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Press Release
U.S. Tax System Imposes Billions in Lost Hours, Hundreds of Billions in Lost Dollars, Citizen Group’s Annual Study Shows
(Alexandria, VA) – If time is money, then our
complex tax system is already costing Americans plenty of both, and the price
tag is about to get a lot worse. By the most recent estimates, the complexity
of the Tax Code costs individual taxpayers $115.4 billion, thanks to the time
burden and expenses of software, preparer fees, and other materials. The total
time burden, including corporate filings, is 7.64 billion hours at a cost of $227.1
billion. These and other sobering results come from the 362,000-member National
Taxpayers Union’s (NTU’s) 13th annual study of tax complexity.
![complexityy](https://webarchive.library.unt.edu/web/20130102202913im_/http://www.ntu.org/assets/images/issue-brief/complex.jpg)
“As the White House and Congress continue to debate how
heavy the burden of paying taxes
should be for Americans, they must pay more attention to how heavy the burden
of filing taxes can be,” said NTU
Senior Counselor and study author David Keating. “NTU’s Taxing Trend Report
shows that complexity is at the root of many other problems surrounding our tax
system, including the tremendous damage it has done to our economy and our
civil liberties.”
NTU has conducted comprehensive
examinations of Tax Code complexity since 1999, providing historical trends in
the compliance burden the IRS places on Americans. NTU’s 2011 findings
include:
- Paperwork burdens
imposed by the Department of the Treasury, most of them attributable to personal
and business income tax forms, cost Americans 7.64 billion hours according to
the most recent available data, equating to about 3.82 million people working
full-time with two weeks’ vacation each year. This “unseen army” would, if it
were officially classified as an occupation, rank second-largest in the
country, right behind that of “retail salesperson” and is larger than the
workforces of IBM, McDonald’s, Target, Wal-Mart, and UPS combined!
- This gigantic amount of
time would add up to $227.1 billion, when measured against the Bureau of Labor
Statistics’ average hourly employer cost for civilian workers. When accounting
for the time component for individuals only, plus their costs for things like
postage, tax software, and tax preparers, the result is staggering: $115.4
billion for the non-corporate taxpaying population alone.
- The government’s most
current version of the Tax Code tops out at 3,837,105 words, an increase of
more than 52,000 words since NTU’s 2010 study. This does not include any of the
tax-law changes enacted through the health care legislation last year.
- The average compliance
time for those using any of the Form 1040 series is 19 hours, up from 17.3
hours last year. The average out-of-pocket cost for filing these forms is $250,
up 10 percent. Yet, the range of time and money involved with these forms can
vary dramatically. For example, small businesses using Form 1040 to declare
their profits face a time burden of 34 hours and a cost of $430. These are
minimums, since most firms spend much more than this on year-round tax
planning.
- The instruction book
alone for the 1040 “long” form continues to live up to its name, consisting of
179 pages (five more than last year’s publication). But the “short form” is no
slouch either: the 1040A instructions total 87 pages, more than the “long”
form’s entire booklet from 1995!
Keating explained that a complicated Tax Code has a detrimental
impact on the U.S.’s business position in the world as well. Our country places
66th worldwide (out of 183 countries surveyed) for hours spent on
tax compliance by a typical smaller corporation, according to a 2011 study
jointly published by PricewaterhouseCoopers and the World Bank Group. The
U.S.’s rank for total tax rate was much worse – 124th out of 183,
dropping another six places from 2010 and 32 places since 2009.
Moreover, Keating contended, tax complexity will soon get
much more nettlesome for businesses and individuals, owing to several factors.
The Alternative Minimum Tax, held at bay by temporary “patches” enacted by
Congress, continues to threaten tens of millions of unsuspecting taxpayers with
an entire second set of tax laws to worry about. Meanwhile, the temporary
extension of the 2001 and 2003 income tax relief provisions – and a death tax
structure that will change again in 2013 – are already causing tax-planning
headaches. For these reasons, Keating noted, recent interest from Executive and
Legislative Branch officials in revisiting the tax laws is especially
important.
“Just as America is confronting a crisis from
unsustainable entitlement programs, policymakers must face facts about the
unsustainable Tax Code they’ve created,” Keating concluded. “For the sake of
our future prosperity, competitiveness, and system of government, tax
simplification is imperative.”
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 128, A Taxing Trend: The Rise in Complexity, Forms, and
Paperwork Burdens, is available online and in PDF format at www.ntu.org.
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