$224 Billion, 6.1 Billion Hours, Lost to Complex Tax Code According to New National Taxpayers Union Study

Apr 15, 2014, 12:05 ET from National Taxpayers Union

ALEXANDRIA, Va., April 15, 2014 /PRNewswire-USNewswire/ -- Today, National Taxpayers Union (NTU) released its 16th annual study of tax complexity in the U.S. This year's analysis found the economy lost $224 billion and 6.1 billion hours of productivity due to the burden of compliance with a complex and invasive tax code.

NTU Senior Counselor and study author David Keating said, "Our convoluted tax laws cost much more than just the dollars collected.  It's time Congress and the President put a stop to the over $200 billion in wasted time and money spent figuring out our complicated tax laws."

NTU has published "A Taxing Trend: The Rise in Complexity, Forms, and Paperwork Burdens" to reveal the realities of tax complexity since 1999. Key findings include:

  • According to the IRS's National Taxpayer Advocate, the total time burden of tax compliance totals an astounding 6.1 billion hours this year.
  • That is the equivalent of about 3.05 million employees working 40-hour weeks year-round with just two weeks off; or more than the number of workers at three of the biggest retailers in the Fortune 500 – Wal-Mart Stores, McDonald's, and Target – combined.
  • When calculated at the average hourly employee compensation cost, the value of the labor involved in tax compliance is a jaw-dropping $192.6 billion.
  • Individuals spend a combined $31.7 billion a year on tax software and other      out-of-pocket costs.

Thus, the total compliance burden of the income tax system is $224.3 billion.

  • The average taxpayer using the 1040 "long" form – which according to IRS projections amounts to two-thirds of all 1040s filed – spends 15 hours on tax compliance. The average out-of-pocket cost (not counting time) associated with this form is $280.
  • Most estimates put the length of the Tax Code (not counting regulations and rulings) at roughly 4 million words. This is more than two times the length of the King James Bible plus the entire works of Shakespeare combined.
  • Seventy-five years ago, the Form 1040 instructions were just two pages long; today, they are 206 pages.
  • Paid preparers and tax software account for over 90 percent of returns – a telltale sign of tax complexity.

Visit www.ntu.org/a-taxing-trend for the complete study. NTU is a nonpartisan, nonprofit organization working for lower taxes, smaller government, and economic freedom at all levels.

SOURCE National Taxpayers Union