TurboTax, Forbes, ProPublica

The people at ProPublica may have believed they were the first to write about the difference between  TurboTax's Free Edition and TurboTax's Free File Alliance Edition. ProPublica got a lot of attention from politicians, some IRS people, and other media for writing about it. However, they were not the first to write about it.

Forbes had this story more than 3 years ago. The author didn't qualify for using the Free Edition due to having a Health Savings Account, and used a pay version of TurboTax to file, unaware of the Free File Alliance. Later she learned she could have filed using the Free File Alliance for $0.

She wrote: Moreover, if a low-income person who would qualify for the Free File Alliance Edition starts doing his or her taxes with Turbotax's Free Edition and needs a form that is not supported in the Free Edition, but is supported in the Free File Alliance Edition, Intuit will not transfer the user to the Free File Alliance Edition. (I did not quote her verbatim, but modified her words only to make the terminology consistent with my first two paragraphs.)

Unlike ProPublica, she didn't accuse TurboTax's maker Intuit of deception and fraud. She wrote about what happened to her and differences between the two TurboTax editions without harshly judging Intuit.

There is another fact pertinent to ProPublica's stories (#1, #2) the authors did not mention. Prior to 2018 the IRS allowed filing with Form 1040A or Form 1040EZ for persons with simpler tax situations. These forms were eliminated for 2018 tax returns. A filer could only use Form 1040. The eligibility criteria for using TurboTax's Free Edition versus TurboTax's Free File Alliance Edition prior to 2018 were likely tied to the rules for using Form 1040A or Form 1040EZ. The IRS's changing its rules did nothing to lessen ProPublica's invective against Intuit.

ProPublica Targets TurboTax

Yesterday I commented on a ProPublica article about income tax filing. Today I comment on another ProPublica article related to the first.

ProPublica says TurboTax Deliberately Hid Its Free File Page From Search Engines.

Its subtitle is: "The makers of TurboTax as well as H&R Block promised the IRS to offer free filing for many Americans. But they have kept Google from seeing it."

ProPublica alleged:
(1) TurboTax uses deceptive design and misleading advertising to trick lower-income Americans into paying to file their taxes, even though they are eligible to do it for free.
(2) Intuit, the maker of TurboTax, is deliberately hiding the truly free edition — TurboTax Free File — from Google Search.

I allege deceptive reporting by ProPublica. Since Google search results have been modified recently (per the April 28 update in the article), I cannot replicate the earlier situation. However, doing two different searches with Google now is a good indicator of the earlier situation. Minutes ago I did two searches:

Search #1: free file TurboTax

Top search result: TurboTax Free File Program, Part of IRS freefile

Search #2: IRS free file TurboTax

Top search result: IRS freefile site

I suspect the earlier situation was:

Search #1: free file TurboTax

Top search result: TurboTax Free Edition, which is not Part of IRS freefile

Search #2: same as above

Note the different Search #1 top search results, earlier versus later. Apparently ProPublica alleged the earlier top search result was deceptive trickery, since it is not an IRS site (it's a TurboTax site) and somebody might need to pay Intuit some money to be able to file. So I ask the reader, does a searcher not being directed to an IRS site when "IRS" is not included in the search criteria constitute "deliberate, deceptive hiding" by TurboTax? I don't, but it seems ProPublica does!

Of course, I don't know what paths actual filers took to the TurboTax Free Edition and tried to file with it but eventually used a pay version of  TurboTax to file. The paths probably varied a lot. But I believe my search criteria and the earlier Search #1 path are very plausible. I doubt that ProPublica has any better idea about what paths actual filers took either.

Anyway, in ProPublica's narrative, it is never the taxpayer's failure to find the no-pay path, but always TurboTax's deliberate deception and fraud.

ProPublica Targets Free File Tax Preparers

Lately some politicians and senior IRS officials launched a review of TurboTax's and H&R Block's free file software (link). They were apparently inspired by articles written by ProPublica, such as this:   Here’s How TurboTax Just Tricked You Into Paying to File Your Taxes.

