The Death of Direct File

Tech for good not welcome in the Trump administration

One of the most most tangible federal government innovations of recent years was Direct File, the long-sought effort to allow taxpayers a free and user-friendly means to report their taxes. The fate of Direct File had hung in the balance, but AP reports that sometime last month the Direct File team were told to expect layoffs and not to work on a version of the product for the next tax season. It appears that Direct File is dead.

Image from: Common Dreams

Even if you never used Direct File, you should mourn its loss. It’s showed that good government tech and tech for good are compatible goals. Government can build high quality tech tools internally, better and more cheaply than if the project was farmed out to a private vendor.

But the Trump administration is not serious about using technology to make services work better. Instead they will kill low-cost and high-value tech innovations within government, deliberately making services worse and more expensive. DOGE is in the business of enabling private sector wealth extraction from the poor, and destroying public sector value creation.

The death of Direct File is also a testament to the power of rent-seeking, as the private tax preparation industry’s years of lobbying to kill a public option paid off.

Destroying Public Value

Scholars sometimes use the term “public value” to get at the idea that public organizations deliver meaningful results even if those are results are not profits. It is often hard to measure public value, but Direct File offered some compelling benchmarks.

• Once Direct File reached its full stride, it was estimated to save about $11 billion per year for taxpayers (an average of $160 per user) and help unlock about $12 billion in government benefits that those taxpayers were eligible for.

• The Direct File cost was relatively small, about about $32 million to get it going. This is peanuts compared to the billions that are often wasted on government tech projects that deliver little. One analysis found that it delivered about $106 in value for every dollar invested.

• Users loved Direct File. In 2024, 86% of users said it increased their trust in IRS, not the most beloved of organizations. The Direct File “net promoter score” (a measure of customer satisfaction and loyalty) is 84, well above that of TurboTax, and even Apple. In user surveys conducted by Code for America, 94% prefer Direct File and state equivalents to their previous filing method and 84% said they were “very satisfiedˮwith another 14% being “satisfied” with the product.

• Direct File expanded the tax filing pool. Over time, the federal government has shifted more and more of the safety net to the tax system, primarily via the Child Tax Credit and the Earned Income Tax Credit. One problem is that people with very low incomes are not obliged to file, even when it’s in their interest to do so. By being truly free, Direct File captured some of those people. About 1 in 4 of Direct File users were non-filers the previous year, a much higher rate than any other filing alternative.

Direct File created real public value, and was on a pathway to delivering much more. That value has now been destroyed. While Treasury Secretary Scott Bessent says that “customer service” is part of the calculation for deciding whether to retain Direct File, it’s hard to square that with removing a choice that customers adored.

Why Direct File Worked

Remember the Obamacare website? A huge technical product released all at once, built around multiple layered contracts with different vendors. It collapsed upon release. One of the key lessons for government was a) it needed to create internal capacity to build technology, and manage contracts, which led to the creation of the US Digital Service and 18F, and b) it needed to follow best practice when it came to digital tools.

Best practice included user-centered design, which meant obsessively observing and engaging with digital product users to find out what worked and didn’t, and related, iterative and ongoing improvement processes, starting simple and small and using data to introduce fixes. For example, the biggest user request from last year’s Direct File pilot was the ability to import IRS data into their return to reduce the time spent entering information. The Direct File team enabled that this year, drawing positive responses from users. On BlueSky one user said: “Used it for 2 years. It's honestly a game-changer. Easy to use, they import your info for you. Took me 30min to do fed and state.”

Making such iterative improvements depended on the Direct File team having direct control of the product (rather than a vendor), and changing it to match what users needed rather than to extract as much money as possible from them (as the private tax prep industry is incentivized to do).

About 140,000 people used Direct File last year, and many more will have done this year. It was not built for everyone. It started with with 12 states last year, expanding to 25 states this year. It served people with relatively simple tax situations. One of the talking points against Direct File is that the majority of users who created an account did not use it. But this is not because the product does not work, but that it cannot currently serve people with more complex tax situations. But if given sufficient time, it could have become more sophisticated, and more broadly available.

Why We Can’t Have Nice Things

At an individual level, spare a thought for a some very smart and talented tech innovators, who for years passed on bigger paychecks and battled bureaucracies to show that government could use technology to make public services world class. I cannot imagine the wrenching disappointment they must feel. It does not matter how well their product worked, how much money it saved the public, how much users loved it. The government is now run by people who do not care about any of those things; who are, in fact, opposed to those values.

Merici Vinton, an architect of Direct File until she recently left IRS, lamented its apparent demise:

Direct File is a wildly successful government startup…All this—the in-house capacity to modernize the IRS, billions of dollars in cost savings, an empowered public—is what is cancelled today. But they have it exactly backwards. It’s a functional, high-quality government that’s efficient. The chaos they are sowing is anything but.

A key point is that this is not groundbreaking technology. Lots of other countries provide free digital tax reporting interfaces to their citizens. Free tax filing advocates assume that while citizens are obliged to pay their taxes they should not also pay to submit those taxes. Yes, America’s tax system is more complicated than other countries, but Direct File showed it could be done. On BlueSky, Waldo Jaquith, who had worked on Direct File said:

It was bad enough when there was no way to file your taxes with the IRS electronically. That was embarrassing for us, as a country. But to have created it *and then destroy it* is just destruction for the sake of destruction.

