Tax Day is upon us, and for many Americans, April 15th is the most dreaded day on the calendar. If you’re like many taxpayers across the country, you’ve probably spent the past several weeks buried in paperwork, preparing various IRS forms, calculating expenses, and hunting for receipts for deductions.
Albert Einstein, the famed physicist who explained the special theory of relativity, was perplexed by the complicated tax code and once commented: “The hardest thing in the world to understand is the income tax.” Here at American Freedom Builders, we agree with Einstein - the tax code is entirely too complex.
The federal income tax was first instituted in 1913 with the passage of the 16th Amendment to the Constitution. Over the last hundred years, the federal tax code has grown exponentially, and federal taxes consume up to 40% of an individual’s income. The Internal Revenue Service (IRS), charged with enforcing our nation’s unwieldy tax code, is a massive bureaucracy that has made news over the past two years for unfairly targeting Americans for their personal beliefs. The unfortunate result of our tax code is the erosion of economic freedom and prosperity in the United States.
The tax code stifles US businesses and entrepreneurs:
When the tax code was written in 1913, it was only 400 pages long. Since then, it has grown to over 73,000 pages and contains almost 4 million words. By comparison, in all of Shakespeare’s plays, there are only 835,997 words. So what impact does this excessively long tax code have on individuals and small businesses? Complying with the U.S. tax code drags the economy down by taking time away from business creation or productive labor and instead creating bureaucratic paperwork.
According to a report by the Laffer Center:
- Individuals spend more than 3 billion hours each year complying with the income tax code, which costs the U.S. economy roughly $216 billion annually.
- Businesses spend close to 3 billion hours complying with the business income tax code, at a cost to U.S. economy of roughly $161 billion.
The tax code has made the United States less competitive in the global economy:
Because of the tax code’s complexity and because of the high rates that individuals, families, and businesses are forced to pay, many businesses move to other countries to conduct their business. According to the Tax Policy Center, “The current U.S. tax system actually encourages U.S. multinationals to locate assets and economic activity, and earn and realize profit, in other countries where taxes are lower.” In other words, our tax code drives businesses abroad and gives other countries with lower tax rates and less burdensome tax codes a decisive advantage over the United States.
The State and Local Tax Scenes
Taxpayers across the country are not only burdened by the federal tax code; each state and local government has its own tax rules, which add to the burden placed on taxpayers. Some states have excessively high real estate taxes, whereas some other states have higher income tax rates. The Tax Foundation published a report last year that demonstrates the United States is less competitive globally because of state and local taxes.
Interested in seeing how your state compares to the rest of the country? Check out Kiplinger’s List of the 10 Most Tax-Friendly States.
The current tax code - with a whopping 73,000 pages of regulations - hinders business and undermines economic freedom. American Freedom Builders supports tax reform at the federal level as the best way to promote economic freedom and prosperity. To stay plugged in and to join the conversation on changing the tax code, like us on Facebook and follow us on Twitter.