What does it cost you every year to file your income taxes? That's a questions I hadn't really considered until I read Arthur Laffer's article in the Wall Street Journal today. Arthur Laffer is the originator of the "Laffer Curve" which shows that tax revenue actually goes up when tax rates go down. Just to remind you of how that has worked historically, the house.gov website posted a report by the Joint Economic Committee that stated:
"... individual income tax revenues rose from $244 billion in 1980 to $446 billion in 1989."
That's the Laffer Curve in action showing what happened after Ronald Reagan cut taxes. Unfortunately, Congress saw the increased revenue as license to spend wildly.
Mr. Laffer's article in today's journal is about the cost to Americans of filing taxes. He points out that for every $1 Americans pay in taxes, there is a 30 cent mark-up which includes the costs of their own time spent filing and complying with the tax code; plus the tax collection costs of the IRS; plus the tax compliance outlays that individuals and businesses pay to help them file their taxes. These costs amount to $431 billion annually.
The article points out:
"David Keating of the National Taxpayers Union provides a useful perspective on how big the tax compliance industry is. According to his research, as of 2009 the income-tax industry employed "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." Without diminishing in any way the professionalism of tax attorneys, accountants and financial planners, all of these efforts produce nothing other than, well, tax compliance."
The IRS tax code is 3.8 million words--over 11,000 single-spaced typed pages. Mr. Laffer supports a flat tax rate. I am not sure exactly what the right answer is, but I know the current system is much more complex than it needs to be. It's time to put in a flat rate so that everyone in America is able to do their own taxes and all Americans are taxed, thus having 'skin in the game.'
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