Filing taxes in the United States keeps getting more complicated, and most taxpayers would pay to make it simpler. In a survey of 796 US taxpayers, those willing to pay for a simpler system put its value at $130 a year on average.
The finding comes from “Rising Income Tax Complexity”, by Youssef Benzarti of the University of California, Santa Barbara and Luisa Wallossek of LMU Munich, released in December 2023 as NBER Working Paper No. 31944.
What taxpayers told the researchers
The authors ran the survey on the Prolific platform on July 10 and 11, 2023. Respondents lived in the US, were older than 25, spoke English as a first language and were employed, and anyone who did not usually file a return was dropped. 85% filed their own returns, often with software.
77% described tax filing as tedious. The average respondent spent about 4 hours on it: 4.4 hours when filing themselves and 3.5 hours when using a tax preparer.
Self-filers spent 2.2 hours in tax software, 1.4 hours looking for receipts and forms and 0.8 hours learning about the tax law. Perceived complexity barely differed by income or political leaning.
Most respondents said filing had become more complex since they first did it, and those with longer filing histories saw a bigger increase. Asked about the ideal system, 46% chose the most extreme answer in favor of less complexity.
Most also rejected the usual defenses of complexity. They believed it makes the tax system less fair and that it encourages tax evasion rather than discouraging it.
The majority were willing to pay more tax for a simplified system. The average of $130 a year is about 4% of the average refund, the authors note, and close to what tax software charges. Most were also willing to pay for a pre-filled return, which some other countries offer, at an average of $77 a year.
Liberals and conservatives reported similar filing times. Liberals were more convinced that complexity breeds evasion and unfairness, and more willing to give up part of a refund for simplicity, but both groups on average favored simpler taxes and pre-populated forms.
A tax code that keeps getting longer
To reach back in time, the authors counted the words in the income tax codes of six countries: Canada, France, Germany, Morocco, Switzerland and the United States. All six share an upward trend.
Over the past 30 years, the US Internal Revenue Code grew from 3.1 million to 4.3 million words, an increase of about 40%. The US had the longest code in the sample, though other countries saw even larger relative increases.
Other indicators point the same way. The average US taxpayer files more forms than before, Google searches for terms such as “tax filing” and “tax preparer” have risen, and IRS operating costs doubled over three decades to $14 billion in 2022. Employment in accounting, tax preparation and related firms grew by about 30% over two decades.
The limits of the evidence
The authors acknowledge that word counts are an imperfect proxy, since a longer code could even be clearer if the extra words reduce uncertainty. Their survey also skews toward self-filers: 85% in the sample, against 44% of individual returns nationally in 2022, according to the IRS figure they cite.
The filing times respondents reported were lower than IRS estimates. Even so, the survey and the word counts agree, and the authors point out that the added complexity has not bought more progressivity, since effective tax rates for the very rich have fallen over the same decades.
Study Details:
- Title: Rising Income Tax Complexity
- Authors: Youssef Benzarti, Luisa Wallossek
- Journal: NBER Working Paper No. 31944
- Publication Date: December 2023
- DOI: 10.3386/w31944