Tax season is here, and the government has a license to hunt. Nearly two-thirds of Americans are caught like wide-eyed deer in the light of their computer screens. The percentage of people who filed their taxes online using services such as H&R Block and Turbotax has increased 27 percent since 2008.
The burgeoning population of middlemen between your pocket and the government’s coffers is growing. As the tax-filing industry has increased, the length of the 101-year-old tax code itself has swelled to 73,954 pages. That’s 60 copies of The Lord of the Rings trilogy or 62 copies of Atlas Shrugged, if that’s your credo. The IRS instructions explaining the tax code drone on for 90 pages.
The longer the tax code, the more policy analysts, politicians, lawyers, and accountants are needed to make sense of it—none of whom have an incentive to simplify it. These are smart individuals whose talents are best spent on innovation, not interpretation of this burden of behemoth bureaucracy.
PTSD (Post-Tax Stress Disorder) is on the rise as a complex tax code takes up more resources and time. At a hearing of the House Ways & Means Committee in April of 2013, Rep. Dave Camp stated:
It takes the average American taxpayer 13 hours to comply with the tax code, gathering receipts, reading the rules and filling out the forms the IRS requires. [. . .] The tax code forces Americans to spend over $168 billion to comply and 6 billion hours.
Annually, the IRS releases numbers on the tax gap—the difference between the amount the government has collected and the amount it is owed. The IRS bemoans the gap and responds by threatening more audits and increasing penalties.
Yet a GAO report suggests that the number of people overpaying their taxes—estimated to account for nearly $1 billion of revenue per year—serves to diminish the tax gap. H&R Block advertises on this fact in their “get your billion back” campaign. In 2002, the IRS claimed that $2,680 was owed per household, whereas the GAO report revealed that the government in fact owed $400 per household in unclaimed deductions. Overpaying your taxes is comparable to unwittingly paying overhead expenses on your overhead expenses.
It is unclear what percentage of Americans evade taxes. The IRS only keeps numbers on the amount of agency resources allocated to pursuing tax cheats. In this way, the IRS aims to frighten Americans into paying more than they should for an ever-expanding social contract of services they don’t need. All in the name of “fairness.”
The U.S. tax code is a multifarious extraction scheme intended to squeeze money from middle-income America, subsidize poor America, and provide special privileges to members of politically favored interest groups and industries. It is like a fractured 100-year-old lead pipe that has been patched with various generations of duct tape and glue in the form of addendums and exceptions. It’s time to reform it.