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How To Open Up The Floodgates

The IRS, you see, is holding hearings today [April 4] on some rule changes, one of which will have the effect of making it much easier for the rest of the world to gain access to what has to be the Holy Grail for marketing--and identity theft.

The IRS wants to update rules surrounding the disclosure and use of taxpayer data that were written for a paper-based world. Some of the proposed changes will require consumer consent where none was previously required, applauds the PRC. But its jaw dropped over one small change, which the IRS characterizes as a way to provide taxpayers with a "meaningful opportunity to consent to the use and disclosure of their tax return information."

In contrast, the PRC describes that same proposal to remove restrictions on who taxpayer data can be shared with as "opening the door for far more insidious privacy invasions."

I have to agree. There's a lot of danger here: Think back to ChoicePoint's lack of oversight on who was buying its data--your data. Plus I can't see how broadening the pool of people who could gain access to tax data translates into providing taxpayers with any meaningful opportunity to control or "direct" their data. The opposite seems more likely to ensue.

Preparers will still need your permission to sell or share your tax data, of course, though I can't think of one sane reason to grant it.

Privacy rights groups, including the PRC, the Consumer Federation, the Consumer Law Center, and the Electronic Privacy Information Center, have already thought of one, however, and they're worried. One of their concerns, expressed to the IRS, is that large tax preparers will offer customers who agree to let their data be sold or otherwise given to other parties an attractive discount on tax preparation services. One fear is that this will have the technical effect of punishing consumers who decline to share what's possibly the most revealing document they'll ever fill out. Another has smaller tax preparation companies being pushed out of business.

Consumers obviously have a right to trade their data for a cheaper rate. But the privacy groups want to make certain that the implications of such a decision are fully understood. They want to make sure consent documents are clear, as opposed to what typically passes for privacy policies today. And that's not a bad thing. Because even with informed consumer consent, this sure looks like a Pandora's box just waiting to be opened. As the PRC said in a letter to the IRS, "Informed consent cannot be realistically obtained for all the potential use if tax preparers are allowed to disclose information to 'any person.' "

And yet the IRS, oddly enough, seems to see a link between protecting consumer privacy and its proposal to allow broader (yawning, really) access to consumer tax data.

I suppose it could be worse. The IRS could just dispense entirely with the need to get taxpayer permission at all. To quote Will Rogers, we'd best be "thankful we're not getting all the government we're paying for."

Would you be willing to open up access to your personal tax data for dissemination to anyone in return for a discounted tax preparation service? You can let us know by responding to this blog post.

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