Report: Tax Code Mushrooms to 3.8 Million Words, Costs Americans Billions

Tuesday, 19 Apr 2011 12:46 PM

By Martin Gould

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So much for simplifying the tax code — it has exploded to an astonishing 3.8 million words, a study released to coincide with the filing deadline Monday found. The result is that American taxpayers had to spend an estimated $431 billion just to comply with the code, according to the report from the Laffer Center.

Income tax code, IRS, billions, millionsThe figure includes the value of time taxpayers spent keeping records and filling out forms, the amount paid to professionals to do the work, and the cost of government bureaucracy needed to administer the code, says a report by the conservative policy site, The Foundry.

The complexity echoes even President Barack Obama's comment last week that the tax system is "kind of screwy."

Keeping up with changes to the code — there were 579 last year alone, that’s 11 every week — is a major part of the cost, the Foundry says.

In the Laffer Report, “The Economic Burden Caused by Tax Code Complexity,” the authors say taxpayers spent a total of 6.1 billion hours — worth an estimated $377.9 billion —preparing tax returns. A further $31.5 billon is spent on tax software and employing professionals to do the work, and $12.4 billion on IRS administration.

Another $9.3 billion is spent on government audits.

A simplified tax structure should be a national priority, as it would result in huge savings and could even increase per-capita earnings between $2,800 and $6,000, the report says.

“Reducing the annual compliance costs of our tax system provides an effective stimulus to our economy that recurs each and every year without the need for federal government spending,” says the report. “The benefits from such a boost would be greater income and job growth for all Americans.”

Another survey that tax publisher CCH did found that the number of pages in federal tax rules has skyrocketed 79 percent during the past 16 years — from 40,500 in 1995 to 72,536 now. A century ago, it stood at a mere 400 pages.


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