Foundation

It's Tax-plicated: Complexity Rising with Obamacare Burden

by Douglas Kellogg / /

This year’s new analysis of tax complexity from National Taxpayers Union Foundation (NTUF) found some startling lead figures: a $234 billion cost to the economy due to 6.1 billion lost hours of productivity and $32 billion spent out-of-pocket to comply with America’s insanely complicated tax system.

As always, there is much more to the story.

Since 2010, tax complexity costs have remained sky-high, at well over $200 billion each year. From fiscal year 2005 to 2013, the Treasury's paperwork burden rose from 6.4 billion hours to 7 billion hours never making up less than 74 percent of the burden imposed by all government agencies combined.

While last year’s (covering 2013) totals actually trended downward compared to the previous year (2012), there was little reason to believe that was the beginning of a trend toward continued relief.

In fact, given the burdens that Obamacare was/and is continuing to add, and to a lesser extent those from the Foreign Account Tax Compliance Act (FATCA), there was good reason to think last year was an anomaly.

NTUF’s latest study clearly shows that to be the case, as the cost of complexity has spiked upward since last year’s analysis by nearly $10 billion.

What does that mean for the future?

Looking deeper at NTUF’s research, there is one big reason to think this could be the beginning of a trend in the wrong direction: 3,322 pages of legal guidance for Obamacare (or the ACA) added to IRS.gov (1,077 pages of regulations, 1,377 pages of Treasury decisions, 669 notices, 100 revenue procedures, and 12 revenue rulings).

Essentially, Obamacare is coming home to roost.

So far, while it certainly contributed to rising complexity over the last tax year, Obamacare has not drastically increased costs under NTUF’s metrics.

Yet, it is inflicting new burdens on taxpayers, and this is bound to increase the burdens of tax complexity more than what has already been observed.

Also alarming, recent polls have shown respondents are wary of tax complexity but not nearly as much as they should be. So, while nobody can file taxes without help because the code is so complex (with 94% of returns filed with assistance), the prominence of tax software may be blinding many to the problems with the tax code.

Ultimately, NTUF’s research paints a grim picture: a public not comprehending the full reality of tax complexity and the drag it places on the economy, combined with added regulations, laws, rules, and powers the IRS is still integrating – taxpayers wobbling under the weight of tax complexity may not like what the future brings.


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