Kerby Anderson

Tomorrow is Tax Day, and I would like to focus some needed attention on the significant cost of tax compliance. But before I get to those facts and figures, let’s start with some first principles.

Many people refer to April 15 as “the day we pay our taxes.” But most of our taxes were already withheld from paychecks. Tax Day is when we file the more than 280 million tax returns to see if we get any money back from the Federal treasury.

Tax compliance has become more difficult because the federal government spends more than it receives. It needs to print more money to cover the nearly $2 trillion annual deficits they run up. That means the dollar is worth less each year. If you put the money you try to save merely into a bank account, you are losing more and more value each year. To keep up with monetary inflation, we need to either become investment experts or hire one.

If we hire a financial planner, things usually get more complicated because our money is often invested in ways most of us don’t completely understand. Then we usually need to hire a tax professional. During this time of year, I often say that I am at the mercy of bookkeepers and accountants. They are the experts in the Byzantine tax code that runs more than 6,800 pages and take billions of hours to apply that knowledge to the multiplicity of investments and then fill out the mountains of IRS paperwork and tax returns.

Americans spend about 8 billion hours trying to comply with the tax code at a total compliance cost of more than $550 billion. We do this because government spends too much and therefore must print too many dollars. If you dread tomorrow, perhaps you should agree with me to cut the cost of government and simplify the tax code.