It now takes a “Tax Army” three times the size of the American military to comply with U.S. tax codes, according to an analysis by the Foundation for Economic Education.
Although the Obama administration is hard at work dreaming up new regulatory excesses for agencies like the Environmental Protection Agency or the Transportation Security Administration, the 74,000-page IRS tax code is responsible for imposing almost four out of every five hours of new burdens of compliance with the federal government.
Breitbart News has previously noted that President Jimmy Carter expanded the U.S. “Federal Registry” of regulations by over 40 percent, to 102,195 pages and 164 volumes. He also issued “Executive Order 12044 – Improving Government Regulations,” which drastically increased the reach of government into the daily lives of its citizens, encouraged businesses to move operations offshore, and spelled the end of middle-class income growth.
An analysis by the U.S. Office of Management and Budget found that the time American businesses and individuals spend to comply with the federal tax code now equals about 8.9 billion hours a year.
To put this in terms with which most Americans can identify, the cost for H&R Block to prepare an average tax return has skyrocketed from $27.36 in 1980 during the Carter Administration to $224.02 in the 2015 tax year.
That has created what economists refer to as a “Tax Army,” which currently includes the equivalent of 4.3 million people. If Americans were paid to address tax compliance at the average wage for full-time work, the annual cost would be $409 billion a year.
That compares to the annual personnel appropriation budget for 1.4 million uniformed active-duty military personnel of $130.5 billion.
As an example of just how inefficient and wasteful the compliance cost of the tax code is, the Foundation’s analysis estimates that the federal estate tax imposes $20 billion a year in paperwork costs, but the tax only raises $21 billion a year for the government.
The Foundation proposes that it is time for an overhaul of the tax code that could increase incentives for working, investing, and “other productive activities.” Since the largest regulatory cost for paperwork stems from the income tax, the Foundation proposes that replacing the federal income tax with a simple “flat tax” would reduce the paperwork burden by about 90 percent.
The plan would be a boon to American competitiveness and job creation because wage and business income could be taxed at a maximum rate of 20 percent and generate about the same revenue as the current system. Business capital purchases would be expensed, thus eliminating complicated depreciation schedules, while capital income — from capital gains, dividends, and estates — would also be taxed at a maximum of 20 percent.
The main impediment to the tax army being retired is that the flat tax would wipe out all deduction and spectacularly reduce fees for the accounting and legal industries.