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1 Scott A. Hodge, Perspectives on the Need for Tax Reform 1 (2016)

handle is hein.taxfoundation/perspndtxr0001 and id is 1 raw text is: TAXO FOUNDATION May 25, 2016 The Tax Foundation is the nation's leading independent tax policy research organization. Since 1937, our research, analysis, and experts have informed smarter tax policy at the federal, state, and local levels. We are a 501(c)(3) non profit organization. ©2016 Tax Foundation Distributed under Creative Commons CC BY NC 4.0 Designer, Dan Carvajal Tax Foundation 1325 G Street, NW, Suite 950 Washington, DC 20005 202.464.6200 taxfoundation.org Written Testimony Of Scott A. Hodge President Tax Foundation Before the Ways and Means Subcommittee on Tax Policy Perspectives on the Need for Tax Reform Thank you Chairman Boustany and Ranking Member Neal for the opportunity to talk with you today about the need for tax reform. There are many reasons to reform our tax code, but the cost of tax complexity to our nation's economy should be near the top of that list. Over the last century, the federal tax code has expanded dramatically in size and scope. In 1955, the Internal Revenue Code stood at 409,000 words in length. Since then, it has grown to a total of 2.4 million words: almost six times as long as it was in 1955 and almost twice as long as in 1985. However, the tax statutes passed by Congress are only the tip of the iceberg when it comes to tax complexity. There are roughly 7.7 million words of tax regulations, promulgated by the IRS over the last century, which clarify how the U.S. tax statutes work in practice. On top of that, there are almost 60,000 pages of tax-related case law, which are indispensable for accountants and tax lawyers trying to figure out how much their clients actually owe. Tax complexity creates real costs for American households and businesses, starting with just the time it takes us to comply with the tax code. According to the latest estimates on Reginfo.gov, Americans spend over 8.9 billion hours complying with IRS tax filing requirements, equal to nearly 4.3 million full-time workers doing nothing but tax return paperwork. To put that in perspective, 4.3 million is greater than the populations of 24 U.S. states. Put in dollar terms, those 8.9 billion hours add up to more than $400 billion each year1 in lost productivity, or greater than the gross state product of 36 states. Tax complexity, and the fear of making mistakes, motivates about 62 percent of all taxpayers to use tax return preparers, but the percentage climbs to about 73 percent for the poorest Americans claiming the EITC.2 But tax complexity creates other costs besides our lost time. Many of the most 1 Authors calculations: See the appendix for details. 2 National Taxpayer Advocate, Report to Congress: Fiscal 2010 Objectives, June 30, 2009, p. xxii. http:/vww.irs.gov/pub/ irs-utl/fy2OlOobjectivesreport.pdf

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