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Preparer regulation: a lesson on barriers to entry

October 01, 2009

Why would an industry support increased regulation? To suppress competition, of course. The summary of speakers at yesterday's Chicago forum on tax preparation in today's Tax Analysts online edition is revealing:

The big franchises will run their trainees through a cookie-cutter course geared to the IRS test, and perhaps even be allowed to test their own employees. After all, we can trust franchised return preparers to adhere to the highest standards.

Meanwhile, independent would-be preparers will have to study themselves and take any required tests at the always user-friendly times and places designated by the IRS. The net result is a barrier to entry to competitors for H&R Block and Jackson Hewitt, allowing them to get more business and raise their prices.

Will the public get a better value for the higher prices? I'm guessing that "increased prices" motivates the big franchises more than "better product."