$224 Billion, 6.1 Billion Hours, Lost to Complex Tax Code According to New National Taxpayers Union Study

(Alexandria, VA) – Today, National Taxpayers Union (NTU) released its 16th annual study of tax complexity in the U.S. This year’s analysis found the economy lost $224 billion and 6.1 billion hours of productivity due to the burden of compliance with a complex and invasive tax code.

NTU Senior Counselor and study author David Keating said, “Our convoluted tax laws cost much more than the dollars collected.  It's time Congress and the President put a stop to the over $200 billion in wasted time and money spent figuring out our complicated tax laws."

NTU has published “A Taxing Trend: The Rise in Complexity, Forms, and Paperwork Burdens” to reveal the realities of tax complexity since 1999, highlighting historical trends in the compliance burden the IRS places on Americans. 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 about 3.05 million employees working 40-hour weeks year-round with just two weeks off; or more than the number of workers at three of the biggest retailers in the Fortune 500 - Walmart Stores, McDonald's, and Target - combined.
    • It is also four times more than the number of workers at the top four banks:  Bank of America Corp., Wells Fargo, Citigroup, and J.P. Morgan Chase & Co.
  • The total compliance cost is $224.3 billion a year. For individuals alone it is $90.3 billion.
  • Individuals spend a combined $31.7 billion a year on tax software and other out-of-pocket costs.
  • When calculated at the average hourly wage, the value of the labor involved in tax compliance is a jaw-dropping $192.6 billion.
  • The most recent Information Collection Budget published by OMB attributes 6.7 billion hours of paperwork burdens to the U.S. Treasury, most of it due to taxes. The Treasury accounted for 74 percent of the government-wide paperwork compliance burden all on its own; no other agency had a share above 6 percent.
  • The average taxpayer using the 1040 “long” form – which according to IRS projections amounts to two-thirds of all 1040 returns filed – spends 15 hours on tax compliance. That’s long enough to watch the entire Dark Knight Trilogy, Christopher Nolan’s three Batman movies – twice.
  • Out of pocket costs for individual taxpayers are expected to average $280. About 151 tall Starbucks coffees.
  • Most estimates put the length of the Tax Code at roughly 4 million words. This is seven times the length of Leo Tolstoy’s War and Peace; more than two times the length of the King James Bible plus the entire works of Shakespeare combined; or, for a more modern reference, well over twice the length of the five Song of Ice and Fire series books that inspired the TV show “Game of Thrones.”
  • Seventy-five years ago, the Form 1040 instructions were just two pages long. Today, taxpayers must wade through 206 pages of instructions, quadruple the number in 1985, the year before taxes were “simplified.”
  • Paid preparers and tax preparation software accounts for over 90 percent of returns – a telltale sign of tax complexity problems.

Keating concluded, “Too many Americans spent too long or too much figuring out their taxes, only to pray they got it right… Paying taxes in a civilized society should not be this hideously complicated.”

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 134, A Taxing Trend: The Rise in Complexity, Forms, and Paperwork Burdens, is available online and in PDF format.