Tax Filing Burden Continues to Grow

Published April 8, 2005

It used to be said that “ignorance of the law is no excuse for breaking it.”

That might have been a reasonable rule of thumb when Moses brought back the Ten Commandments from his mountain meeting with God. But ignorance of the current tax code’s intricacies is inevitable.

A decade ago there were 40,000 pages of federal tax rules. Now there are 60,000 pages–more than 7 million words. Who can keep up?

The number of forms taxpayers must consider also has been increasing. Five years ago there were 475 federal income tax forms. Now there are 529.

Granted, some of these new forms are for the purpose of allowing exemptions from taxes, credits against taxes, or reductions in tax liability. Nevertheless, they add to the complexity of complying with the tax code.

The amount of time people spend filling out tax forms has grown to an estimated seven billion hours a year. That’s about 28 hours per 1040 filed–up from 21 hours a decade ago.

The basic federal 1040 tax instruction booklet has ballooned to more than 130 pages. Ten years ago the booklet was between 80 and 90 pages. In 1945, the booklet really was a booklet–just four pages. So, while the individual taxpayer doesn’t usually have to deal with the entire 60,000 pages of regulations, he or she still has to cope with a fairly dense set of instructions that are not always clear.

And it isn’t only exasperated taxpayers who find the IRS instructions unclear. In 2002, government auditors found IRS taxpayer assistance centers give the wrong advice for filling out forms a distressingly large 50 percent of the time.

Taxpayers’ distress is intensified by the IRS’s refusal to stand behind the advice it gives out. Taxpayers are not relieved of any penalties they may face for errors on their tax forms resulting from following the advice given by the IRS assistance centers.

Complexity in the tax code and the unreliability of IRS answers to questions have driven more people to rely on professional tax preparers. In 1980, fewer than 40 percent of taxpayers hired accountants to prepare their tax forms. Now, more than 60 percent turn to these experts to do their taxes.

The profits of businesses in the tax preparation field have boomed. H&R Block, for example, has seen more than a doubling of revenue over the past 10 years.

But are the professional tax preparers getting it right? A Money magazine experiment gave the same hypothetical family data to 46 different tax preparers … and got back 46 different conclusions on the amount of tax owed.

In 1996, the National Commission on Tax Reform and Economic Growth asserted, “The current tax system is indefensible. It is overly complex, burdensome, and severely limits economic opportunity for all Americans.” Since then it has gotten worse.

Maybe it’s time to consider something like Georgia Congressman John Linder’s “fair tax.” His bill (HB 25) would repeal all corporate and individual income taxes, payroll taxes, self-employment taxes, capital gains taxes, estate taxes, and gift taxes and replace them with a revenue-neutral personal consumption tax. You can learn more about Linder’s proposal on his Web page:

John Semmens is policy advisor to The Heartland Institute in Chicago. He can be contacted by email at [email protected].