I want to briefly discuss the wonders of free market competition. While the U.S. tax code and free market economics do not really go too well together, this is an exception.
Tens of millions of Americans have to suffer through tax time during this time of the year. Billions of man hours are wasted filling out tax forms. This doesn’t account for the huge expenses in time and money that companies have to go through just to abide by the law in providing the proper tax forms.
You can take your tax information to a professional for help, which will set you back a few hundred dollars or more if you have anything complicated such as investments, rental property, or a business. If you want to attempt to do it yourself, there is software that can help.
The biggest name in tax software is TurboTax. The biggest name in tax preparation help is H&R Block.
In 2015, TurboTax decided to shake things up a bit. The company changed its software from what it previously offered. For example, if you have investment capital gains and dividends, or if you have a rental property, you could previously have used TurboTax Basic and it worked for these things. You could upgrade to Deluxe or Premier for more help or more in-depth items.
This year, for the 2014 tax year, TurboTax Basic does not do much, unless you are just filling out a basic tax return with a W-2. If you have investments or rental properties, then you will have to get the Premier edition, which will probably run you around $75 or more. In the past, you could use the Basic for $20.
Needless to say, TurboTax has received a lot of complaints. If you look at the reviews on Amazon, it is mostly one and two star reviews. When you raise prices on loyal customers from about $20 to about $75, there is probably going to be a backlash. And to make it worse, some people bought the Basic edition or the Deluxe edition thinking it would do the same as last year.
I wonder what bureaucrats at Intuit (the owner of TurboTax) sat down and came up with this brilliant idea to raise more revenue. I can just imagine a bunch of senior executives dressed in suits sitting in a conference room scheming about this brilliant plan.
Who knows; maybe it will be a good move. Some people are paying the higher price, which is a lot higher. But I also know of people refusing to use TurboTax, not only because of the high price, but just out of principle because they see this as a sleazy tactic by the company.
Meanwhile, H&R Block, a competitor, is offering free software for this year only to certain TurboTax customers if they can show their receipt. This is a great marketing ploy by H&R Block to obtain new customers.
Even if Intuit increases revenue this year from TurboTax, what is to say that more customers won’t leave next year? Here is a company with a solid customer base and it just turned its back on its customers. Sure, they have apologized for “the confusion”, but there really is no confusion now. Customers are going elsewhere because they don’t want to be treated this way.
This is really the free market at work. It just shows that companies cannot just take their customers for granted. They can’t just raise prices like crazy and expect that the customers will take it.
If Intuit is wise, it will revert back to the old TurboTax editions from the 2013 tax year. It is too late this year, but we’ll see what happens next year. If not, I expect customers to continue to slip away and find other alternatives. In a relatively free market, the customer is king. The customers vote with their money and where to spend it. If a company doesn’t respect its customers, it won’t be around for too long, assuming it doesn’t get help from the government.