April 7, 2006

By Fax (202-228-4260)

The Honorable Barack Obama
United States Senate
Washington, DC 20510

Dear Senator Obama:

The National Consumer Law Center (on behalf of its low-income clients), the Consumer Federation of America, Consumers Union, the nonprofit, independent publisher of Consumer Reports, and the groups listed below write in regards to S. 2484, the Protecting Taxpayer Privacy Act. S. 2484 would prohibit tax preparers from disclosing taxpayer information to unaffiliated third parties, with certain narrow exceptions. We support S. 2484 as a good start in eliminating the dangerous gaps in taxpayer privacy protections created by IRS regulations. Indeed, taxpayer return information is so sensitive that it should never be shared, sold, traded, or used for secondary purposes, including to cross-market ancillary products by any company, especially considering the great amount of trust that taxpayers have in their preparers and the potential for exploitation of that trust. Ultimately, tax preparers should be prohibited from using tax return information to market even their own products, and from sharing tax information with their affiliates.

Nonetheless, the protections in S. 2484 are critical to prevent commercial preparers from sharing and selling the highly private and confidential information contained in taxpayers’ returns to unaffiliated marketing firms, database brokers, and other businesses eager to mine this rich trove of data. The marketing, data mining or other commercial uses of tax return information exposes consumers to security risks, identity theft, and intrusive marketing, not to mention a completely unwarranted invasion of their privacy.

Tax preparers should not be permitted to share or sell return information to third parties simply by getting the taxpayer’s signature on a piece of paper, as the IRS would permit. Consent forms are too easily buried in stacks of paper that preparers give to taxpayers to sign, and taxpayers who have placed their trust in a preparer will all too readily sign the consent forms as instructed. Consumers will not realize or understand what they’ve signed and the rights they have given away.

The protections in S. 2484 will help restore consumer confidence in the security of their tax returns, an especially important consideration given that the U.S. tax system largely depends on voluntary compliance. Our system depends on the willingness of taxpayers to provide detailed personal financial information to the federal government in order to ensure accurate payment of taxes, the lifeblood of government. Erosion of public confidence in the security and privacy of that information undercuts the pact between taxpayers and their government to keep this information safe and confidential, and used only for the purposes of tax return preparation and tax collection.

Thank you for your support of taxpayers’ right to privacy. We look forward to working with you on this legislation as it moves through the legislative process.

Sincerely,

Jean Ann Fox
Consumer Federation of America

Chi Chi Wu
National Consumer Law Center

Susanna Montezemolo
Consumers Union

Linda Sherry
Consumer Action

Susan Grant
National Consumers League

Remar Sutton
Privacy Rights Now