by Matt Agorist, The Free Thought Project:
(Steve Dewey) — The American public has long held an unfavorable view of the Internal Revenue Service, as evidenced by several historical surveys. A Gallup poll taken more than 25 years ago in October 1997 found that 69 percent of the American public held the opinion that the IRS “frequently abuse[d] its powers.” Fast forward to October 2022, when another Gallup poll was taken on the American public’s job-performance rating of 11 federal agencies. The poll ranked the IRS dead last, with only 34 percent of Americans regarding the job performance of the IRS as “excellent/good.”
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Another poll released by the Pew Research Center in March 2015 on the “complexity of the tax system” indicated that 72 percent of the American public were at least somewhat bothered by the complexity, and 44 percent were a lot bothered by it. Public concern over the complexity of the federal tax code is certainly understandable when you consider that the body of law that codifies all federal tax laws, the Internal Revenue Code (U.S. Code Title 26), comprised 6,979 pages as of year-end 2022.
Aside from the American public’s unfavorable view of the tax system, there is a real economic reason for addressing its complexity: the enormous cost of compliance for the American taxpayer, both individual and corporate. The Tax Foundation issued a report in August 2022 estimating that “Americans [would] spend over 6.5 billion hours complying with IRS tax filing and reporting requirements in 2022.” This equates to approximately 3.1 million full-time workers focused entirely on federal tax compliance.
The Tax Foundation estimates that the monetary cost of compliance based on its estimated 6.5 billion work hours would at minimum amount to $313 billion in 2022 — nearly 25 times greater than the IRS’s $12.6 billion 2022 budget with a workforce of approximately 80,000 employees.
An additional unknown cost of significant size is the time spent by American taxpayers in calling the IRS for tax-filing assistance. Based on information from the IRS’s Taxpayer Advocate Service, Americans made 72.8 million calls to the IRS in 2022 seeking help. Only 7.4 million calls were answered — just over 10 percent — and these had an average wait time of 28 minutes.
The Taxpayer Advocate Service, an independent organization within the IRS established in 1996 to help Americans address federal tax problems, issues an annual report to Congress every January with an assessment of the IRS’s prior-year operations and some legislative recommendations. The recommendations typically include more amendments to the Internal Revenue Code, more IRS rules and rule revisions, more funding from Congress, expanding jurisdiction of the U.S. Tax Court, and more mandates on the private sector, such as establishing new IRS competency standards for tax preparers. Hence, these ongoing annual recommendations, while well-intentioned, only serve to tinker with a massive system already fundamentally broken and beyond repair.
The current American tax system is clearly a dysfunctional labyrinth and an oppressive cost burden on American citizens and businesses. So, how did the United States, a nation founded on liberty and limited government, get to this point? A historical look at the evolution of the American tax system provides the necessary context for understanding the problem and achieving a sensible solution.
The 16th Amendment: A Brief History
Despite a national history predominantly void of income taxes for more than a century, the experience of an income tax being put into actual practice from 1862 through 1872, and again briefly in 1894, caused the American public and its legislative representatives to at least become accustomed to the idea of a federal income tax. But more importantly, the narrow Supreme Court decision in Pollock v. Farmers’ Loan & Trust Co. energized a growing populist and progressive political movement in the United States to push for a graduated federal income tax in the late 1890s and early 1900s.
When Republican President William Howard Taft succeeded progressive Republican President Theodore Roosevelt in 1909, he was under immediate pressure to support a new graduated income tax law. Not only was there widespread bipartisan support for a new income tax on high-income Americans, but Taft’s predecessor Roosevelt had also advocated for it. Taft was lukewarm, at best, about reviving the tax, but he realized it was an issue that he had to face as aggressive efforts by congressional Democrats to legislate new taxes on corporations and wealthy Americans mounted. These efforts included a new income tax proposed by Sen. Joseph Bailey Sr. (D-Texas) that was likely to pass in Congress, as well as proposals by Sen. Norris Brown (R-Neb.) for a new income tax amendment to the Constitution.
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