Post by Origanalist on Jul 24, 2016 8:36:17 GMT -8
June 15, 2016
By Scott A. Hodge
taxfoundation.org/article/compliance-costs-irs-regulations
Key Findings:
The growing complexity of the U.S. tax code has led to large compliance costs for households and businesses.
Using data from the Office of Information and Regulatory Affairs and the Bureau of Labor Statistics, it is possible to estimate the total cost of tax compliance on the U.S. economy.
Americans will spend more than 8.9 billion hours complying with IRS tax filing requirements in 2016.
All in all, tax compliance will cost the U.S. economy $409 billion this year.
Introduction;
There are many reasons to reform the U.S. tax code. The United States has a high marginal corporate tax rate, a poorly defined tax base, and an out-of-date international tax system. However, one often overlooked issue in tax reform is complexity. For decades, the tax code has become more and more detailed, with thousands of additional pages of statutes, regulations, and case law. This added complexity imposes a real cost on the U.S. economy. Tackling the cost of tax complexity to our nation’s economy should be a priority for lawmakers.
The Expanding Size of the Tax Code
Over the last century, the federal tax code has expanded dramatically in size and scope. In 1955, the Internal Revenue Code stood at 409,000 words. Since then, it has grown to a total of 2.4 million words: almost six times as long as it was in 1955 and almost twice as long as in 1985.
However, the tax statutes passed by Congress are only the tip of the iceberg when it comes to tax complexity. There are roughly 7.7 million words of tax regulations, promulgated by the IRS over the last century, which clarify how the U.S. tax statutes work in practice. On top of that, there are almost 60,000 pages of tax-related case law, which are indispensable for accountants and tax lawyers trying to figure out how much their clients actually owe.
It Takes America 8.9 Billion Hours to Comply with IRS Paperwork.
Tax complexity creates real costs for American households and businesses, starting with just the time it takes us to comply with the tax code.
According to the latest estimates from the Office of Information and Regulatory Affairs, Americans will spend more than 8.9 billion hours complying with IRS tax filing requirements in 2016.[1] This is equal to nearly 4.3 million full-time workers doing nothing but tax return paperwork. The majority of the 8.9 billion hours will be spent complying with U.S. business (2.8 billion hours) and individual income (2.6 billion hours) tax returns (Table 1, below).
It wasn’t long ago that official estimates put the annual IRS paperwork burden at 6.1 billion hours.[2] However, the IRS recently revised its estimate of the hours required to comply with business tax returns from 363 million to 2.8 billion,[3] which increased the total time estimate by nearly 50 percent.
The Tax Complexity Will Cost the U.S. Economy $409 Billion This Year.
The time it takes to comply with the tax code imposes a real cost on the economy. Individuals and businesses need to devote resources to complying with the tax code instead of doing other productive activities. For example, a business owner who needs to file a complex tax return each year may hire an accountant or tax lawyer to do it. This tax professional may cost $70,000 a year or more. This is $70,000 that this business owner cannot devote to purchasing equipment or hiring workers. Economists refer to this as an opportunity cost, and it results in lost productivity.
Put in dollar terms, the 8.9 billion hours needed to comply with the tax code computes to $409 billion each year in lost productivity, or greater than the gross product of 36 states (Table 1).[4]
continued... taxfoundation.org/article/compliance-costs-irs-regulations
By Scott A. Hodge
taxfoundation.org/article/compliance-costs-irs-regulations
Key Findings:
The growing complexity of the U.S. tax code has led to large compliance costs for households and businesses.
Using data from the Office of Information and Regulatory Affairs and the Bureau of Labor Statistics, it is possible to estimate the total cost of tax compliance on the U.S. economy.
Americans will spend more than 8.9 billion hours complying with IRS tax filing requirements in 2016.
All in all, tax compliance will cost the U.S. economy $409 billion this year.
Introduction;
There are many reasons to reform the U.S. tax code. The United States has a high marginal corporate tax rate, a poorly defined tax base, and an out-of-date international tax system. However, one often overlooked issue in tax reform is complexity. For decades, the tax code has become more and more detailed, with thousands of additional pages of statutes, regulations, and case law. This added complexity imposes a real cost on the U.S. economy. Tackling the cost of tax complexity to our nation’s economy should be a priority for lawmakers.
The Expanding Size of the Tax Code
Over the last century, the federal tax code has expanded dramatically in size and scope. In 1955, the Internal Revenue Code stood at 409,000 words. Since then, it has grown to a total of 2.4 million words: almost six times as long as it was in 1955 and almost twice as long as in 1985.
However, the tax statutes passed by Congress are only the tip of the iceberg when it comes to tax complexity. There are roughly 7.7 million words of tax regulations, promulgated by the IRS over the last century, which clarify how the U.S. tax statutes work in practice. On top of that, there are almost 60,000 pages of tax-related case law, which are indispensable for accountants and tax lawyers trying to figure out how much their clients actually owe.
It Takes America 8.9 Billion Hours to Comply with IRS Paperwork.
Tax complexity creates real costs for American households and businesses, starting with just the time it takes us to comply with the tax code.
According to the latest estimates from the Office of Information and Regulatory Affairs, Americans will spend more than 8.9 billion hours complying with IRS tax filing requirements in 2016.[1] This is equal to nearly 4.3 million full-time workers doing nothing but tax return paperwork. The majority of the 8.9 billion hours will be spent complying with U.S. business (2.8 billion hours) and individual income (2.6 billion hours) tax returns (Table 1, below).
It wasn’t long ago that official estimates put the annual IRS paperwork burden at 6.1 billion hours.[2] However, the IRS recently revised its estimate of the hours required to comply with business tax returns from 363 million to 2.8 billion,[3] which increased the total time estimate by nearly 50 percent.
The Tax Complexity Will Cost the U.S. Economy $409 Billion This Year.
The time it takes to comply with the tax code imposes a real cost on the economy. Individuals and businesses need to devote resources to complying with the tax code instead of doing other productive activities. For example, a business owner who needs to file a complex tax return each year may hire an accountant or tax lawyer to do it. This tax professional may cost $70,000 a year or more. This is $70,000 that this business owner cannot devote to purchasing equipment or hiring workers. Economists refer to this as an opportunity cost, and it results in lost productivity.
Put in dollar terms, the 8.9 billion hours needed to comply with the tax code computes to $409 billion each year in lost productivity, or greater than the gross product of 36 states (Table 1).[4]
continued... taxfoundation.org/article/compliance-costs-irs-regulations