ProPublica claims to be "a nonprofit newsroom that aims to produce investigative journalism in the public interest." The people at ProPublica allege they tried the TurboTax software, entered pretend info, and then were told they could not file for free after all, as described in their article. They wrote the following:

"We started the process by creating the profile of a TaskRabbit house cleaner who took in $29,000. We entered extensive personal information. TurboTax asked us to click through more than a dozen questions and prompts about our finances.
     After all of that, only then did we get the bad news: TurboTax revealed this wasn’t going to be free at all. Turns out the house cleaner didn’t qualify because he is a independent contractor. The charge? $119.99."

Where did they do this? Probably here, or here, where clicking on 'Simple Tax Returns' shows a popup that gives situations not covered in TurboTax Free Edition, including business income, i.e. that of an independent contractor. So they either missed or ignored the caveat. Also, that software is not on the IRS's free file site.

This IRS site (as directed by the Free File Alliance) is the IRS's starting place for filing federal income taxes for $0 online. Clicking on the blue button 'Start Free File Now' does not direct you to a site to start entering data to file, but rather to a page of several free file software offers, including one by TurboTax and another by H&R Block. The TurboTax one says you can file free if you qualify (no guarantee).

So I selected the latter and I did a similar thing myself, pretending to be self-employed with income of $29,000, only not from TaskRabbit. TurboTax did not disqualify my pretend input for being an independent contractor nor say I needed to pay.

ProPublica also wrote the following:

"Then we tried with a second scenario. We went back to TurboTax.com and clicked on “FREE Guaranteed.” This time, we went through the process as a Walgreens cashier without health insurance, entering personal information and giving the company lots of sensitive data.
     Again, TurboTax told us we had to pay — this time because there’s an extra form if you don’t have insurance. The charge? $59.99."

Again, where did they do this? Probably here, or here, where clicking on 'Simple Tax Returns' shows a popup that gives situations not covered in TurboTax Free Edition, including things reported on Schedule 4. The so-called  "shared responsibility payment" for not having health insurance goes on Schedule 4. So again the ProPublica people missed or ignored the caveat. Again, that software is not on the IRS's free file site.

Per their description the ProPublica people did not use the IRS's gateway to file free! But I went to the TurboTax site via the IRS gateway. I entered data for a person with a W-2 and no health insurance. The software accepted it, even calculated the so-called  "shared responsibility payment", and did not say I needed to pay to file!

The Los Angeles city attorney filed a lawsuit against H&R Block and TurboTax's maker Intuit, alleging that the companies defrauded low-income taxpayers.

I assume ProPublica would side with the attorney. What principle are they invoking? I allude to the answer with an analogy. A customer is ready to buy something at Kroger. A Kroger employee knows the customer could buy the same thing at Walmart for significantly less. On said principle, the Kroger employee defrauds the customer if he or she doesn't tell the customer about Walmart's price. Arguably on said principle, Kroger defrauds the customer if there is no prominent sign by the product telling about Walmart's lower price.

P.S.:
1. I had never used any version of TurboTax before seeing ProPublica's reporting.
2. The so-called non-profit ProPublica had a $10 million profit (revenues minus expenses, and 35% of revenues) in 2017 and a $6.7 million profit (22% of revenues) in 2018. 😊 In 2017 the two highest paid employees were paid almost $400,000 each (> $400,000 with other compensation). Source: Annual Statements and Form 990.

Two Logics #2

A topic that Two Logics does not address is Boolean logic or Boolean algebra, which is the type of logic used by computers. George Boole introduced it about 120 years before Veatch published Two Logics, and Claude Shannon made great use of it for electronic computers 20+ years before Veatch published Two Logics. It has some similarity to the modern or relating logic that Veatch addresses, but he has nothing to say about it in the book.

It seems to me that Boolean logic used in computer circuits should not be subject to what-logic as Veatch calls it. The programmer and the human user should, of course, heed what-logic, but the computer circuits have no need for it. The circuits do not relate meanings to the real world anything like humans do, so what-logic does not apply. Context matters.

