and the free system stops being responsive to their complaints, but the main thing that depends on is how much the government cares about making their system any good.

If the premise of embarrassing the public system when a private system can do better is successful, the public system could get arbitrarily good over time -- until the private system doesn't have enough revenue to do better.

You push that point further down the line by not forcing the private system to duplicate the public system's work.

> That's no different from entering any other established market right now. Yes, incumbents have an advantage, this is always so, always have been so and always will remain so.

It's not the incumbent's advantage which is the issue because that isn't the change. What you'd be doing is closing the door to new entrants regardless of whether the incumbent continues to exist.

Even if the market provided enough revenue for Intuit to continue if well-managed, if they were to become mismanaged or otherwise go out of business, or just do a crappy job while not actually ceasing to exist, no one could replace them because no one else could cover the initial entry costs while competing with the free system.

Re: IRS to begin trial of its own free tax-filing system

#335

Post by crazydoggers »

kirubakaran wrote: post #94
protomolecule wrote: post #91

Earlier quoted context omitted.

"There’s lots of wining and dining" You mean the congressmen are bribed by free food and alcohol? Asking as a non-American.

This should shed some light: Bill Gurley: "2,851 Miles" https://www.youtube.com/watch?v=F9cO3-MLHOM

Just came back to check replies. This is a great talk.

He mentions Obamacare and the digitization of records, which is very on point and a similar issue. In the interview he mentions, Obama says:

“In some cases, you have economic incentives against making the system better; you have service providers — people make money on keeping people’s medical records — so making it easier for everyone to access medical records means that there’s some folks who could lose business. And that’s turned out to be more complicated than I expected.”

I think “more complicated than expected” is a hilarious and sad way to sum up the whole mess that is greed and Washington DC combined.

Re: IRS to begin trial of its own free tax-filing system

#336

Post by bschwindHN »

Izkata wrote: post #312
bschwindHN wrote: post #221

Earlier quoted context omitted.

I do them on paper as well. It doesn't take me too long and I hope it adds to their pain of processing it so they get along with implementing free (and good) digital solutions faster.

I use free fillable forms, an online version of the paper forms. They're pretty much exactly the same, just the online one does some basic math and copying values between steps for you.

Oh nice, I'll be checking that out, thanks!

Re: IRS to begin trial of its own free tax-filing system

#337

Post by protomolecule »

kirubakaran wrote: post #94
protomolecule wrote: post #91

Earlier quoted context omitted.

"There’s lots of wining and dining" You mean the congressmen are bribed by free food and alcohol? Asking as a non-American.

This should shed some light: Bill Gurley: "2,851 Miles" https://www.youtube.com/watch?v=F9cO3-MLHOM

Thanks!

Re: IRS to begin trial of its own free tax-filing system

#338

Post by AnthonyMouse »

Buttons840 wrote: post #314
BurningFrog wrote: post #252

Earlier quoted context omitted.

> It's perfectly possible for a market with 10 or 20 competitors to stop competing for mutual benefit. As I remember it, the empirical research says two competitors can keep a stable monopoly cartel going for a long time. three can maybe do it for a while. With larger numbers things get very unstable.

Source? I would enjoy reading more about this. I wonder if this was a simulation or an observational study of real markets?

> I wonder if this was a simulation or an observational study of real markets?

It's kind of both.

Try to name a market where the largest company in the market has Drug cartels can have lots of members because they murder you for defecting. Landlords collude through zoning boards. OPEC is literally a cartel of governments.

You can also kind of reason this out.

Suppose a market has two companies and the smaller one has 40% market share. If they could increase their market share to 60% by cutting their margins in half, that's losing money, so screw that. The bigger company doesn't even have to buy them off.

Suppose a market has eleven companies and the smallest one has 1% market share. If they could increase their market share to 20% by cutting their margins in half, they're making 10 times more than they do now. The other companies would have to buy them off. But how? More market share without lowering prices? Even if they could arrange it, any company with less than 10% market share would rather have 20% at half the margins, but in a market of eleven the smallest company can't have more than 9% without making someone else the smallest company. And that's if having the lowest price only gets you 20% market share and not more.

Now, you can make up numbers that allow coordination with arbitrarily many companies. Maybe lowering your margins to zero doesn't get you any more customers at all and then no one would have any reason to do it. But how many real markets work like that?

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