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Taxpayer's Tab: Tax Complexity Costs $233.8 billion, 6.1 Billion Hours

by Demian Brady, Michael Tasselmyer, Timothy Howland / /

 

Yesterday, National Taxpayers Union Foundation (NTUF) released a new study of tax code complexity in the U.S., finding the economy lost $233.8 billion due to 6.1 billion hours (an estimated value of $202.1 billion) and $31.7 billion in out-of-pocket costs spent complying with a complex and invasive tax code.
 
Additionally, a new analysis of the Affordable Care Act’s (ACA’s) impact on complexity found 3,322 pages of legal guidance related to the ACA added to IRS.gov.  

“Americans face a rising tax complexity burden that essentially prevents anyone from being able to comply without assistance,” study author and NTUF Policy Analyst Michael Tasselmyer said. “This year’s study gives an indication of future challenges, revealing the additional complications the Affordable Care Act will add to the Tax Code and filing.”

 
 
NTUF’s report also highlights complexity issues related to the Foreign Account Tax Compliance Act (FATCA), heavier paperwork burdens, taxpayer service challenges, and identity theft.

NTUF’s policy paper is available at ntu.org/taxcomplexity. This year’s key findings include:

  • According to the IRS National Taxpayer Advocate, the total time burden of tax compliance totals an astounding 6.1 billion hours this year.
    • That is the equivalent of 152.5 million 40-hour workweeks. It would take 59,580 American workers working every week with no days off from age 18 until reaching the full Social Security retirement age of 67 to account for that much time.
  • The total compliance cost is $233.813 billion a year, including $31.72 billion spent on tax software and other out-of-pocket costs along with $202.093 billion in labor costs.
  • Taxpayers or professionals looking for legal guidance on the Affordable Care Act will have to wade through 3,322 pages of legal guidance posted on IRS.gov – including regulations (1,077), Treasury decisions (1,377), notices (669), revenue procedures (100), and revenue rulings (12).
  • The Treasury’s paperwork burden (most of it due to taxes) imposed on the public has grown from 6.4 billion hours to 7 billion hours over the period from fiscal year 2005 to 2013, never making up less than 74 percent of the burden imposed by all government agencies combined.
  • Paid preparers and tax preparation software account for 94 percent of returns. Meanwhile, the average retail fee per return for H&R Block has nearly tripled since 1980.
  • Last year, the IRS responded to over 50 percent of its correspondence outside of established timeframes. Nearly 4 out of every 10 taxpayers calling for assistance were unable to get through to an agent.

With Tax Day just around the corner, NTU Foundation’s latest study of tax complexity and its costs is a timely reminder that the current Tax Code needs to be reformed.
 
“The IRS has never had more power over America’s taxpayers, thanks to even greater cost and complexity added to the code by Obamacare and FATCA,” added Tasselmyer. “Without reform there is little reason to expect anything other than a rising time and financial burden, not to mention more invasion of privacy.”
 
For more, check out NTUF Policy Paper 176A Complex Problem: The Compliance Burdens of the Tax Code at ntu.org/taxcomplexity.

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National Taxpayers Union Foundation is a nonpartisan research and educational organization dedicated to helping Americans of all ages understand how taxes, government spending, and regulations affect them. Through our timely information, analysis, and commentary, we’re empowering citizens to engage in important policy debates and hold officials accountable.

Our findings are provided for educational purposes only and are not intended to aid or hinder the passage of legislation or as a comment on any Member’s or Candidate's fitness to serve. Photo Credits: Wiki Commons

 

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