The Most Taxing Day of the Year

Even though it is April 18, not April 15, today is tax day and it is the most taxing day of the year.  Why do people dread this day every year?  Let’s take a look at some factoids from the the National Taxpayers Union, Tax Foundation, and National Taxpayer Advocate as compiled by the Republican Study Committee:

• The IRS’s Taxpayer Advocate Service notes that “The Code has grown so long that it has become challenging even to figure out how long it is.” National Taxpayers Union found a total of 3,784,745 words in the most recently issued Tax Code (January 2009).
• According to the Tax Foundation, as of 2005 (the most recent data available), IRS regulations contained over 6,958,000 words—an 18.7% increase since 1995 and almost 9 times the total number of words in the King James Bible.
• According to the National Taxpayer Advocate, in 2007, the IRS estimated that individual and business taxpayers spent 7.6 billion hours complying with the tax laws. That is the equivalent of 3.8 million employees working 40-hour weeks year-round without any vacation. That’s more workers than are employed at the five biggest employers among Fortune 500 companies – more than all the workers at Wal-Mart Stores, United Parcel Service, McDonald’s, International Business Machines, and Citigroup combined.
• The National Taxpayers Union (NTU) estimates that, in 2011, individual taxpayers alone will spend an estimated 2.43 billion hours complying with the income tax laws this year. Using the most recently reported average employer cost for civilian workers by the Bureau of Labor Statistics of $29.37 per hour, this time is worth an incredible $71.4 billion.
• The Internal Revenue Service (IRS) reported that individuals spent an estimated $31.5 billion in 2009 for tax software, tax preparers, postage, and other out-of-pocket costs related to filing their federal income tax—which is more than the entire economic output of Yemen.

If that isn’t depressing enough, here are some examples of various impending tax increases as outlined by the Joint Committee on Taxation:

2011:

The $8,000 first-time homebuyer credit will expire for those serving on qualified official extended duty overseas. 

2012:

• The one-year employee-share payroll tax cut of 2% will expire (sec. 601).
• The exemption for the Alternative Minimum Tax (AMT) will decrease from $46,700 to $33,750 for single filers and from $70,950 to $45,000 for married couples filing jointly.
• The $250 deduction for elementary and secondary school teachers to purchase supplies for use in the classroom will expire.

 2013:

• The marginal income tax rates will increase as follows:

                  –35% bracket will increase to 39.6%

                  –33% bracket will increase to 36%

                  –28% bracket will increase to 31%

                  –25% bracket will increase to 28%

                  –10% and 15% brackets will condense to 15%

• The personal capital gains tax will increase to 20% and 10% (from 15% and 5%).
• The “death” tax using the “stepped up” basis will return with a 55% maximum rate (including surtax) and a $1 million exemption, after years of decreasing “death” tax rates, increasing exemptions, and the 2010 tax compromise’s 35% tax rate with a $5 million exemption.
• Several provisions of the student loan interest deduction, the increase in the phase-out range, the repeal of the limitation on number of months interest is deductible, and the allowance for voluntary, deductible payments of interest will expire.
• The maximum contribution to educational IRAs will decrease from $2,000 to $500, the expanded list of allowable distributions will expire, and the marriage penalty for the phase-out range will be reinstated.

Taxpayers are justifiably frustrated with the complexity and expense of taxes.  Congress needs to do the right thing for taxpayers and the economy by lowering taxes and making the system easier to understand.