NCPA - National Center for Policy Analysis

Tax Code More Complex Than Ever

April 24, 2013

Over the decades, the U.S. tax code has become incrementally more complex, with small additions, loopholes and deductions being added slowly. Today's forms and instructions are far more complicated than year's past and the trend is likely to continue, says David Keating of the National Taxpayers Union.

  • According to data from the Office of Management and Budget, the current paperwork burden generated by the Internal Revenue Service now totals more than 6.7 billion hours, which is equivalent to about 3.35 million employees working 40-hour weeks year-round with just two weeks off.
  • The value of 6.7 billion hours is more than $240 billion, including $34 billion in out-of-pocket expenses (tax return preparation and software costs).
  • The most recent publication of the official Tax Code contains more than 3.9 million words, which is a 112,000 word increase from 2010.

In addition to the law itself, there are 20 volumes of regulations spanning 14,000 pages with more than 10 million words.

  • Even for the common and simple 1040 tax form, there are 214 pages in the instruction booklet, about five times the number in 1975, one of the many reasons why the IRS has repeatedly said that the complexity of the Internal Revenue Code is the most serious problem facing taxpayers.
  • There are more than 2,022 publications, forms and instructions advising the public on tax compliance and average wait times for telephone assistance were more than 15 minutes last year.
  • U.S. tax compliance time burden ranks 63rd in the world while the total tax rate -- including corporate, payroll and other taxes -- ranked 132nd out of 185 in the world.

The tax system is so complex that now only paid professionals or tax preparation software navigate the intricacies of the tax code. General Electric, one of America's largest companies, files a tax return of over 24,000 pages every year.

  • Today, almost 60 percent of taxpayers use a preparation service, compared to 38 percent in 1980. The cost of such services rose from an average of $27.36 in 1980 to an average of $192 in 2012.
  • ObamaCare surtaxes, limits on exemptions and deductions, and a higher death tax rate have increased the tax complexity and more tax laws are currently being considered by Congress.

Source: David Keating, "A Taxing Trend: The Rise in Complexity, Forms, and Paperwork Burdens," National Taxpayers Union, April 15, 2013.


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