(Reason) For new father and first-time homeowner Erik Breidenbach, this year’s tax-filing season was one of the more difficult of his adult life.
Breidenbach says he spent about 12 hours working through the process by hand, as he does every year, figuring out which business expenses could be deducted, how to factor in the mortgage interest payments, and sorting through the complexities of getting paid in two states as a civilian and an active-duty member of the military. A mix-up involving the amount of federal taxes withheld from his wife’s paycheck created another headache.
When it was all over, “I thought with the house and baby I would get some amazing refund” that would at least make the effort worth it, he says, “but nope.”
It’s a frustration that many Americans can relate to—and one that lots of us will be dealing with this weekend, as the federal income tax filing deadline looms on Monday—thanks to the complexities of a federal income tax system that consumes money and time every year.
This year, Americans will spend an estimated 6.5 billion hours trying to file their taxes, according to a new analysis by the American Action Forum (AAF), a nonprofit that has been tracking the burden of tax-related paperwork since 2017.
The aggregate time it takes for Americans to comply with income tax paperwork, according to the AAF’s tracker, has fallen a bit in recent years—probably due to the tax reforms passed in 2017 that expanded the standard deduction for all filers—but the overall cost of compliance has kept on growing. This year, the group estimates, Americans will spend more than $200 billion just trying to pay their taxes.
That’s an insane amount of added expense—in terms of time and money—being put toward no productive ends whatsoever.
Much of the complexity (and paperwork) of paying federal income taxes flows from the federal government’s effort to tax income many times, Grover Norquist, president of Americans for Tax Reform, a fiscally conservative nonprofit that advocates for lower taxes and flatter rates, tells Reason.
Income is taxed “once when you earn it, again if you invest and receive interest or capital gains, again if you invested in a company that is subject to the corporate income tax, again if you are imprudent enough to die,” he says. “If they taxed your income one time—when you received it as income—it would be simpler and be less damaging to your privacy.”
Some of that complexity is the natural result of a tax system that attempts to do a lot more than simply collect the revenue necessary to run the federal government. The tax code attempts to balance fairness, enforceability, efficiency, and other goals that are often in conflict with one another. “Simplicity often loses out to other priorities,” notes the Tax Policy Center, a centrist think tank.
Some of the complexity is not an accident, either. Companies that profit off the complexity of the tax code—like Intuit, which owns the “TurboTax” brand—lobby hard to block changes that would make it easier for Americans to do their taxes without help.
They have plenty of help in the form of a multitude of special interests that deploy legions of lobbyists to preserve or create the many exemptions, breaks, and credits that make filing your taxes such a pain. That’s why the idea of a postcard-sized tax form has always been a pipe dream.
