Is that really efficient?
The IRS boasts that it’s the most efficient U.S. government agency because it spends only about 35 cents for every $100 of tax collected. That seems remarkably efficient, but distorts the facts. First, of the $3.4 trillion collected in 2017, almost 70% was not collected by the IRS. Rather, businesses collected it through wage withholding and employment taxes. Second, the public alone carries the cost of recordkeeping and filing tax returns. The National Taxpayer Advocate estimated that in 2016, taxpayers spent 6 billion hours on these tasks, not even including dealing with IRS notices, audits and enforcement actions. If tax compliance were a business, it would be one of the largest in the U.S. The Tax Cuts and Jobs Act will increase these costs. The Treasury believes businesses will spend 25 million hours/year complying with section 199A. That’s more than one-third the time it took GM to manufacture all the vehicles it sold in the U.S. in 2017. At an estimated cost of $46/hour, businesses will spend $1,150,000,000 complying with this single code section. Treasury also believes businesses will spend 900,000 hours and $49 million complying with the new international tax laws. Is that truly efficient? Isn’t it time for a new tax system?
