Complying with the tax code costs the United States roughly 2 to 3 cents for every dollar of economic activity and represents about 20 percent of federal income and payroll tax revenue received.
Simplifying this system could add as much as one-half of 1 percent growth each and every year, according to a recent study conducted by The Laffer Center.
In its 2011 Information Collection of the U.S. Government, the Office of Management and Budget estimated we spend nearly 9 billion hours per year to comply with the federal tax code. Assuming an average of $40 per hour, this equates to roughly $360 billion annually.
Adding direct outlays for professional tax preparers and tax software ($31.5 billion), IRS administrative expenditures ($12.4 billion) and comprehensive audit procedures ($9.3 billion), the total exceeds $400 billion per year, according to The Laffer Center study.
Reducing this compliance cost would permit a more effective and efficient allocation of resources and foster greater focus on innovative, entrepreneurial endeavors — in lieu of decision making based on tax minimization.
Simplifying the tax code could save the United States hundreds of billions of dollars in compliance expenditures, while providing additional economic growth of nearly $75 billion per year.
The major obstacle seems to be the relocation of employment for those individuals involved in these service areas. We need to think creatively to absorb these talents in other economic areas.
© 2014 Moneynews. All rights reserved.