Tax Complexity Now Costs the US Economy Over $546 Billion Annually

[Bigun]

Tax Complexity Now Costs the US Economy Over $546 Billion Annually

The federal tax code imposes many costs on the US economy. The most direct costs, of course, are the roughly $4.9 trillion in federal taxes that consume 17 percent of US gross domestic product (GDP). Our tax system is heavily reliant on individual and corporate income taxes, which economists at the Organisation for Economic Co-operation and Development (OECD) have determined are the most harmful for economic growth.

A less direct cost is the precious time taken out of our lives to comply with a Byzantine tax code that requires billions of hours completing mountains of IRS paperwork and tax returns. In 2023, Americans filed 271.5 million tax returns. Of these, nearly 71 percent, or 192.3 million, were individual and corporate income tax returns, while another 36.3 million were employment tax returns.

According to the latest estimates from the White House Office of Information and Regulatory Affairs (OIRA), Americans will spend more than 7.9 billion hours complying with IRS tax filing and reporting requirements in 2024. This is equal to 3.8 million full-time workers doing nothing but tax return paperwork—roughly equal to the population of Los Angeles—and nearly 46 times the workforce at the IRS.

If we assume a reasonable hourly wage, the 7.9 billion hours Americans spend complying with the tax code costs the economy roughly $413 billion in lost productivity. In addition, the IRS estimates that Americans spend roughly $133 billion annually in out-of-pocket costs to comply with the tax code. This brings the total compliance costs to $546 billion, or nearly 2 percent of GDP. ...

More at headline link

[Bigun]

If there was no alternative to the irrational and unfair income/payroll tax system that creates such a cost to each of us, we would just have to tolerate it “for the good of the country.”

However, there is an alternative—the FAIRtax, a national retail sales tax on new retail goods and retail services.  The FAIRtax provides a family credit so that all purchases up to the poverty level for each family are not taxed. There is no withholding from your paycheck.

When the FAIRtax is passed:
 
       It is estimated that compliance costs and regulatory burdens will be reduced by 80% to 90%.

       Except for retailers, none of us will ever have “report” our income to the government.

       None of us will have to report what we spent to the government.

       None of us will ever have worry about the IRS questioning our return and demanding additional tax, penalties and interest.

       None of us will spend any time keeping receipts.

       None of us will recall April 15th in a few years as “Tax Day”.

[andy58-in-nh]

If there was no alternative to the irrational and unfair income/payroll tax system that creates such a cost to each of us, we would just have to tolerate it “for the good of the country.”

However, there is an alternative—the FAIRtax, a national retail sales tax on new retail goods and retail services.

@Bigun

I agree with you in theory.

Some variation of a "Fair Tax", in the form of a retail sales tax at the point of sale would be far preferable to the status quo.

However, in your example, how would exemptions work?

How would they be determined, calculated and claimed? Self-evidently, vendors and retailers could not possibly do this.

Would it not be necessary for individuals and families to still file annual tax returns to state their income and claim their exemptions, and thus have to keep track of all qualifying purchases each and every year, which by itself would be extremely labor-intensive?

Perhaps you might explain how this could work as a practical matter.

[Bigun]

@Bigun

I agree with you in theory.

Some variation of a "Fair Tax", in the form of a retail sales tax at the point of sale would be far preferable to the status quo.

However, in your example, how would exemptions work?

How would they be determined, calculated and claimed? Self-evidently, vendors and retailers could not possibly do this.

Would it not be necessary for individuals and families to still file annual tax returns to state their income and claim their exemptions, and thus have to keep track of all qualifying purchases each and every year, which by itself would be extremely labor-intensive?

Perhaps you might explain how this could work as a practical matter.

There would be no exemptions @andy58-in-nh . Watch
https://www.youtube.com/watch?v=HTOOw7u_lsI

https://fairtax.org/about/how-fairtax-works

[Drago]

IRS form: "How much income did you have in 20XX....multiply that by 0.10 and remit to the iRS".

No to the "Unfair Tax"...I paid income taxes/sales taxes/excise taxes/cap gains taxes, etc., etc., etc. for 45 years and now that I am recently retired and planning to spend some of my hard earned (& taxed) savings you want to hit me with an insane sales tax rate?!! No thanks. No more double/triple taxation.

