The IRS is getting the biggest increase to its budget in recent memory – more than $80 billion spread over the next 10 years. While this has a number of politicians saying the agency is about to unleash an army of tax collectors on the nation, the IRS says its first hires will be more prosaic: Hiring more customer service reps to answer its telephone helplines.
While that is long overdue, there's a point about the IRS and its bigger budget that doesn't get enough ink: The continually rising cost taxpayers fork out each year to comply with the tax code.
It's a mammoth amount of money and a similar eye-popping amount of time. And both are going to get worse thanks to the ill-named “Inflation Reduction Act.” As the Tax Foundation's Scott Hodge writes:
According to the latest estimates from the White House Office of Information and Regulatory Affairs (OIRA), Americans will spend more than 6.5 billion hours complying with IRS tax filing and reporting requirements in 2022. This is equal to 3.1 million full-time workers doing nothing but tax return paperwork—roughly equal to the combined populations of Philadelphia and San Antonio—and 39 times the workforce at the IRS.
And the cost:
Put in dollar terms, the 6.5 billion hours needed to comply with the tax code conservatively computes to $313 billion each year in lost productivity. This is equal to 1.4 percent of U.S. GDP and is 23 times larger than the IRS's annual budget.
The burden costs to individual taxpayers (including small businesses) are nearly $74 billion annually, about 24 percent of the overall cost of tax compliance. The burden on corporate entities of complying with just their income tax returns is more than $60 billion. However, businesses bear additional costs, totaling the vast majority of the remaining $179 billion in costs, complying with the hundreds of remaining tax forms and regulations in the code.
This is just the start – there are a lot more cost estimates at the link.
The bottom line: Giving the IRS more money is almost irrelevant compared to the enormous cost in time, effort, lost opportunity, and growth destruction embedded in our current tax code.
Sweeping tax reform that trashes the existing code and replaces it with a flat or fair tax is the ideal way to stop this dead weight burden on taxpayers. Will such a proposal get through Congress and the president? No. That would require a lot of work, even more courage, and a willingness to shut down a major source of political favors.
But that doesn't mean the worthies can't be convinced to make the tax code less of a burden of taxpayers big and small.
The opinions expressed in this article are those of the author and do not necessarily reflect the positions of American Liberty News.
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I have heard about the Fair Tax as far back as the 80’s, but nothing ever happens.
NO. Exactly so. Becuase the politicians will never, ever conspire to relinquish their Power of the Purse. I am sure this applies to almost as many Republicans as to the DemonCrats. Absolute power corrupts absolutely. And financial power corrupts financially.
I know H&R Block raises their rates every year to where it cost me last year about $400 to find out I owed the IRS money. Something I haven’t done for many years. Turns out if you are on SS and still work, even though you are past the age where it is supposed to matter, they tax the heck out of you. Then my preparer of many years died and they gave me an other one that I do not have as much confidence in. Maybe it’s time to start doing my own again. Maybe Block needs a business model that works on supply and demand and lower the price to increase their demand instead of the Apple model of buy low and sell high. That’s what made Apple the richest company in the world though. They make no apologies. But it’s hard on the rest of us that don’t make $100000 a year. Amazing how the numbers they keep using for family income are $75000 to $200000. Not in my universe.
New IRS Training Now Includes Simulated Assault With Armed Agents because the more complex you make compliance, the more insane, incomprehensible and inherently contradictory the directions become and the higher the percentage of money the government proposes to extract from the productive private sector the more will grow the resistance to compliance, the more difficult it becomes for the government to consolidate the wealth of the nation under its own control. It has been said that, at its collapse, the cash flow of the underground economy in the USSR exceeded that of the official economy. The federal government, seeking to centralize control of all socioeconomic functions, assumes controls and responsibilities never Constitutionally intended. Like Mussolini. Who never did get the trains to run on schedule anyway. It’s been reported that the government seeks access to your private correspondence and wants to track your monetary expenditures. Like 1984.
Can we scrap the Tax Code for Flat, Fair Tax plans??