The costs to individuals and companies of complying with federal tax requirements are staggering.

• Americans spend over five billion hours each year on income taxes alone -- equivalent to more than 2 million workers spending their entire work year on tax forms.

• Complying with the federal tax system will cost Americans about $225 billion this year -- $157 billion of that for income taxes, or $1,200 per taxpayer.

• That amount is equivalent to destroying every vehicle built by the Ford Motor Company last year plus every third vehicle made by Chrysler, according to the Tax Foundation.

Two-thirds of compliance costs are borne by business, with small businesses getting hit the hardest.

• Firms with less than $1 million in assets bear a cost burden 27 times greater than firms with more than $10 billion in assets.

• On average, small firms pay $724 in compliance costs for every $100 they pay in federal income tax.

• The ratio is driven up by many small firms that have no taxable income, but which are forced to keep records and fill out forms anyway.

The Tax Foundation compared savings in compliance costs among the three major income tax reform proposals being discussed currently: the flat tax, the USA Tax system and the national sales tax.

• Under a flat tax, compliance costs would drop 94 percent -- to only $9.4 billion.

• Under the USA Tax, compliance costs would drop 77 percent -- to $36 billion.

• And under a national sales tax, costs decrease 95 percent, or $8.2 billion; however, the compliance burden would shift to retail and service firms.

There would be abundant benefits from simplifying the tax code, not the least of which would be removing the burden of crushing compliance costs which are sapping the economy.

Source: Perspective, "The Costs of Compliance," Investor's Business Daily, May 1, 1996.