[Hoodat]

The federal tax code imposes many costs on the US economy. The most direct costs, of course, are the roughly $4.9 trillion in federal taxes that consume 17 percent of US gross domestic product (GDP).

This is the key fact here.  If government can only confiscate 17% of GDP, then why are they spending 24% of GDP?

[Bigun]

IRS form: "How much income did you have in 20XX....multiply that by 0.10 and remit to the iRS".

No to the "Unfair Tax"...I paid income taxes/sales taxes/excise taxes/cap gains taxes, etc., etc., etc. for 45 years and now that I am recently retired and planning to spend some of my hard earned (& taxed) savings you want to hit me with an insane sales tax rate?!! No thanks. No more double/triple taxation.

I did that for over 60 years and LOVE the Fairtax!

Please read @Drago

https://mr.cdn.ignitecdn.com/client_assets/fairtaxorg/media/attachments/56c4/aa47/6970/2d06/a718/0000/56c4aa4769702d06a7180000.pdf?1455729223

[Hoodat]

I did that for over 60 years and LOVE the Fairtax!

Please read @Drago

https://mr.cdn.ignitecdn.com/client_assets/fairtaxorg/media/attachments/56c4/aa47/6970/2d06/a718/0000/56c4aa4769702d06a7180000.pdf?1455729223

So, let's say we implement the fair tax.  Government ends up bringing in 17% of GDP.  Yet that same government continues spending 24% of GDP.  Then what?  How does the 'fair tax' help us?

[cato potatoe]

If we assume a reasonable hourly wage, the 7.9 billion hours Americans spend complying with the tax code costs the economy roughly $413 billion in lost productivity. In addition, the IRS estimates that Americans spend roughly $133 billion annually in out-of-pocket costs to comply with the tax code. This brings the total compliance costs to $546 billion, or nearly 2 percent of GDP. ...

Don't assume.  Rather than hire college graduates, the greedy owners of CPA firms are outsourcing tax prep to India.  The residual stateside CPAs spend all day/night fixing the garbage they get from India.

[Drago]

I did that for over 60 years and LOVE the Fairtax!

Please read @Drago

https://mr.cdn.ignitecdn.com/client_assets/fairtaxorg/media/attachments/56c4/aa47/6970/2d06/a718/0000/56c4aa4769702d06a7180000.pdf?1455729223

Sorry still not a fan, your "FairTax for Seniors" .PDF "White Paper" is full of "Pie in the Sky" statements like:
"The FairTax legislation totally repeals the current income tax on Social Security benefits. The FairTax legislation also adjusts the Social Security benefits indexing formula, commonly known as the cost of living adjustment or COLA, so that benefits increase to the extent, if any, that the federal sales tax results in higher costs to seniors."

SS is in deficit spending now as it is...adjusting the COLA under the "Fair"Tax to account for the 75% increase in the cost of food/groceries/medical/dental care (not exempt from the "Fair"Tax) would kill Social Security faster than is already happening. Also, the "pre-bate" isn't going cover increased sales tax cost to seniors...one vehicle purchase at $30K would incur $22,500. in sales tax charges.  I am still in the "Cons" camp of analysis write-ups like these:

https://www.toplinecontentmarketing.com/n.cfm/page/e105/key/448373371G2355J8987367N9N25524P0P10427876T0/

https://www.fustcharles.com/newsroom/demystifying-fair-tax-proposals

[Kamaji]

Don't assume.  Rather than hire college graduates, the greedy owners of CPA firms are outsourcing tax prep to India.  The residual stateside CPAs spend all day/night fixing the garbage they get from India.

[Bigun]

So, let's say we implement the fair tax.  Government ends up bringing in 17% of GDP.  Yet that same government continues spending 24% of GDP.  Then what?  How does the 'fair tax' help us?

It's ALL out in the open for everyone to see now. No more hiding the costs of government is possible and EVERYONE has skin in the game.

