Complying with IRS rules takes a lot of time and money.
How much money?
- $409 billion per year, or $1266 per man, woman, and child
How much time?
- 8.9 billion man-hours per year, equivalent to 160 million people (the entire US labor force) working for a week
https://taxfoundation.org/compliance...s-regulations/
This is pure waste; it yields nothing but a lower standard of living.
So, how can compliance costs be reduced? First, lowering rates won't help. Rates should be lowered, of course, but for other reasons. Compliance costs are high because the code is complex; lowering rates doesn't make it less complex. Second, reducing the number of brackets (e.g. to one, with a flat tax) won't help; the accountants aren't spending 8.9 billion hours per year because they can't figure out which bracket to use. Third, even eliminating deductions and credits won't help all that much. The fundamental reason that the federal tax code is so complex is that it's focused on taxing income, which is inherently difficult to define, esp. for businesses.
If you want a simpler code, with lower compliance costs, you need to tax something other than income. I propose real estate. Calculating tax liability would be dead simple; compliance costs would drop to virtually nothing. What would the tax rate have to be? The total value of real estate in the US is around $30 trillion. Supposing the government's spending what it currently spends, the average real estate tax would have to be around 13%. Or, the tax could be graduated, based on property values. I don't have the data to do this, but it would be possible to set real estate tax brackets so that everyone ended up paying approximately the same tax they're paying now. In other words, nothing would change, except we'd save that $409 billion and 8,900,000,000 hours wasted on tax compliance. Finally, instead of relying on government assessments (as with local property taxes), people could be given the option to self-asses. But wouldn't people abuse this and value everything at $1? Yes, which is why they'd be required to sell their property at whatever price they self-assessed, should anyone offer that amount. Businesses especially would take advantage of this option, as their properties have no sentimental value to them.
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