Contribute
CONNECT:

research

U.S. Tax System: Costly, Convoluted, And In Need Of An Overhaul

- April 26, 2017

Tax Reform Is Desperately Needed To Fix A System That Has Grown Overly Complex And Hinders Economic Growth


TOP TAKEAWAYS

  • Comprehensive tax reform has not been achieved for more than 30 years, and it's costing the American taxpayers and small businesses.
  • At nearly 75,000 pages and 2.4 million words, the tax code has become bloated and overly-complicated.
  • Billions of dollars are spent each year to comply with the ever-growing tax code.
  • Corporations hold money offshore and away from the U.S. economy due to the burdensome nature of the corporate tax rate, which is one of the highest tax rates in the world.

TAX REFORM IS LONG OVERDUE AND THE CURRENT SYSTEM IS COSTING OUR ECONOMY

Major Tax Reform Has Not Been Achieved Since The 1980's, And Taxpayer's Rates Are Expected To Rise To Record Levels

Comprehensive Tax Reform Has Not Been Achieved Since 1986, More Than 30 Years Ago. "Many believe there is a much greater possibility of achieving bipartisan support for tax reform even though the last comprehensive tax reform occurred in 1986." (David M. Walker, Op-Ed, "It's Time For Comprehensive Tax Reform," CNBC , 03/29/17)

If Current Law Remains Unchanged, Individual Income Taxes Are Expected To Rise To A Greater Share Of The Gross Domestic Product (GDP) "In All But One Of The Past 50 Years" By 2027. "If current laws remain generally unchanged, receipts from individual income taxes are expected to rise markedly relative to GDP over the next 10 years-from 8.6 percent in 2017 to 9.7 percent by 2027, which would be a greater share of GDP than has been recorded in all but one of the past 50 years." ("The Budget And Economic Outlook: 2017 - 2027," Congressional Budget Office , 01/17)

Small Businesses Can Face Up To A 60 Percent Tax Burden Which Is "Nearly The Most Onerous In The World." "That's why tax reform must be broader than just focusing on the country's anti-competitive corporate tax rate - it must focus on providing relief for America's 28 million small businesses and the 85 million Americans who owe their livelihoods to them. These businesses have been struggling under the weight of a 40 percent marginal federal tax burden, which can reach 50 percent when state taxes are included, and 60 percent when payroll and other taxes are added in. That's nearly the most onerous in the world, according to the Tax Foundation." (Stephen Moore and Alfredo Ortiz, Op-Ed, "Congress, The Clock Is Running Out On Small Business Tax Reform," The Hill , 03/05/17)

THE CURRENT TAX SYSTEM IS "MIND-NUMBINGLY COMPLEX" AND COSTS BILLIONS TO COMPLY WITH

The Tax System Is Absurdly Complicated

"At 75,000 Pages And 2.4 Million Words, The U.S. Tax Code Is Twice The Size Of Encyclopedia Britannica And Nearly 200 Times Longer Than It Was A Century Ago." (William Becker, Op-Ed, "Here Is What Tax Reform We Actually Need Would Look Like," The Huffington Post , 04/25/17)

According To The Internal Revenue Service, "The Most Serious Problem Facing Taxpayers Is The Complexity Of The Internal Revenue Code." ("Annual Report To Congress, Taxpayer Advocate Service, Internal Revenue Service , 2008)

"Congress Has Made More Than 5,900 Changes" To The Federal Tax Code Since 2001 Alone, Averaging More Than One Change A Day. "It has now been more than 30 years since Congress enacted the Tax Reform Act of 1986 to substantially simplify the tax code, and since that time, the code has grown more complex by the year, as evidenced by the fact that Congress has made more than 5,900 changes to the code - an average of more than one a day - just since 2001." ("Annual Report To Congress 2016: Executive Summary: Preface, Special Focus, And Highlights," Internal Revenue Service National Taxpayer Advocate , 12/31/16)

The IRS Currently Publishes 199 Tax Forms Related To The Individual Income Tax." "The IRS currently publishes 199 tax reforms related to the individual income tax." (Demian Brady, "Tax Complexity 2017: As The Burden Grows, Taxpayers' Patience Shrinks," National Taxpayers Union , 04/13/17)

  • The IRS Publishes 230 Business Related Tax Forms . "As noted above, there are 199 forms related to the individual income tax, as well as 230 business tax forms, 14 related to employer's quarterly tax returns, and many others related to benefit plans, gift and estate taxes, etc. IRS's list of forms currently consists of 1,278 available files." (Demian Brady, "Tax Complexity 2017: As The Burden Grows, Taxpayers' Patience Shrinks," National Taxpayers Union , 4/13/17)

The "Mind-Numbingly Complex" And "Unfair" U.S. Corporate Tax System "Is In Desperate Need Of Reform." "The United States corporate tax system is in desperate need of reform, and there are many sources of discontent. The U.S. raises less corporate tax revenue than peer countries do, and the system is mind-numbingly complex, rife with distortion, and widely perceived to be unfair." (Kimberly Clausing, "The Real (And Imagined) Problems With The U.S. Corporate Tax Code," Harvard Business Review , 12/06/16)