The logic of concepts (variables and "objects" in object-oriented programming) represented in computer circuits is much the same way C. I. Lewis described concepts in relating logic. "[I]t being up to us to define our concepts in any way we might choose, packing into them only those notes that we ourselves might decide we wanted them to contain, and leaving out those we do not want" (p. 107).

There may be a better way to articulate this. If one occurs, I shall return.

Two Logics #1

Two Logics is a book published by Henry B. Veatch in 1969. '[W]e shall not only want to develop the suggestion that in the present day intellectual scene there are two very different and competing types of knowledge -- the more traditional humanistic or philosophical knowledge on the one hand, and the newer-fashioned scientific knowledge on the other -- but in addition, and more specifically, we shall want to try to clarify the nature of the difference between the two "knowledges" in terms of the respective logics that are brought into play as the characteristic means or instruments for effecting each sort of knowledge in turn" (p.21).

Veatch dubs the philosophic logic as 'what logic' and the scientific logic as 'relating logic'. He criticizes the latter as a logic that can't say what anything is. "It must be acknowledged that we are entirely free to legislate just what will go into our concepts and what will not, this freedom of legislation must nowise be thought to extend to the data of experience or what is in the world. Thus, given our concept "planet," the proposition "A planet moves in a circular orbit" is necessarily entailed thereby, and is itself an analytic truth, hence necessary. Nevertheless, when we undertake to apply such a concept to the world and thus to characterize certain of the bodies which we observe in the heavens as being "planets" (in the sense defined, of course), it remains to be seen ... whether the things to which we have applied our concept "planet" are properly so-called or not" (p. 107).

He then proceed to call this 'the fallacy of inverted intentionality', of inverting the Scholastic distinction between first and second intentions. By example, the first intention of men is when it refers to real men in the real world, where as the second intention of men is our linguistic use of it.

There is a good review of the book on Amazon. So I defer to it, except that I will make a couple different comments in my next post.

The Entrepreneurial State #3

The author says that integrated circuits were designed by Jack Kilby and Robert Noyce. She omits that they did so when they worked at private companies. She then gives huge credit to the US Govt for the development of the microprocessor industry. “As the sole consumers of the first processing units based on the new circuit design, defense contracts helped fund the development of the infant microprocessor industry and those introducing complementary electronic equipment and devices were simply unaffordable in regular commercial markets. Large-scale demand for microprocessors by the US Air Force was created by the Minuteman II missile programme” (p. 104).

The microprocessors in the missile’s guidance system were made by Texas Instruments (and two other companies). However, the use of microprocessors in missiles was not the sole demand for microprocessors or the transistors in them. The hearing aid industry began making use of transistors a few years earlier. Also a few years earlier, the huge consumer demand for transistor radios spurred the development of microprocessors. Shortly after the surge in demand from defense contractors came another surge in demand for microprocessors for use in hand-held or pocket calculators. The author mentions none of these and thus gives no credit to the buyers of those things.

She also claims that “government agencies helped to drive down the costs of integrated circuits significantly” (p.105). This is another instance of her magnifying government and diminishing the private sector. The costs fell due to more efficient production, economies of scale, and competition.

She devotes an entire chapter to the State behind Apple. She praises Steve Jobs and Apple, but exaggerates the State’s role – for example, public schools buying Apple computers and a $500,000 State-backed investment. “[I]n 1980 Apple additionally secured $500,000 as an early-stage equity investment from Continental Illinois Venture Corp, a Small Business Investment Company (SBIC), which was licensed by the Small Business Administration (SBA), a federal agency” (100-101). Nothing is said about that $0.5 million being a drop in the bucket. In 1980 Apple’s net sales were $117 million and its profits $11.7 million. In 1979 the amounts were $48 million and $5 million (link). She says nothing about whether or not Continental Illinois might have invested with or loaned Apple the money without the SBA. She also says little about SBIC failures. The LA Times says about Apple’s case: “But such success stories are rare among SBICs. Since the program started in 1958, 465 SBICs out of a total of 1,597 have been placed in liquidation after defaulting on their payments. Since 1980, the backlog of the SBIC program's liquidation portfolio has grown from $100 million to more than $500 million, and the number of SBICs placed in liquidation has doubled in the past five years” (link).

