I support getting rid of the income tax, but this $1 trillion a year seems way out of whack. That would mean that almost half of the federal budget would be going to IRS enforcement, and I just don't by it. He might be adding in the loss of productivity, and the cost that people pay accountants and advisorts, but he needs to say that if he has the numbers to back it up.
but this $1 trillion a year seems way out of whack.
I presume he is talking about he cost of tax compliance, as defined by Payne in '95. Works out to be over $1Trillion today.
Every time Washington collects a dollar in tax revenues, taxpayers shell out that dollar plus another 65 cents. Why is that? It's not that the IRS is inefficient.
That agency's expenses eat up less than a penny of each dollar it raises. The 65 cents is what it costs taxpayers -- businesses and individuals -- to pony up each dollar. Compliance costs, which come to 24 cents, include the expense of keeping records, staying current with the tax code, and filling out the forms. Enforcement costs, close to 2 cents, include tax-???payers' expense for audits and litigation. We spend 3 cents on tax evasion and avoidance. However, the biggest expense item, at 33 cents, is economic disincentive. "By taking away the fruits of labor and capital," says political economist James L. Payne in his book Costly Returns, "the tax system works to discourage working and investing." So the next time Washington announces a, say, $10-billion program, remember that the real cost is that plus 65 cents per dollar -- or $6.5 billion more.
Costs of the Federal Tax System to Taxpayers for Every Dollar of Revenues Collected
Compliance costs 24¢ Enforcement costs 2¢ Disincentive to production 33¢ Disincentive cost of tax uncertainty 2¢ Evasion and avoidance cost 3¢ Government cost 1¢ Total 65¢ Source: Costly Returns, by James L. Payne (ICS Press, San Francisco, 1993). n
I believe that he is and I agree that I would love to see some hard figures on this issue. All of these compliance costs act as a hidden tax burden on every good and service that we use and needs to be eliminated if we ever hope to regain our competitiveness in the global market.