The Heritage Foundation

Executive Summary #1170es on Taxes

April 15, 1998

April 15, 1998 | Executive Summary on Taxes

BG1170es: 737,734,941,858 Reasons...And Still Counting: Why A FlatTax Is Needed to Reform the IRS

Last year, The Heritage Foundation released a publication, "577,951,692,634 Reasons...And Counting: Why a Flat Tax Is Needed to Reform the IRS." Since that time, calls to reform the Internal Revenue Service have led to unprecedented hearings in Congress and outcry among the public. In 1997, however, Congress moved away from reform and approved a tax bill that adds even more complexity to the tax code. Because of that bill, as well as Heritage's continued research into the myriad nooks and crannies of the current tax code, 159,783,249,224 new reasons that the Internal Revenue Code should be replaced with a flat tax have come to light, bringing the total number of reasons to 737,734,941,858.

A 1997 national voter survey by the Polling Company finds that the majority of respondents would prefer to undergo a root canal than be audited by the Internal Revenue Service (IRS). And a 1990 People magazine survey finds that the most frightening words people could imagine hearing when they answer the phone are "This is the IRS calling." Although Americans have every right to be upset by an oppressive tax system, their anger should not be directed at the IRS. The vast majority of problems with the current tax system are the result of 85 years of bad tax policy.

The way to reduce the public's intense aversion to the IRS is to enact a flat tax. By wiping out all the complicated, obscure, and convoluted provisions of the current tax code, a flat tax would reduce compliance costs and ease the uncertainty and anguish that make April 15 everyone's least favorite day of the year. The following numbers provide the evidence:

62,000,000 = The number of lines of computer code required by the IRS to manage the current tax code.

3,200 = The number of threats and assaults against IRS agents over a five-year period.

820 = The number of pages added to the tax code by the 1997 budget act.

271 = The number of new regulations issued by the IRS in 1997.

569 = The number of tax forms available on the IRS Web site.

33,984,689 = The number of civil penalties assessed by the IRS in 1996.

2,100,000 = The number of IRS audits conducted in 1996.

85 = The percentage of taxpayers selected by the IRS for random audits who had incomes of less than $25,000.

15 = The number of years the IRS believes it will need to modernize its computer system.

653 = The number of minutes the IRS estimates it takes to fill out a 1040 form.

$134,347,500,000 = The Clinton Administration's estimate of private-sector compliance costs.

22 = The percentage of occasions in which reporters from Money magazine received inaccurate or incomplete information in 1997 when calling the IRS's toll-free hot line.

40 = The percentage of occasions in which reporters from Money magazine received wrong answers in 1997 during face-to-face visits at IRS customer service offices.

46 = The number of wrong answers Money magazine received in 1998 when it asked 46 different tax experts to estimate a hypothetical family's 1997 tax liability.

$34,672 = The difference in liability between the highest and lowest incorrect answers among the 46 professionals who failed to calculate the correct tax liability of Money magazine's hypothetical family.

$610 = The amount by which the hypothetical family would have overpaid its 1997 taxes if it had used the answer that came closest to the actual tax liability (assuming, of course, that Money magazine's expert had filled out the tax return correctly).

824 = The number of changes in the tax code accompanying the 1997 tax cut.

285 = The number of new sections in the tax code created by the 1997 budget act.

3,132 = The number of pages needed by the Research Institute of America to explain the changes in the tax law in 1997.

11,410 = The number of tax code subsection changes between 1981 and 1997.

160 = The percentage increase in the stock value of tax preparation firms in the month period surrounding enactment of the 1997 budget.

54 = The number of lines on the new capital gains form, up from 23 before the 1997 budget deal.

$3,500 = The amount one woman was forced to pay twice, even though the IRS eventually admitted that the debt had been owed--and paid--by her former husband.

$26 = The amount the IRS seized from a six-year-old's bank account because her parents owed money.

$900,000 = The amount a small businessman was fined after being entrapped by his accountant, a paid informer for the IRS.

25 = The percentage of households with incomes over $50,000 that would pay an inaccurate assessment from the IRS rather than fight.

The only way to address these problems is fundamental reform. A flat tax that taxes all income--but only one time and at one low rate--will reduce the power of the IRS dramatically by eliminating the vast majority of possible conflicts. In a system that asked individuals to provide only their total income and the size of their families, much of the fear, frustration, and uncertainty surrounding the payment of taxes would disappear.

Daniel J. Mitchell, Ph.D., is McKenna Senior Fellow in Political Economy at The Heritage Foundation.

About the Author

Daniel J. Mitchell, Ph.D. McKenna Senior Fellow in Political Economy