[Bigun]

Sorry still not a fan, your "FairTax for Seniors" .PDF "White Paper" is full of "Pie in the Sky" statements like:
"The FairTax legislation totally repeals the current income tax on Social Security benefits. The FairTax legislation also adjusts the Social Security benefits indexing formula, commonly known as the cost of living adjustment or COLA, so that benefits increase to the extent, if any, that the federal sales tax results in higher costs to seniors."

SS is in deficit spending now as it is...adjusting the COLA under the "Fair"Tax to account for the 75% increase in the cost of food/groceries/medical/dental care (not exempt from the "Fair"Tax) would kill Social Security faster than is already happening. Also, the "pre-bate" isn't going cover increased sales tax cost to seniors...one vehicle purchase at $30K would incur $22,500. in sales tax charges.  I am still in the "Cons" camp of analysis write-ups like these:

https://www.toplinecontentmarketing.com/n.cfm/page/e105/key/448373371G2355J8987367N9N25524P0P10427876T0/

https://www.fustcharles.com/newsroom/demystifying-fair-tax-proposals

No pie in the sky to it @Drago. The FairTax legislation DOES totally repeal the current income tax on Social Security benefits and everything else. The Marxist income tax is history along with the social security payroll tax, the medicare payroll tax, and all gift and estate taxes! EVERYONE is better off under the fairtax for a host of reasons.

Also, the "pre-bate" isn't going cover increased sales tax cost to seniors...one vehicle purchase at $30K would incur $22,500. in sales tax charges.

What? How did you come up with that BS? The sales tax on a $30,000 item would be $6,900 IF you paid the absolute maximum rate which NO ONE, except illegal aliens would do. Plus all of the taxes and compliance costs currently embedded in the price of that car are now gone. Further, you would only need $36,900 AT MOST to make the purchase. How much do you have to earn under the current system in order to make that purchase? For most people It would be a hell of a lot more than $36,900!

[Drago]

Because a lot of people (me included) think the proposed 25% "Fair"Tax...(actually 30% because it is a "tax-inclusive" sales tax) is way short of replacing the income tax & payroll taxes. I did "the math" and came up with a 71% sales tax.

My math:
Current federal government income/revenue from income and payroll taxes (not even accounting for the estate taxes/gift/cap gains taxes that are eliminated under the “Fair”Tax) is $4.1 Trillion. Total retail sales in the U.S.A. for 2024 were $7.26 Trillion. So just to replace the $4.1 Trillion you would need a “Fair”Tax sales tax rate of 57%. The current federal budget deficit is about $2 Trillion, so assuming $1 Trillion in cuts made by Congress as the “Fair”Tax is passed into law that leaves a “revenue neutral/tax replacement” amount of about $5.1 Trillion. Which results in a “Fair”Tax rate of 71%. (More if current deficit spending {$2 Trillion} isn’t cut buy by $1 Trillion). The proposed “Fair”Tax rate of 25% (actually 30% because it is a “tax-inclusive” sales tax rate) is way short of replacing the income/payroll taxes…even more short if replacing income/payroll/estate/gift/cap gains taxes. Even more short if accounting for the current federal budget deficit.  In addition, a sales tax rate that high will inevitability lead to reduced retail sales numbers…requiring even higher “Fair”Tax sales tax rates going forward.

Retail sales #’s:
https://capitaloneshopping.com/research/retail-statistics/
https://www.oberlo.com/statistics/us-retail-sales

Federal govt. income & payroll tax numbers:
https://usafacts.org/answers/how-much-does-the-us-federal-government-collect/country/united-states/
https://usafacts.org/articles/this-chart-tells-you-everything-you-want-to-know-about-government-spending/ 

[Bigun]

Because a lot of people (me included) think the proposed 25% "Fair"Tax...(actually 30% because it is a "tax-inclusive" sales tax) is way short of replacing the income tax & payroll taxes. I did "the math" and came up with a 71% sales tax.