Inefficiencies In The Tax Code Require Unnecessarily High Tax Rates That Generate Far Less Revenue Than Needed. "Inefficiencies [in the tax code] require higher tax rates than necessary while generating far less revenue than the government actually needs." (Rick Newman, Op-Ed, "The U.S. Tax System: Here's How Messed Up It Is," Yahoo Finance , 07/02/13)

The Cost Of Compliance In A Single Year Totals Billions Of Dollars And Is "Greater Than The Annual Revenue Of 154 Countries"

The National Taxpayers Union Estimates That The "Total Economic Value Of [The] Compliance Burden Of The [Federal] Tax Code" Is More Than $262 Billion. "We can arrive at an estimate of the value of this time by framing it in terms of private sector labor costs. According to the Bureau of Labor Statistics (BLS), U.S. employers spent an average of $32.76 per hour worked on total non-federal civilian employee compensation in December 2017 (that figure includes wages and salaries as well as benefits). Thus, 6.989 billion hours of such work would have paid $229 billion - valuable labor that will instead be lost to Tax Code compliance. Add to that the $33.672 billion in estimated out-of-pocket costs taxpayers spent on software and professional preparation services, and the total economic value of compliance burden of the Tax Code can be calculated at$262.632 billion." (Demian Brady, "Tax Complexity 2017: As The Burden Grows, Taxpayers' Patience Shrinks," National Taxpayers Union , 04/13/17)

The National Taxpayer Union Has Said That Amount Is Greater Than The Annual Revenue Of 154 Countries And All But One Fortune 500 Company. "This burden is greater than the annual revenues of all but one Fortune 500 companies. This cost also surpasses the GDP of 154 countries, including Chile, Finland, and Portugal." (Demian Brady, "Tax Complexity 2017: As The Burden Grows, Taxpayers' Patience Shrinks," National Taxpayers Union , 04/13/17)

Taxpayers Spend Six Billion Hours Each Year Filing Taxes. "In our first legislative recommendation, Simplify the Internal Revenue Code Now, we describe in detail the burdens the current, hideously complex Code imposes on taxpayers and the IRS alike. But suffice it to say here that a Code consisting of four million words8 and requiring six billion hours of taxpayer time when meeting their filing requirements9 is simply too complex to administer well." ("Annual Report To Congress," National Taxpayer Advocate , 2016)

In 2014, The Internal Revenue Service Commissioner, John A. Koskinen, Said 90 Percent Of Taxpayers Seek Some Sort Of Assistance To Prepare Their Taxes. " Each year, paid preparers are called upon by taxpayers to complete about 80 million returns, or about 56 percent of the total individual income tax returns filed, while another 34 percent of taxpayers use tax preparation software, for a total of 90 percent who seek some form of assistance." (IRS Commissioner John A. Koskinen, Committee On Finance, U.S. Senate, Testimony , 04/08/14, p. 1)

There Are Up To 1.2 Million Tax Preparers In The U.S. " All told, up to 1.2 million tax preparers make a living deciphering the labyrinth U.S. tax code for taxpayers." (Elaine Povich, "The Scary Truth About Your Independent Tax Preparer," The Huffington Post, 02/25/14)

In 2014, The Average Cost Of Professional Tax Preparation Was $273 . "The average cost of a professional income tax preparer to handle a 'typical' 2014 tax return (the one filed by April 15, 2015) was $273 this year." (Isaac M. O'Bannon, "Average Income Tax Preparation Fees Increased In 2015," CPA Practice Advisor , 10/28/15)

IBISWorld Reported In October 2016 That The Tax Preparation Industry Earned $10 Billion In Revenue. ("Tax Preparation Services In the US: Market Research Report," IBISWorld , 10/16)

TO AVOID "INTERNATIONALLY UNCOMPETITIVE" CORPORATE TAX RATES, SOME COMPANIES KEEP PROFITS OFFSHORE

The U.S. Corporate Tax Rate Is One Of The Highest In The World

The Statutory U.S. Corporate Tax Rate For Most Major Companies Is 34 To 35 Percent . "(C) 34 percent of so much of the taxable income as exceeds $75,000 but does not exceed $10,000,000, and (D) 35 percent of so much of the taxable income as exceeds $10,000,000." (26 U.S.C. § 11) )

According To Data From The Organization For Economic Co-Operation And Development, The U.S. Has The Highest Corporate Income Tax Rate Among The 35 OECD Nations. ( The Organisation For Economic Co-Operation And Development , Accessed 04/26/17)

According To A March 2017 Congressional Budget Office Report, The U.S. Has The Highest Statutory Corporate Income Tax Rate Among G20 Countries As Of 2012. ("International Comparisons Of Corporate Income Tax Rates," Congressional Budget Office , 03/17, p.2)