I bet Apple Inc. and its employees paid billions in income taxes before Mazzucato finished writing her book. It apparently was not enough to satisfy her. Also, per its 10-Ks Apple Inc. paid $55.7 billion in income taxes 2014-18. Not all of it went to the US Treasury, but I wonder if she now believes that the US government has had an adequate return on its tiny support via Continental Illinois.

She doesn’t write about Internet browsers, which surprises me. The first very successful browser was Mosaic. It was developed by Marc Andreessen and Eric Bina at the National Center for Supercomputing Applications at the University of Illinois, which had been funded by the (Sen. Al) Gore Bill. (The Innovators, 415-6). Al Gore took credit, so why didn’t she credit the State?

She says the algorithm developed by the Google founders was funded by a National Science Foundation grant (27). She says this was while the founders attended Stanford University, but does not say Stanford is a private, not a public, university. She also says nothing about how much the government has benefited from Google. How much have government employees used Google without paying? She says, “After Google made billions in profits, shouldn’t a small percentage have gone back to fund the public agency that funded its algorithm?” I bet Google (Alphabet Inc), Page and Brin have paid income taxes many, many times the amount of the NSF grant, but she says nothing about that.

She asserts that the drug Taxol was discovered by the National Institute of Health (203). An Internet page belies this (link).  It credits two men at the Research Triangle Institute (RTI) for the discovery and the National Cancer Institute (NCI) for some further work. RTI International is a nonprofit organization headquartered in North Carolina that provides research and technical services. It was founded in 1958 with $500,000 in funding by local businesses and the three North Carolina universities (Wikipedia). NCI is part of the NIH. But why did she give all credit to NIH and none to those local businesses who helped fund RTI? Obviously, it is because she is very biased.

The Entrepreneurial State #2

The author often wrote ‘the State’ as another term for government(s). I will follow her practice.

Before commenting on some of her specific narratives, I will make general criticisms of the method of her narrative. I haven’t read all the reviews on Amazon, but all the criticisms I read were at a more specific level.

She bases much of her exaggeration of the State’s role on funding or being a customer, rather than the developing and implementing the basic ideas. She says little about an entrepreneur’s work in implementing new ideas and bringing a new product to market. Sorry, buying, subsidizing, and demanding are not producing. The author blurs the difference between a producer of X and its customers buying X.

True entrepreneurs rely on funding, money for research and producing their products/services. The funding may be from issuing stock, borrowing, revenue from selling their products/services to customers, or, when from the State, subsidy or grant. When the State is involved, the author conflates the last three ways and says funding. Customers aren’t always passive ones; they may give specs to a supplier or otherwise assist the supplier. However, in her narratives the State is never only a customer; it provides “entrepreneurial funding.” She hypes this customer and downplays the role of the true entrepreneur. That’s like shifting most or all credit from those who invented and produced iPhones to the buyers of iPhones.

The author mentions Xerox a few times, but not about the State being a customer for Xerox’s copy machines, toner, and paper. I’m confident that States were a major customer for these things. But does that imply the State played a major entrepreneurial role in Xerox’s growth? I think not.

The author purports to define entrepreneurship (64). She cites Schumpeter: “[A]n entrepreneur is a person who is willing and able to convert a new idea or invention into a successful innovation. It is not not just about setting up a new business … , but doing so in a way that produces a new product, or a new process, or a new market. Citing Knight and Drucker, “entrepreneurship is about taking risks.”

That’s fine, but she falls short of illuminating the nature of this risk. The risk is that the revenues from selling the product are enough to meet or exceed the funds spent in creating the product. I’d like to know how the US or a European government does this. What does it create with a plan to sell it for money exceeding the funds spent in creating it?