My math:
Current federal government income/revenue from income and payroll taxes (not even accounting for the estate taxes/gift/cap gains taxes that are eliminated under the “Fair”Tax) is $4.1 Trillion. Total retail sales in the U.S.A. for 2024 were $7.26 Trillion. So just to replace the $4.1 Trillion you would need a “Fair”Tax sales tax rate of 57%. The current federal budget deficit is about $2 Trillion, so assuming $1 Trillion in cuts made by Congress as the “Fair”Tax is passed into law that leaves a “revenue neutral/tax replacement” amount of about $5.1 Trillion. Which results in a “Fair”Tax rate of 71%. (More if current deficit spending {$2 Trillion} isn’t cut buy by $1 Trillion). The proposed “Fair”Tax rate of 25% (actually 30% because it is a “tax-inclusive” sales tax rate) is way short of replacing the income/payroll taxes…even more short if replacing income/payroll/estate/gift/cap gains taxes. Even more short if accounting for the current federal budget deficit.  In addition, a sales tax rate that high will inevitability lead to reduced retail sales numbers…requiring even higher “Fair”Tax sales tax rates going forward.

Retail sales #’s:
https://capitaloneshopping.com/research/retail-statistics/
https://www.oberlo.com/statistics/us-retail-sales

Federal govt. income & payroll tax numbers:
https://usafacts.org/answers/how-much-does-the-us-federal-government-collect/country/united-states/
https://usafacts.org/articles/this-chart-tells-you-everything-you-want-to-know-about-government-spending/

Sigh!!! When you do your income taxes and pay the government $25 K of the $100K you earned do you say "I paid uncle sugar 25% of what I earned (Tax inclusive rate)" or do you say "I paid 33% (Tax exclusive rate)"?

EVERYONE I know uses the former and not the latter so let's compare apples to apples instead of apples to oranges.

And, by the way, the sales tax rate is 23% (which no one in the country legally would actually pay. For someone at poverty level who spends every dime on a NEW good or services would pay 0%) not 25% and that covers income taxes, social security payroll, Medicare payroll, and all gift and estate taxes.

According to current U. S. law, any replacement tax must be able to bring in the same amount of revenue as the current system does and the Fairtax meets that standard with ease.

[DefiantMassRINO]

Tax complexity is a smoke screen to obscure who is getting the biggest tax breaks and who is getting screwed.

Things are the way they are because those with wealth, status, and power want it that way because it benefits themselves.

The last thing a vulture capitalist or pirate equity guy, like Mitt Romney, wants is a fair tax system.

[Bigun]

Tax complexity is a smoke screen to obscure who is getting the biggest tax breaks and who is getting screwed.

Things are the way they are because those with wealth, status, and power want it that way because it benefits themselves.

The last thing a vulture capitalist or pirate equity guy, like Mitt Romney, wants is a fair tax system.

The exact reason Warren Buffett pays less taxes than his secretary.

[Kamaji]

Tax complexity is a smoke screen to obscure who is getting the biggest tax breaks and who is getting screwed.

Things are the way they are because those with wealth, status, and power want it that way because it benefits themselves.

The last thing a vulture capitalist or pirate equity guy, like Mitt Romney, wants is a fair tax system.

Define a “fair tax system”.

[DefiantMassRINO]

One in which I don't have to pay taxes.  That seems fair to me.

Define a “fair tax system”.

[Bigun]

Define a “fair tax system”.

Everybody pays! No more carve outs allowing the ultra-rich to live like kings while paying little to nothing in taxes. Allowing our domestically produced goods to compete in world markets unencumbered by corporate taxes and all the costs that accompany them. That will do for starters.

[Kamaji]

Everybody pays! No more carve outs allowing the ultra-rich to live like kings while paying little to nothing in taxes. Allowing our domestically produced goods to compete in world markets unencumbered by corporate taxes and all the costs that accompany them. That will do for starters.

When was the last time you saw a “rich” person’s tax return?

[Bigun]

When was the last time you saw a “rich” person’s tax return?

When was the last time you saw an average person's tax return?

[Kamaji]

When was the last time you saw an average person's tax return?

Yesterday. 

[catfish1957]

 

[Bigun]

Yesterday.

Ok. So, what does that have to do with the subject of this thread?

[Kamaji]

Ok. So, what does that have to do with the subject of this thread?

You asked a question and I answered.  If you don’t like the answer, don’t ask the question.

[roamer_1]

Complexity:

If you can't dazzle em with brilliance, baffle em with bullsh*t...