The U.S. Corporate Tax Rate Is 16.4 Percent Higher Than The Worldwide Average. "The U.S. tax rate is 16.4 percentage points higher than the worldwide average of 22.5 percent and a little more than 9 percentage points higher than the worldwide GDP-weighted average of 29.5 percent. Over the past ten years, the average worldwide tax rate has been declining, pushing the United States farther from the norm." (Kyle Pomerlau, "Corporate Income Tax Rates Around The World, 2016," Tax Foundation , 08/18/16)

According To A March 2017 Congressional Budget Office Report, The U.S. Average Corporate Tax Rate Is More Than 10 Points Higher Than That Of Australia, Canada, Germany, And The United Kingdom. ("International Comparisons Of Corporate Income Tax Rates," Congressional Budget Office , 03/17, p.2)

According To A March 2017 Congressional Budget Office Report, The U.S. Average Statutory Corporate Tax Rate Is 14.1 Percent Higher Than China's, Corporate Tax Rate Is 9.9 Points Higher Than China's, And Effective Tax Rate Is 8.6 Percent Higher Than China's. ("International Comparisons Of Corporate Income Tax Rates," Congressional Budget Office , 03/17, p.2)

According To The Tax Foundation, When Combined With The Average State Tax Rate, The United States Has The Third Highest Corporate Tax Rate In The World. "However, it is less well known how the United States stacks up against countries throughout the entire world. Expanding the sample of countries and tax jurisdictions to 188, the U.S.'s corporate tax rate of almost 39 percent is the third highest in the world, lower only than the United Arab Emirates' rate of 55 percent and Puerto Rico's rate of 39 percent." (Kyle Pomerlau, "Corporate Income Tax Rates Around The World, 2016," Tax Foundation , 08/18/16)

The Current Tax Structure Is "Antiquated And Overly Complex" Due In Part To "High Business Tax Rates That Are Internationally Uncompetitive." "Unfortunately, the current tax structure is antiquated and overly complex, due in part to high business tax rates that are internationally uncompetitive and overall revenue levels that are insufficient to cover necessary spending obligations." (Ben Ritz, "Reforming An Antiquated Tax Code," Bipartisan Policy Center , 11/03/16)

Corporations Hold Trillions Offshore To Avoid Onerous Domestic Tax Policies

According To The Firm Capital Economics, US Firms Held $2.5 Trillion Overseas In 2015 Due To "The Substantial Tax Bill Most Firms Would Face" If They Brought The Money To The U.S. "The cash held overseas by US firms has continued to grow at a rapid pace, rising to almost $2.5tn in 2015. The substantial tax bill most firms would face if they attempted to bring this cash home, however, means that it is still very unlikely to ever be repatriated under the current system." (Paul Ashworth, Michael Pearce, Andrew Hunter, "Firms Continue To Hoard Cash Overseas," Capital Economics , 09/19/16)

"Global Corporations Owe An Estimated $700 Billion In Taxes On The $2.6 Trillion In Past Profits They Are Holding Offshore." ("We Need Tax Reform That Works For Working People," AFL-CIO , 04/17/17)

Due To Loopholes In The In The Corporate Tax Code, Tax Revenues As A Share Of GDP Are Only Average Despite The High Tax Rate. "As a result of numerous loopholes, aggressive corporate tax avoidance, and the large share of U.S. businesses that takes the form of non-C-corporation activity (which is in itself a form of corporate tax avoidance), U.S. corporate tax revenues as a share of GDP are only average compared to other countries, despite the high tax rate." (Aaron Krupkin and William G. Gale, "Major Tax Issues In 2017," The Brookings Institution , 09/28/16)

"American Corporations Use Tax Breaks And Loopholes To Cut Their Collective Tax Liability By Nearly $190 Billion Annually." (William Becker, "Here Is What Tax Reform We Actually Need Would Look Like," The Huffington Post , 04/25/17)


Previous post

100 Days Of Obstruction: Dems Unhinged Anger Towards President Trump

Next post

Ditching Obama's Withdrawn Approach, Trump Has Been Accessible To Congress
Republican National Committee

Connect With Us

Republican National Committee
Chairwoman Ronna McDaniel
News & Videos
  • 310 First Street SE, Washington, DC 20003
  • 202-863-8500

By providing your phone number, you are consenting to receive calls and SMS/MMS msgs, including autodialed and automated calls and texts, to that number from the Republican National Committee. Msg&data rates may apply. Terms & conditions/privacy policy apply 80810-info.com.

Paid for by the Republican National Committee. Not Authorized By Any Candidate Or Candidate's Committee. www.gop.com

By providing your phone number, you are consenting to receive calls and SMS/MMS msgs, including autodialed and automated calls and texts, to that number from the Republican National Committee. Msg&data rates may apply. Terms & conditions/privacy policy apply 80810-info.com.

Paid for by the Republican National Committee.
Not Authorized By Any Candidate Or Candidate's Committee. www.gop.com