Reference no: EM132664323

Problem - Tax Compliance Costs

By one estimate, the cost of compliance with Federal tax laws exceeds $400 billion per year. Roughly, this means that compliance costs act as an additional tax of almost 40 cents for every tax dollar collected. This amount exceeds the gross domestic product of 36 U.S. states.

In this estimate, the following items were counted as costs of tax compliance.4

The value of taxpayers' time spent record keeping, filing, planning, and otherwise complying with the tax laws.

Tax collection costs (chiefly wages and benefits) of IRS employees.

Expenditures made to professional tax preparers, consultants, and other preparers.

Comment on the appropriateness of Congress and the Treasury passing along to taxpayers the costs of its revenue collection operation.