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Another Tax Day Gone...


Douglas Kellogg
April 17, 2014

“Man is a creature that can get used to anything.”

That’s Dostoyevsky, though he’s not the only person to express that sentiment.

After another tax season, as the federal government vacuums up record revenues while the economy sputters, that seems to be the appropriate theme. Though one might add, “especially if he cannot see or understand it.”

Last year I wrote on a few topics related to Tax Day and NTU’s study of tax complexity: A Taxing Trend. Unfortunately, from the challenges faced by overseas taxpayers, and the spike in the cost of tax complexity in the ‘10s, to the IRS tracking of your digital footprint, nothing has really changed.

There are more stories about the IRS’ monitoring of social media presences, overseas taxpayers still have to deal with FATCA, and we still lost north of $200 billion to tax complexity.

Though for the cost of tax complexity, that is quite noteworthy… This year the hour cost of tax complexity seems to have come down a bit, and, while that has brought the dollar cost down ever so slightly, that second figure has not come down much.

In fact, it is still in the stratosphere at $224 billion this past year. The charts illustrate how the dollar cost of tax complexity is, at best, very slow to react to the hour burden - and with more Obamacare measures still being implemented the dip may be short-lived.

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The story is a familiar one as our tax code remains a huge burden, and the agency enforcing it looks for more ways to track your every move, but perhaps it’s not that much of a problem?

It might seem anathema to consider such a question, yet, the Associated Press asked whether filing taxes was truly difficult in a recent poll, headline: “Most Americans Say Filing Taxes Easy.”

How could something that is costing the economy 6.1 billion hours be “easy”? How could it take the average taxpayer 15 hours and $280 out of pocket to get it done? Maybe we just aren’t that bright.

Well the AP found that 58 percent of respondents thought filing a tax return was easy. Sad to say, that relief you’re feeling will be short lived.

The poll’s other findings undermine their own lead finding. First of all, they peg the number of taxpayers using assistance of some type (from Turbo Tax to an accountant) at 91 percent!

That’s right, practically everyone gets help with their taxes, and then claims filing them is “easy.” Something is amiss…

This is like saying changing your oil is easy because you take your car to Jiffy Lube. By this logic I have no problem flying a plane, just look how many times I’ve flown on airplanes! One could go on and on.

AP also needles simplicity by asking: “Would you be willing to pay more in federal taxes if the process of filling out a tax return were easier, or not?”

Of course only 7 percent of respondents said yes. It is very disappointing this loaded question was asked, as if paying more is somehow a feature of simplifying the tax code.

Maybe if they had told them how much they are losing just due to tax complexity those polled would have had some math to do.

This poll does show that the convenience tax filing products have brought to the table is now obscuring the true pain of complying with the tax code for almost everyone. We are all glad to have this arduous process made easier on us, but when you combine this situation with the real cost of tax complexity as shown by A Taxing Trend, you have the worst possible situation: A complex tax code that costs our economy billions, and remains hidden from view.

Similar to how automatic withholding and deficit spending can obfuscate what you pay in taxes, when everyone has help filing their taxes, the inefficiencies and burdens of the system are not clear to individuals.


 

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