NCPA - National Center for Policy Analysis

The Financial Burden of Compliance and Paperwork

February 4, 2013

Embedded in the Notice of Proposed Rule Making for every proposed executive agency rule that appears in the Federal Register is a formal cost-benefit analysis that includes the amount of labor hours the rule's implementation would require. Theoretically, the Office of Management and Budget (OMB) tracks the compliance cost of every new rule, but in reality, it only tracks the paperwork hours and tax compliance costs for significant rules, says Wayne Crews, vice president for policy and director of technology studies at the Competitive Enterprise Institute.

  • The OMB estimates that 8.783 billion hours were required to complete regulatory paperwork in 2010, a decrease from 2009.
  • A newer Information Collection Budget report that has yet to impact official calculations estimates that the public spent 9.14 billion hours in fiscal year 2011.
  • A conservative estimate of just $20 per hour by the OMB means compliance costs are nearly $182 billion per year. This may be low, however, as the Bureau of Labor Statistics cites hourly wages for compliance officers as about $30 an hour, accountants as $33 an hour and human resources professionals as $52 per hour.

Estimates on the cost of complying with federal taxes vary widely but all amount to substantial figures. The Small Business Administration estimates a 2010 compliance cost of $159.6 billion and the Tax Foundation projected overall compliance costs of $368 billion in 2010. The Government Accountability Office says that compliance costs are at a minimum $300 billion.

  • The Treasury Department is responsible for an estimated 73 percent of the total paperwork burden, yet is not accounted for in the OMB'S annual Cost and Benefits report, which supposedly records all regulatory compliance costs.
  • Other agencies are not accounted for in the Cost and Benefits Report, including the Securities and Exchange Commission, which has compliance costs of 361 million hours, and the Federal Communications Commission, which has compliance costs of 58 million hours.

All told, the various estimates total a minimum compliance cost of $321.6 billion for 2011. Recent numbers from 2012 will surely indicate higher compliance costs due to increased regulation.

Source: Wayne Crews, "How Much Does Federal Paperwork and Tax Compliance Cost?", January 28, 2013.


Browse more articles on Tax and Spending Issues