Federal Tax Complexity 2017: The Burden Growls . . . .
On the eve of April 18 when federal tax returns are due, the National Taxpayers Union (NTU) released NTUF Policy Paper #178 on tax complexity 2017 this week, which concludes that "as the burden grows, taxpayers' patience shrinks."
They write in the introduction:
"Perhaps as a symptom of how unwieldy the tax system has become, one of the nation’s largest tax preparer firms has teamed up with IBM’s Watson to assist filers this year. Perhaps it’s fitting that an artificial intelligence technology be enlisted to help citizens understand the tax laws, since they seem to be beyond the comprehension of the human mind. Regrettably, this is the current state of affairs, but ideally taxpayers should not have to consult a supercomputer to properly fill out their taxes!"
The paper by Demian Brady, NTU's director of research, includes numerous helpful tables and charts. For example, the first table shows the number of 1040 returns and the number of compliance hours. In 2016, the Internal Revenue Service received 148.9 million 1040 returns. Of that total, 79% were 1040's, 19% were 1040a, and 12% were 1040EZ. A total of 1.868 billion hours were needed to comply with the tax code -- an average of 15 hours for the 1040, 8 hours for the 1040a, and 5 hours for the 1040EZ.
To demonstrate how tax complexity has increased over the years, Brady uses basic data about the 1040 return. For example, in 1935, the 1040 return requested just 34 items, or lines, of information, increasing to 67 lines in 1975, 70 in 2000, and its current 79 in 2016.
The number of pages in the Form 1040 Instruction Booklet has grown even more exponentially. In 1935, the instruction booklet was just two pages. By 1975, it had grown to 39 pages. and then to 117 pages in 2000. In 2016, it was a weighty 241 pages.
Another measure of complexity is the average fee charged by the H&R Block tax service. In 1980, the average fee was $27.36, growing to $233.27 in 2016.
Here is the conclusion of the policy paper:
"In 2015, Congress enacted a Taxpayer Bill of Rights that included the right to quality service, the right to pay the correct amount of tax, the right to appeal decisions of the IRS, and the right to a fair and just tax system. Yet, our system continues to fail taxpayers: the tax enforcement agency proves increasingly deficient in administering the Code and responding adequately to taxpayer needs, while filers find it increasingly necessary to seek professional assistance with their forms.
"The IRS does seek to improve taxpayer services through a proposed “Future States” initiative. This set of policies would shift taxpayer interactions with the IRS from person-to-person assistance in order to maximize online interactions. The Taxpayer Advocate continues to list this proposal as a serious risk because the constrained communications could diminish services and increase compliance burdens on taxpayers.
"Ultimately, lasting and meaningful change to alleviate the difficulties faced by so many taxpayers struggling to comply with the current Tax Code must come from lawmakers. Under the current tax system, efforts to enhance and improve taxpayer services would require a significant expenditure of limited resources into an agency that too many people distrust, thus limiting the potential benefits. That same agency would still face the task of attempting to ensure compliance with tax laws that no one inside or outside of government can completely, confidently explain or understand. A more efficient, effective policy solution would be to enact comprehensive reform of the entire system. Otherwise the toll of tax complexity will continue to rise for our economy and our society."
The .pdf version of the report is 15 pages.
With Congress set to take up tax reform later this year, now is the for for Growls readers to make their views about tax complexity known to your representatives in Congress. Contact information is available at the Library of Congress' Congress.gov. Taxpayers living in Virginia's Arlington County can contact:
- Senator Mark Warner (D) -- write to him or call (202) 224-2023
- Senator Tim Kaine (D) -- write to him or call (202) 224-4024
- Representative Don Beyer (D) -- write to him or call (202) 225-4376
Ask for a written response. And tell them ACTA sent you.