Tax Compliance costs 2% of Economy

Complying with the current federal tax code costs American taxpayers at least $100 billion annually, and lost economic efficiency associated with the tax system may top half a trillion dollars, auditors for the Government Accountability Office told Congress.

In a new report likely to add fuel to campaign for an easy-to-administer national consumption tax, the GAO said that the "lowest available estimates" of the cost of complying with federal income, payroll and excise taxes is $107 billion -- 1 percent of the nation's total gross domestic product. Other studies suggest compliance costs may be 50 percent higher than these estimates, the GAO told Congress.

Citing U.S. Treasury Department estimates that individuals, businesses and exempt organizations spent a total of 6.4 billion hours completing federal tax forms last year, the agency concluded that even those estimates might be conservative.

"If this burden were monetized at rates between $15 and $30 per hour, the total cost would amount to between about $100 billion and $200 billion" each year, the report said.
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