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Complicated Returns: A Taxing Trend

by National Taxpayers Union - 04/15/09 4:01 PM ET

Tea parties are taking place across the nation today, and rightly so. Beyond frustration about Washington’s spending fever, taxpayers should be outraged by the fact that compliance with the U.S. Tax Code costs individuals and businesses nearly $300 billion. And since consumers bear the brunt of business costs, that really means everyday taxpayers are shouldering this burden.

This according to the National Taxpayers Union’s 11th annual study of tax complexity trends, released yesterday. Among the findings:

Taxpayers using any of the 1040 tax form series will spend an average of 26.4 hours and $209 completing their returns for the most current tax year, up from 25.4 hours and $185 four years ago. Treasury Department paperwork, 90 percent of which consists of personal and business income tax forms, imposes a burden of 7.75 billion hours on Americans. That’s the equivalent of some 3.7 million employees working 40-hour weeks year-round without any vacation — more workers than are employed at the five biggest employers among Fortune 500 companies combined.

Individual taxpayers will spend about 3.8 billion hours complying with income tax laws this year — up from 3.6 billion hours last year. The value of this time is worth $110.6 billion. They’ll also spend a lot of money this year: an estimated $29.33 billion for tax software, tax preparers, postage, and other direct out-of-pocket costs. The cost of paperwork time burdens for corporations facing the federal income tax (3.8 billion hours) adds up to $159.4 billion — equivalent to 54 percent of corporate income taxes collected in FY 2008. Taken together, these three factors add up to $299.3 billion.

Tossing our Tax Code altogether and starting anew is no doubt the easiest and quickest solution, but unfortunately, one that is highly unlikely given our political reality. Still, Congress must work to enact reforms that result in a simpler and more transparent Tax Code — one that is fair and fiscally responsible.

View NTU’s full study online or in PDF:

A Taxing Trend