Trump Highlights Tax Code Complexity, Cites NTUF Research

As Congressional leaders and administration officials work out the fine print of tax reform, President Trump has been making the case to the public on the necessity of fixing our broken tax code. In a speech on Wednesday in North Dakota, Trump said that our tax code has grown “ridiculously complex.” Whether tax filers discover they will get a refund for overpayment of taxes, or end up owing more on April 15, the very act of filing taxes imposes a burden of time and money. And in the thirty years since the last comprehensive tax reform, these costs have steadily increased; costs to the economy reached over $262 billion last year alone. The President cited several figures from National Taxpayers Union Foundation’s study on the state of our tax system to show how taxpayers are negatively impacted by the code itself:

  • President Trump noted that “the average taxpayer has to wade through 241 pages of instructions to file a basic tax form.” The size of the Form 1040 instruction booklet has more than quadrupled since 1985, the year before tax reform was enacted. Many middle-class filers use the regular 1040, the completion of which requires an average of 15 hours on preparation and submission time, along with out-of-pocket expenses of $280.
  • Increasingly, taxpayers need help filing their taxes. The Taxpayer Advocate estimates that 56 percent of forms were submitted with the help of a paid preparer, and another 40 percent of filers used tax preparation software. It’s not just the instructions that grow longer, but also the underlying laws and regulations. The complexity of the system – as well as fear of making and error and triggering an audit notice – compels filers to seek out tax preparation assistance.

  • Every year taxpayers spend over 6 billion hours complying with the tax code. This figure includes time required for record keeping and retrieval, calculating figures for the form and schedules, seeking guidance or tax preparation assistance, and submitting the files to the IRS. The tally does not include all tax forms, nor does it take into account time taxpayers spend responding to post-filing notices, examinations, or collection actions. The overall compliance burden of the tax code, plus the out-of-pocket expenses on tax preparation, represents a net drain in productivity that costs the economy more than $262 billion.

Taxes shouldn’t be this hard. The President correctly stated that we have an historic opportunity to fix the tax code. The goal of the current effort should not only be to reduce the tax burden, but to cut down the billions of hours spent complying with the code, so that Americans can spend their time – and money – on more fruitful purposes.