Cost of Administering the US Income Tax

[bobman0330]

Tax simplification is pretty obvious, but the fact is that most tax lobbying is done by tax professionals and by people who want a special deduction or credit. Those people aren't going to stand up for simplification.

[xorbie]

Although, to be fair, Phil's point about people already keeping records for other reasons should be considered. Not sure how much that factors into the equation, but his arithmetic is mostly off due to not realizing that $20/hr is a ridiculous figure for most corporate accountants.

[KUJustin]

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200 billion is way too high in my opinion, probably ban order of magnitude. Here's a rough estimate:

Most employees wouldn't spend more than a couple of hours a year on tax, which accounts for around $8 billion at $20/hr.

For a rough idea of the corporate market, PricewaterhouseCoopers is the largest accounting firm in the world, 146,000 people in 150 countries, and their annual revenue is 20 billion. A fraction of that would be tax. Most larger firms and businesses maintain good records anyway (income, receipts, salaries), so you can't count that as a cost of tax. So, I'd estimate something like:

24 million US businesses filing tax returns at 50 hours/year each and $20/hr =~ $20 billion.

So I'd estimate between 10 and 30 billion are spent on tax each year or ~0.2% of US GDP.

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My only question is if "ban order of magnitude" is a typo of "by an order of magnitude" or if he's suggesting my guess is so bad I should be banned, haha.

Anyway, thanks for the numbers and link. That looks like an obviously biased source, but at the same time the number seems reasonable to me and I wouldn't expect them to make something up out of thin air.

I'm mostly just glad this didn't get hijacked into a debate on the merits of the income tax. I was really just curious.

[One Outer]

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Without turning this into a debate on the merits of said income tax, can anyone here give me some direction on finding out the total cost of administering it? I'm coming up short on Google.

This would include the total IRS budget, but also all the money spent by private firms and individuals in terms of internal man-hours, accountants, forms, etc.

FWIW (nothing), my out-of-thin-air guess is $200B annually.

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It's free because the government is more efficient than markets. How many examples of efficient tax administration can you think of that were administered by private companies? NONE. That's what we refer to as a "market failure".

Thanks for visiting Politics Forum.

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This just might be the best post in the history of the politics forum.

[AlexM]

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Although, to be fair, Phil's point about people already keeping records for other reasons should be considered. Not sure how much that factors into the equation, but his arithmetic is mostly off due to not realizing that $20/hr is a ridiculous figure for most corporate accountants.

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Gotta pay the people with the power to embezzle better than that! [img]/images/graemlins/wink.gif[/img]