Despite promises by President Obama and other politicians to simplify the federal tax code, it gets more complicated every year:
- The number of pages of tax rules skyrocketed from 40,500 in 1995 to 70,320 in 2009. Congress is increasingly micromanaging society with special tax incentives for education, energy, and other activities.
- Federal tax paperwork consumes 7.6 billion hours of time annually, which is like having a full‐time “tax army” of 3.8 million people.
- There are about 500 changes to the tax code every year as Congress and the Treasury churn out a never‐ending stream of laws and regulations.
- The share of taxpayers requiring professional help keeps rising, with 62 percent of returns completed by professionals in 2007.
Aside from the compliance burden, tax complexity creates other problems:
- It complicates decision‐making in the economy, for example by confusing family financial planning and generating uncertainty for businesses.
- It encourages an invasion of privacy by the government. Each new tax incentive requires special documentation, which exposes people to scrutiny by the IRS.
- It results in frequent errors by taxpayers and the IRS. Individuals and businesses can get locked into battles with the IRS for years because of uncertain tax rules.
- It encourages tax evasion. High tax rates combined with complexity fosters aggressive tax dodging, which prompts Congress to pass even more complex tax regulations.
The solution to all these problems is to rip out the income tax and replace it with a low‐rate flat tax, as two dozen other nations have done.