Kitchen Table Economics

Tax Burden Gets Bigger and Bigger

The Internal Revenue Service’s (IRS) jurisdiction is growing by the year. According to a recent Tax Foundation report, the number of words published by the IRS has reached 7.7 million—without even taking into account the complicated tax code itself.

The length of the tax code is 2.4 million words—up from 409,000 words in the 1950s. But there are roughly 7.7 million words of tax regulations, which clarify how U.S. tax statues work in practice. On top of that, there are almost 60,000 pages of tax-related case law, which allow accountants and tax lawyers to figure out how much their clients owe.

Because of the complexity, Americans will spend more than 8.9 billion hours complying with IRS tax filing requirements in 2016. According to the latest estimates from the Office of Information and Regulatory Affairs, this compliance is the equivalent of 4.3 million full-time employees doing nothing but tax return paperwork. The majority of the almost 9 billion hours will be spent complying with business (2.8 billion hours) and individual income (2.6 billion hours) tax returns. These hours, in terms of dollars, computes to $409 billion each year in lost productivity, or greater than the gross economic output of 36 states.

The tax burden is especially troublesome for business owners, who are forced to devote precious resources to tax compliance instead of business expansion and job creation. For example, hiring a tax professional can cost a job creator $70,000 a year or more. This is $70,000 that he or she cannot spend purchasing equipment or opening additional locations—a huge loss for the economy.