The penalties of our tax code

With April 15 quickly approaching, Americans are spending large chunks of time wading through paperwork, poring over forms and instructions, and entering information into tax preparation software – or they're paying to outsource the ordeal.

Complaints about tax complexity are common at this time of year. While some degree of tax complexity is inevitable in a large, diverse, and dynamic economy like ours, unnecessary complexity creates unfairness and uncertainty and hinders economic growth. Fortunately, a handful of reforms could create a tax system that is more growth-friendly, simple, and fair.

The Internal Revenue Service’s taxpayer advocate estimates that the total compliance cost of the federal individual and corporate income tax system was $168 billion in 2010 – or about 15 cents for every dollar of taxes collected. This cost includes not just money spent on accounting services and software, but also the value of taxpayers’ time spent keeping records and preparing returns. And that’s just federal taxes. Most taxpayers have to deal with tax complexity at the state and sometimes local level as well.

Read the full text of this article on The American website.

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Sita Nataraj
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