A double dose of tax articles today – but don’t start to expect it J
Taxpayers must spend significantly more than $1 in order to provide $1 of income-tax revenue to the federal government.
To start with, individuals and businesses must pay the government the $1 in revenue plus the costs of their own time spent filing and complying with the tax code; plus the tax collection costs of the IRS; plus the tax compliance outlays that individuals and businesses pay to help them file their taxes.
In a study published last week by the Laffer Center, my col leagues Wayne Winegarden, John Childs and I estimate that these costs alone are a staggering $431 billion annually. This is a cost markup of 30 cents on every dollar paid in taxes. And this is not even a complete accounting of the costs of tax complexity.
Like taxes themselves, tax-compliance costs change people's behavior. Taxpayers, whether individuals or businesses, respond to taxes and tax-compliance costs by changing the composition of their income, the location of their income, the timing of their income, and the volume of their income.
Citizens should be able to comply with the tax code without having to spend absurd amounts of money to do so. The fact that there is such a large compliance markup in our tax s ystem indicates that the tax system has gone awry. All of these hours could have been used for something a lot more productive than just making sure our taxes are filed and paid correctly.