Opinion

Regulators are glad they're helping Big Business at the expense of Mom & Pops

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Beltway Confidential,Opinion,Timothy P. Carney,Taxes,Big Government,IRS,Minusextra

Regulating an industry tends to add to overhead costs, which disproportionately affects smaller operators, leading to industry consolidation. This is why Big Business often supports — or at least tolerates — regulation.

H&R Block, Jackson Hewitt and Intuit all supported the Internal Revenue Service's 2010 regulations on tax preparers. Small-time tax preparers, aided by the Institute for Justice, sued and have helped block the rules. IJ's Dan Alban alerted me this weekend to a 2013 study that shows that the regs, nonetheless, seem to be having their desired effect.

See the chart, below, from the IRS.


The number of preparers is dropping. Returns per preparer is rising. The number of small preparers fell dramatically, as the full study shows.

The IRS notes that smaller preparers are more likely to make errors, and so driving them out of business is good from the perspective of eliminating errors. Another benefit of consolidation, from regulators' viewpoint:

A more stable and readily identifiable preparer base aids engagement and promotes effective tax administration.

In other words, regulators like working with fewer industry players -- it makes their job easier.

So, some liberals consider industry consolidation an unfortunate consequence of regulation. The IRS seems to consider it a feature, not a bug.

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