A new Tax Foundation study, released just in time for those of you who are getting a jump on your 1040s, puts the cost of complying with the federal income tax at $265 billion in 2005, or 22 cents for every dollar collected. The compliance cost, which was 14 cents per dollar in 1990, is down slightly from the 2004 figure of 24 cents.
This burden consists mainly of the value assigned to 6 billion hours of effort, based on average pay for professional tax preparers and average hourly compensation for the general population (for people who prepare their own tax forms). It does not include the costs associated with litigating tax disputes, operating the IRS and the U.S. Tax Court, or tax planning aimed at minimizing liability. Unsurprising bottom line: The tax code is too damned complicated, dedicated as it is to myriad goals aside from generating revenue.