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Amount & complexity of taxes vexes Americans

Americans are filing their taxes today, but “Tax Freedom Day” won’t occur until April 24, one day later than last year, according to the Tax Foundation.

“Tax Freedom Day® is the day when the nation as a whole has earned enough money to pay off its total tax bill for the year. Tax Freedom Day provides Americans with an easy way to gauge the overall tax take-a task that can otherwise be daunting due to the multiplicity of taxes at various levels of government and “hidden” taxes and fees that are often buried in the cost of living. Tax Freedom Day computed by dividing total tax collections by the nation’s income, as reported by the Bureau of Economic Analysis. Every dollar that is officially called income by the government is counted, and every payment that is officially considered a tax is counted. The resulting percentage is then converted into days of a 365-day calendar year.”

It’s not only the amount of taxes that vexes Americans; it’s the complexity of the tax system.

The National Taxpayers Union Foundation  (NTUF) has released a new annual study of tax code complexity in the U.S., “finding the economy lost $233.8 billion due to 6.1 billion hours of lost productivity (an estimated value of $202.1 billion) and $31.7 billion in out-of-pocket costs spent complying with a complex and invasive tax code.”

‘Americans face a rising tax complexity burden that essentially prevents anyone from being able to comply without assistance,’ Study author and NTUF Policy Analyst Michael Tasselmyer said. ‘This year’s study gives an indication of future challenges, revealing the additional complications the Affordable Care Act will add to the Tax Code and filing.’
“Additionally, a new analysis of the Affordable Care Act’s (ACA’s) impact on complexity found 3,322 pages of legal guidance related to the ACA added to IRS.gov – this overlaps partially with 1,865 pages of new ACA regulations.

“NTUF’s report also highlights complexity issues related to the Foreign Account Tax Compliance Act (FATCA), heavier paperwork burdens, taxpayer service challenges, and identity theft.

This year’s key findings include:

  • According to the IRS National Taxpayer Advocate, the total time burden of tax compliance totals an astounding 1 billion hoursthis year.
    • That is the equivalent of 152.5 million 40-hour workweeks. It would take 59,580 American workers working every week with no days off from age 18 until reaching the full Social Security retirement age of 67, to account for that much time.
    • Or, enough time for the Voyager spacecraft to fly to the nearest star (Proxima Centauri) and back four times!

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  • The total compliance cost is $233.813 billiona year. More than the GDP of Ireland, Portugal, or Pakistan.
    • Of this, individuals spend a combined $31.72 billiona 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 $202.093 billion.
  • NTUF found a staggering 3,322 pagesof legal guidancefor the Affordable Care Act added to IRS.gov – including regulations (1,077), Treasury decisions (1,377), notices (669), revenue procedures (100), and revenue rulings (12).
  • The Treasury’s paperwork burden (most of it due to taxes) imposed on the public has grown from 6.4 billion hours to 7 billion hours over the period from fiscal year 2005 to 2013, never making up less than 74 percent of the burden imposed by all government agencies combined.
  • With paid preparers and tax preparation software accounting for 94 percent of returns, it is nearly impossible for any taxpayer to file without assistance.Meanwhile, the average retail fee per return for H&R Block rose to a high of $215. 
  • Most estimates put the length of the Tax Code at roughly 4 million words. This is seven timesthe length of Leo Tolstoy’s War and Peace; more than two times the length of the King James Bible plus the entire works of Shakespearecombined; or, for a more modern reference, well over twice the length of the five Song of Ice and Fireseries books that inspired the TV show “Game of Thrones.”
  • Over 75 years ago, the Form 1040 instructions were just two pages Today, taxpayers must wade through 209 pages of instructions, quadruple the number in 1985, the year before taxes were “simplified.”

“Between 2009 and 2011 the cost of tax complexity spiked from under $150 billion per year to well over $200 billion per year. It has not fallen below that threshold since, and 2015’s estimates are nearly $10 billion higher than last year, showing complexity costs are back on the rise.

‘The IRS has never had more power over America’s taxpayers, thanks to even greater cost and complexity added to the code by Obamacare and FATCA,’ added Tasselmyer. ‘Without reform there is little reason to expect anything other than a rising time and financial burden, not to mention more invasion of privacy.”