January 2, 2017 Print

Federal tax regulations in the United States are incomprehensibly complex, with the Internal Revenue Code now reaching 74,608 pages that contain 2.4 million words, as well as an additional 7.7 million words of regulatory clarification from the Internal Revenue Service (IRS). The annual cost of compliance has reached more than $1 trillion, reports the Tax Revolution Institute (TRI), an Atlas Network partner based in Washington, D.C.

“Using data from the Office of Information and Regulatory Affairs and U.S. Bureau of Labor Statistics, the Tax Foundation estimates that it will take Americans more than ‘8.9 billion hours’ per year to ensure compliance with Title 26 of the U.S. tax code and Federal Register,” writes Philip Schlosser, a tax policy analyst with TRI. “This is equivalent to 4.3 million Americans doing nothing other than working on tax compliance for the entire year in 2016.”

Those compliance costs alone amount to more than $400 billion dollars annually, “equivalent to the annual GDP of 36 states combined.” TRI notes that a study published by the Mercatus Center at George Mason University goes still further, estimating many other hidden costs of tax compliance, such as the opportunity costs and economic losses that result from the gross market distortions created by tax provisions and loopholes that cater to special-interest lobbying.

“Mercatus estimates that the hidden costs of tax compliance — the time and money spent on tax compliance coupled with the opportunity cost of foregone economic growth — hold a price tag of up to $987 billion per year,” Schlosser writes. “Since the Mercatus study was published, the Office of Information and Regulatory Affairs has updated its estimate for annual hours expended on tax compliance from 6.1 billion to 8.9 billion, which would almost certainly increase Mercatus’s estimates. For example, a static adjustment to accounting costs alone would already raise our top estimate from $987 billion to north of $1 trillion per year.”

Public opinion in the United States is overwhelmingly opposed to the federal tax status quo, with polls showing anywhere from 72 percent to 82 percent of the public who maintain that the tax code is too complex, and may require a “complete overhaul.”

“Enough is enough; it’s time for a change,” Schlosser concludes.