There is a lot more to taxes than simply paying the bill. Taxpayers must spend significantly more than $1 in order to provide $1 of income-tax revenue to the federal government.
To start with, individuals and businesses must pay the government the $1 in revenue plus the costs of their own time spent filing and complying with the tax code; plus the tax collection costs of the IRS; plus the tax compliance outlays that individuals and businesses pay to help them file their taxes.
In a study published last week by the Laffer Center, my colleagues Wayne Winegarden, John Childs and I estimate that these costs alone are a staggering $431 billion annually. This is a cost markup of 30 cents on every dollar paid in taxes. And this is not even a complete accounting of the costs of tax complexity. Tax compliance employs more workers than Wal-Mart, UPS, McDonald's, IBM and Citigroup combined.
A complete accounting of compliance costs would also include the efficiency losses created when individuals and businesses invest in tax-avoidance activities that lower their tax liability at the expense of creating more jobs and economic growth. These lost opportunities are impossible to measure but could be the largest cost of all.
Editor’s Note: It’s well known that the US Internal Revenue Code is among the biggest piles of red tape that mankind has ever seen. The human capital and financial costs of complying with this Byzantine system are so large its total effect is incomprehensible. It’s no wonder then, that so many Americans are renouncing their citizenship to escape this suffocating burden.
To address this topic we’ve prepared for International Man readers a free report called The American Expatriation Guide—How to Divorce the US Government. This report will guide you through the process of renunciation in amazing detail. To get a copy of the PDF, simply go to the Free Resources section of the website.