That $3 Checkbox

When you file your income tax return, there is a box that taxpayers can “check off” to send $3 of their taxes to the Presidential Election Campaign Fund. This Fund provides funds to candidates to help finance presidential campaigns. When initiated in 1981, 28.6% of taxpayers made the designation. In recent years, this has dropped to 9.1%.

There are various theories discussed for why the participation has dropped. One theory is that the computer/electronic tax preparation software discourages taxpayers from participating, based on default assumptions of “no participation” and inadequate descriptions. According to this theory, the explosion of use of this software has accelerated the decline.

Working with Commisioners of the Federal Election Commission, the Campaign Finance Institute has been able to bring the purported problem to the attention of the tax preparation software producers and tax preparers. In response, two of the major software producers have now agreed to modify their software.

H &R Block has agreed -- in all of its TaxCut boxed software and online products -- to:

--Change “I want to contribute $3” to “I want to designate $3” to the Presidential Fund (This is followed by the caution “Checking the box will not change your tax or reduce your refund,” a key Form 1040 phrase that the company added last year at CFI’s request); and

--Add to its explanation of the Fund the following Form 1040 language: “The fund reduces candidates’ dependence on large contributions from individuals and groups and places candidates on an equal footing in the general election.”

Intuit agreed -- for all versions of consumer TurboTax -- to:

--Eliminate the pre-filled in “No” check box;

--Change “Do you want $3 to be contributed” to substitute “designated” for the last word (The caution remains, “Note: Selecting Yes will not increase your tax due or reduce your refund”) ; and

--Amplify its current explanation of the Fund to include the missing 1040 phrase, “and places candidates on an equal footing in the general election.”

All of the changes will go into effect in consumer product and web updates for Tax Year 2005.

It will be interesting to see if this reverses the slide in taxpayer participation, or whether the decline arises for other reasons (including the reduction in the number of tax filers that actually owe tax and intentional decisions not to participate in public finance of elections).