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Hyoi · 04-10-2007, 06:45 AM

This is a part of what the existing system is costing us. We're already suckers.

Tax Gap

In her testimony before Congress, Nina Olson, the National Taxpayer Advocate, said the following regarding the impact of noncompliance on taxpayers, in general:

"If we divide the 2001 net tax gap estimate of $255 billion by 130 million individual taxpayers, we can see that each of those taxpayers in 2001 paid, on average, an extra $2,000 to subsidize the unwillingness or inability of some taxpayers to pay their fair share."

In 2001 the average taxpayer paid $8,265 in taxes. With an estimated tax gap - which is the difference between what taxpayers should pay and what they actually pay on a timely basis -of $345 billion, this means that the 130 million taxpayers paid on average $2,649 more in taxes to subsidize the unwillingness or inability of some taxpayers to pay their fair share.
In other words, if everyone paid the taxes they owed, average individual income taxes paid per taxpayer could have been 32.1 percent less.

Olson, Nina E., National Taxpayer Advocate, "The Tax Gap and Tax Shelters," Taxpayer Advocate Service,
Testimony before the Senate Committee on Finance, July 21,2004.

Time is money.

According to a detailed study by the Tax Foundation, in 2005 individuals, businesses, and non-profits spent an estimated 6 billion hours complying with the federal income tax code at an estimated cost of over $265.1 billion. This amounts to imposing a 22.2-cent tax compliance surcharge for every dollar the income tax system collects.

A compliance burden of 6 billion hours per year represents a work force of over 2,884,000 people: Larger than the populations of Dallas (1,210,393), Detroit (900,198), and Washington, D.C. (553,523) combined; and more people than work in the auto, computer manufacturing, airline manufacturing, and steel industries combined. Projections show that by 2015 compliance costs will grow to $482.7 billion.

Compliance costs are regressive.

Business pays 55.7 percent of compliance costs, individuals 41.7 percent and non-profits 2.5 percent.

Compliance costs are found to be highly regressive. Taxpayers with adjusted gross incomes under $20,000 incur a compliance cost of 5.8 percent of income. Taxpayers with AGI over $200,000 incur a compliance cost of only 0.45 percent. Over 54 percent of all the tax surcharge savings resulting from tax simplification would go to taxpayers with less than $50,000 in adjusted gross income.

Moody, J. Scott, Wendy P. Warcholik, and Scott A. Hodge, "The Rising Cost of Complying with the Federal Income Tax," Tax Foundation, Special Report No. 138, December 2005.

Efficiency costs.

The efficiency costs of the federal tax system dwarf compliance costs. Efficiency costs occur when tax rules distort the decisions of individuals and businesses regarding work, savings, consumption, and investment. By changing the relative attractiveness of highly taxed and lightly taxed activities, taxes alter decisions such as what to consume and how to invest. When taxpayers alter their behavior in response to tax rules, they often end up with a combination of consumption and leisure that they value less than the combination they could have achieved if they made decisions free of any tax influences. This reduction in value is a welfare loss or efficiency cost. According to research by the Government Accountability Office, efficiency costs are on the order of magnitude of two to five percent of Gross Domestic Product (GDP). Based on GDP of $13.259 trillion in 2006, efficiency costs are an additional $265 billion to $663 billion.

"Tax Policy: Summary of Estimates of the Costs of the Federal Tax System," U.S. Government Accountability Office Report No. GAO-05-878, August, 2005, p. 20.

04-10-2007, 06:45 AM	#36
Hyoi Faithful Companion Join Date: Mar 2007 Posts: 188	This is a part of what the existing system is costing us. We're already suckers. Tax Gap In her testimony before Congress, Nina Olson, the National Taxpayer Advocate, said the following regarding the impact of noncompliance on taxpayers, in general: "If we divide the 2001 net tax gap estimate of $255 billion by 130 million individual taxpayers, we can see that each of those taxpayers in 2001 paid, on average, an extra $2,000 to subsidize the unwillingness or inability of some taxpayers to pay their fair share." In 2001 the average taxpayer paid $8,265 in taxes. With an estimated tax gap - which is the difference between what taxpayers should pay and what they actually pay on a timely basis -of $345 billion, this means that the 130 million taxpayers paid on average $2,649 more in taxes to subsidize the unwillingness or inability of some taxpayers to pay their fair share. In other words, if everyone paid the taxes they owed, average individual income taxes paid per taxpayer could have been 32.1 percent less. Olson, Nina E., National Taxpayer Advocate, "The Tax Gap and Tax Shelters," Taxpayer Advocate Service, Testimony before the Senate Committee on Finance, July 21,2004. Time is money. According to a detailed study by the Tax Foundation, in 2005 individuals, businesses, and non-profits spent an estimated 6 billion hours complying with the federal income tax code at an estimated cost of over $265.1 billion. This amounts to imposing a 22.2-cent tax compliance surcharge for every dollar the income tax system collects. A compliance burden of 6 billion hours per year represents a work force of over 2,884,000 people: Larger than the populations of Dallas (1,210,393), Detroit (900,198), and Washington, D.C. (553,523) combined; and more people than work in the auto, computer manufacturing, airline manufacturing, and steel industries combined. Projections show that by 2015 compliance costs will grow to $482.7 billion. Compliance costs are regressive. Business pays 55.7 percent of compliance costs, individuals 41.7 percent and non-profits 2.5 percent. Compliance costs are found to be highly regressive. Taxpayers with adjusted gross incomes under $20,000 incur a compliance cost of 5.8 percent of income. Taxpayers with AGI over $200,000 incur a compliance cost of only 0.45 percent. Over 54 percent of all the tax surcharge savings resulting from tax simplification would go to taxpayers with less than $50,000 in adjusted gross income. Moody, J. Scott, Wendy P. Warcholik, and Scott A. Hodge, "The Rising Cost of Complying with the Federal Income Tax," Tax Foundation, Special Report No. 138, December 2005. Efficiency costs. The efficiency costs of the federal tax system dwarf compliance costs. Efficiency costs occur when tax rules distort the decisions of individuals and businesses regarding work, savings, consumption, and investment. By changing the relative attractiveness of highly taxed and lightly taxed activities, taxes alter decisions such as what to consume and how to invest. When taxpayers alter their behavior in response to tax rules, they often end up with a combination of consumption and leisure that they value less than the combination they could have achieved if they made decisions free of any tax influences. This reduction in value is a welfare loss or efficiency cost. According to research by the Government Accountability Office, efficiency costs are on the order of magnitude of two to five percent of Gross Domestic Product (GDP). Based on GDP of $13.259 trillion in 2006, efficiency costs are an additional $265 billion to $663 billion. "Tax Policy: Summary of Estimates of the Costs of the Federal Tax System," U.S. Government Accountability Office Report No. GAO-05-878, August, 2005, p. 20. __________________ When you stop trying to make sense of it all, it all begins to make sense.