In an effort to bring government services into the 21st Century, the federal government and many state governments – including initiatives in California and Montana – have embraced the Internet as a way to better serve their citizens.

For those who like the idea of renewing your fishing license at 3 a.m. while dressed in your bathrobe, these new “e-government” initiatives hold great promise. But if you dig a little deeper, some of the proposals raise such frightening privacy and security concerns that make long lines at the DMV look positively inviting by comparison.

The centerpiece of many e-government proposals is online tax preparation. Without a doubt, the most complicated, and occasionally painful, interaction that most citizens have with their government comes this time every year.


Around tax season, the websites of the IRS and state taxing authorities are swamped with users downloading forms, instructions, and seeking tax tips. So it makes some sense that governments would want to go the next step and give users the ability to prepare and file their taxes online.

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Unfortunately, whenever governments have tried to take logical steps, they all too often step into something unsavory. And in this case, what gets trod upon is the privacy of taxpayers and the integrity of the tax process.

The root of the problem is simple: government has an abysmal record of protecting the privacy and security of personal information.

On the state level, we see almost monthly reports of data breaches, misplaced laptops, surplus filing cabinets being sold while still stuffed with confidential files, and other privacy missteps. As if those accidental problems weren’t bad enough, a few years ago it was discovered that several states were actually selling their databases full of citizens’ driver’s license photos to private firms.

In case you thought Washington, D.C. was more on-the-ball than your state capitol, a report from investigators at the IRS issued just last month discovered that more than 500 laptops – an unknown number of which contained sensitive taxpayer information – have gone missing from IRS employees over the last several years.

Data mishandling is in no way a new problem for the IRS; a February 2001 report by the government’s General Accounting Office found security problems at the IRS that were so severe, investigators were able to easily access not only online tax records, but were even able to access tax data on people who had filed paper returns the old fashioned way.

The problems aren’t confined to the IRS, and the lessons predate the 21st Century. Back in 1997, the Social Security Administration tried to make Personal Earnings and Benefit Estimate Statements available to citizens via the Internet. But it was only a matter of hours before strangers were able to access salary history and other private financial information of others and the service had to be shut down.