National Taxpayers Union Study Exposes $241 Billion, 6.7 Billion Hours Lost to Complex Tax Code


(Alexandria, VA) -- Today, National Taxpayers Union (NTU) released its 15th annual study of tax complexity in the U.S., revealing that the tax code now costs the economy a startling $240.8 billion thanks to billions of hours of labor and other expenses lost to a growing and ever-invasive Tax Code.

A Taxing Trend: The Rise in Complexity, Forms, and Paperwork Burdens” reveals a startling increase in the cost of tax complexity to the economy of more than $10 billion from the prior two years. Individual filers now shoulder a $116.8 billion dollar burden.

“Washington’s continued wrangling over taxes has done nothing to corral an out-of-control Tax Code that makes the act of filing taxes more painful every year,” said NTU Senior Counselor and study author David Keating.  “The record cost of tax complexity  is especially worrisome since so many additional provisions in the Affordable Care Act are still to be implemented.”

NTU has conducted comprehensive examinations of Tax Code complexity since 1999, highlighting historical trends in the compliance burden the IRS places on Americans. This year’s key findings include:

  • The total paperwork time burden imposed by the Treasury – almost all of it due to tax compliance – totals an astounding 6.7 billion hoursfor the most recent year available. That is the equivalent of about 3.35 million employees working 40-hour weeks year-round with just two weeks off.
    • It is also more than the number of workers at the four biggest retailers in the Fortune 500 – Wal-Mart Stores, McDonald’s, Target, and Kroger – combined.
    • More than double the number of elementary school teachers and ten times the number of mail carriers.
  • Individuals spend a combined $34.1 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 6.7 billion hours is a jaw-dropping $206.6 billion. The total compliance cost is $240.8 billion a year; for individuals alone it is $116.8 billion.
  • The most recently published Tax Code had 3,951,104 words, an increase of more than 112,000 words from February 2010. This is seven times the length of Leo Tolstoy’s War and Peace. Or, more than two times the length of the King James Bible and the entire works of Shakespeare combined (3,345,402 words).
  • To help provide additional detail, there are 20 volumes of regulations spanning 14,000 pages with 10.48 million words. The law and regulations top 14.4 million words in all.
  • Seventy-five years ago, the Form 1040 instructions were just two pages long. Today, taxpayers must wade through 214 pages of instructions; quadruple the number in 1985, the year before taxes were “simplified.”
  • Paid preparers and tax preparation software accounts for 90 percent of returns – a telltale sign of tax complexity problems.

This year’s “Taxing Trend” study’s revelation of another spike in the economic cost of the Tax Code is particularly notable. More will likely be on the way. As a review of the list of Affordable Care Act tax provisions reveals, the worst is yet to come. Other recent tax changes like The Foreign Account Tax Compliance Act are certainly not helping, causing headaches for “expat” workers’ and retirees’ banks.

Keating concluded, “Tax complexity is already the IRS Taxpayer Advocate’s top concern, and 2013 threatens to exacerbate the problem. How much more will it take for Congress to fix this crisis?”

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