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U.S. Tax System Imposes Billions in Lost Hours, Hundreds of Billions in Lost Dollars, Citizen Group’s Annual Study Shows
April 18, 2011
By Douglas Kellogg
(Alexandria, VA) – If time is money, then our complex tax system is already costing Americans plenty of both, and the price tag is about to get a lot worse. By the most recent estimates, the complexity of the Tax Code costs individual taxpayers $115.4 billion, thanks to the time burden and expenses of software, preparer fees, and other materials. The total time burden, including corporate filings, is 7.64 billion hours at a cost of $227.1 billion. These and other sobering results come from the 362,000-member National Taxpayers Union’s (NTU’s) 13th annual study of tax complexity.
“As the White House and Congress continue to debate how heavy the burden of paying taxes should be for Americans, they must pay more attention to how heavy the burden of filing taxes can be,” said NTU Senior Counselor and study author David Keating. “NTU’s Taxing Trend Report shows that complexity is at the root of many other problems surrounding our tax system, including the tremendous damage it has done to our economy and our civil liberties.”
NTU has conducted comprehensive examinations of Tax Code complexity since 1999, providing historical trends in the compliance burden the IRS places on Americans. NTU’s 2011 findings include:
Keating explained that a complicated Tax Code has a detrimental impact on the U.S.’s business position in the world as well. Our country places 66th worldwide (out of 183 countries surveyed) for hours spent on tax compliance by a typical smaller corporation, according to a 2011 study jointly published by PricewaterhouseCoopers and the World Bank Group. The U.S.’s rank for total tax rate was much worse – 124th out of 183, dropping another six places from 2010 and 32 places since 2009.
Moreover, Keating contended, tax complexity will soon get much more nettlesome for businesses and individuals, owing to several factors. The Alternative Minimum Tax, held at bay by temporary “patches” enacted by Congress, continues to threaten tens of millions of unsuspecting taxpayers with an entire second set of tax laws to worry about. Meanwhile, the temporary extension of the 2001 and 2003 income tax relief provisions – and a death tax structure that will change again in 2013 – are already causing tax-planning headaches. For these reasons, Keating noted, recent interest from Executive and Legislative Branch officials in revisiting the tax laws is especially important.
“Just as America is confronting a crisis from unsustainable entitlement programs, policymakers must face facts about the unsustainable Tax Code they’ve created,” Keating concluded. “For the sake of our future prosperity, competitiveness, and system of government, tax simplification is imperative.”
NTU is a nonpartisan, nonprofit citizen organization founded in 1969 to work for lower taxes, smaller government, and economic freedom at all levels. Note: NTU Policy Paper 128, A Taxing Trend: The Rise in Complexity, Forms, and Paperwork Burdens, is available online and in PDF format at www.ntu.org.