Both figures are unnervingly high, given that most people take the standard deduction. Since it was introduced in 1944, the standard deduction has relieved many millions of taxpayers from some of the complexity and cruelty of the tax code. The tax changes in 1969 and 1986 made taking the standard deduction more attractive to a lot of filers. The U.S. personal income tax system is probably the most complicated in the world, says Professor Joel Slemrod, director of the Office of Tax Policy Research at the University of Michigan Business School. Click on image to see larger version.
Complexity costs money.
Estimates provided by Slemrod suggest that direct and indirect costs of complying with the personal income tax code such as accountants fees and taxpayer time, respectively are running at more than 8 percent of the money Washington gets from the personal income tax. The 1986 estimate is based on Edwin S. Rubenstein s extrapolation of Slemrod s figures. The compliance cost spike in 1986 reflects the numerous taxpayers who realized capital gains that year in anticipation of the 1987 capital gains tax hike. Reprinted by permission of Forbes magazine. Copyright Forbes, Inc., 1999.