NCPA - National Center for Policy Analysis


May 10, 2005

Tax reform is motivated by many factors, including the fact that the tax code is too complicated and compliance is too costly.

According to the Economist magazine:

  • The Treasury Department estimates the total annual cost of complying with the income tax at about $125 billion.
  • The average American taxpayer spends 27.4 hours to file his or her taxes.

However, this information may be dated. The latest rigorous survey of tax filings occurred almost 20 years ago -- before the computer and the major tax simplification of 1986. The Economist also notes that the length of a tax code may not suggest complexity. When the Australian government tried to translate its tax rules into plain English it discovered the five lines of code could decompress into as many as five pages of comprehensible prose.

The Economist also suggests that it might be easier to cheat the Internal Revenue Service than you think:

  • Its staff numbers actually fell by 15 percent between 1993 and 2001.
  • According to the Organization for Economic Cooperation and Development (OECD), the IRS has only enough auditors to check the books of each American business for one day every 10 or 11 years.
  • For every $100 it raises in net tax revenue, the IRS spends just 52 cents; its French counterpart spends $1.44.

Source: "The burden of complexity," Economist, April 14, 2005.

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