Someone else I communicated with who was involved with Direct File echoed the sense of wanton destruction:

I don’t think it should surprise anyone that the people gleefully taking a chainsaw to the functioning of the American state have killed off a young and still fragile program committed to the idea that government can be a force for good in people’s lives. Whether from malice or sheer incompetence, the administration has been handicapping and undermining this program since day one. Honestly I have been amazed every day that the Direct File team has managed to go on shipping and go on delivering a world-class product, even as the federal government was being destroyed all around them. But, ultimately, Direct File was a common sense, cost-effective, good-government program — and that’s exactly why it didn’t survive the Trump administration.

Direct File was a federal product. It did not provide state tax services, and the integration of state and federal tax reporting is a critical expectation for taxpayers. And so, Code for America, a civic tech nonprofit, has been helping states set up their version of free tax e-filing that piggybacked off Direct File. Their CEO, Amanda Renteria, warned about the damage that eliminating Direct File will do.

News of a plan to eliminate Direct File is especially hard for those closest to the work—people who understood its potential, saw its value, and knew just how much it represented a better way for government to serve. Getting rid of a program that actually worked—one that made tax filing simple, free, and accessible—is more than a step back. It risks further eroding public trust at a moment when we should be demonstrating that government can rise to meet people’s needs…Direct File helped hundreds of thousands of people access life-changing tax benefits, many for the first time. It showed what’s possible when we work together to build systems that are centered on people.

Who Killed Direct File? Attack on Civic Tech or Triumph of the Rent Seekers

It is too early to know who killed Direct File. DOGE-related staff cuts put it on life support. IRS was in chaos given the departure of almost the entire leadership team. It’s clear that Treasury Secretary Scott Bessent did not provide Direct File with a fair review, apparently deciding its fate even before data was back from this year’s tax season. The DOGE framework of cutting anything, regardless of its value, likely tilted his decision.

The fact that Direct File existed was an intolerable affront to the DOGEists that pretend to do what the Direct File technologists actually did. The federal government had a healthy and growing civic tech movement that worked thoughtfully and carefully to enable tech for good. DOGE has effectively eliminated that movement, starting with 18F and the US Digital Service, but also civic tech offices within agencies, such as the Office of Transformation within the Social Security Administration. The Defense Digital Service will soon disappear.

Musk and DOGE say the future of government will be AI, but have built nothing with the sophistication and complexity of Direct File which took years of patient work. They do not have some better alternative. You get the sense that they don’t want people who actually understand how tech intersects with government that can call them on their bullshit. A member of the Defense Digital Service said: “They’re not really using AI, they’re not really driving efficiency. What they’re doing is smashing everything”.

Meanwhile, Elon Musk is telling the skilled technologists and other government workers that they would provide more value working the mines even as his DOGE team destroys real public value.

We should also not discount the power of rent seekers. The private tax preparation industry has tried to kill Direct File since it was created, and for decades before.

There remains a “Free File” product that was created via a partnership between IRS and the private tax preparation industry. In reality the partnership was one-sided, designed to deliver a low-quality product that would not compete with the private tax preparers. When Intuit, the maker of TurboTax, failed to make the partnership permanent via statute, it exited, and has instead focused on blocking Direct File.

In the greater scheme of things, Direct File was not threatening Intuit or the overall tax preparation market. Instead, it offered a tool for the people that, in theory, the private tax industry agreed should be allowed to use a free service: lower income earners. But that was not enough. Any functional public option was intolerable. Any high-quality product that did not constantly upsell users had to be stopped.

Where do we go from here?

This is a dispiriting moment if you believe in good government, and especially the role of technology in making it better.

There are examples of where the Trump administration have backed down when faced with pushback, and it may be that the leak of the decision to kill Direct File was intended to test the waters. If that is the case, and even if it’s not, there is no reason not to make your voice heard. They took Direct File from you, from us. Even if you never used it, don’t you want to know that it exists and could help tens of millions?

At another level, I sometimes feel like the current moment is one where we are simply witnessing and recording administrative vandalism, while trying to protect what has value, like data, knowledge or successes. Direct File really was a success. I plan to write about it in more depth (if you worked on it, reach out to me). As Amanda Renteria, the Code for America CEO:

Now, our responsibility is to make sure Direct File’s lessons and its success aren’t lost. We must preserve the progress, build on what worked, and keep pushing for the change we know is possible.

The person I communicated with who was involved in Direct File echoed the need for us to record successes, and continue to look to the future. They said:

I take some solace in recognizing that, despite the careless actions of a few malicious people, no one can erase what Direct File accomplished. No longer can anyone argue that our broken filing system is anything other than a policy choice to needlessly immiserate everyday Americans. I have faith that one day, good-faith public servants will collect the pieces of what this project accomplished and pick up where we left off.

Another DirectFile worker writing on LinkedIn noted how the initiative could help others, speaking to the prosocial motivation that distinguishes civic tech from DOGE:

The Trump administration has decided to kill the Direct File program because “it’s not efficient.”…Taking care of lower income families, people with disabilities, children, widows, the elderly, is not inherently efficient. The question at hand is whether you believe the government has an imperative to care for its people. I joined the government because I wanted to help vulnerable people. It’s clear that my personal values are diverging from the IRS’s current tech priorities, so I have chosen to walk away.

Ask yourself, is America better off without skilled technologists who actually want government to work. Is that really our path to efficiency?