As Tax Day approaches, Americans are feeling the stress and impact of the current Tax Code. Besides the obvious financial impact of paying taxes, Americans are experiencing a confusing burden imposed through compliance with federal forms, reporting requirements, and paperwork.
In 1995, Congress passed the Paperwork Reduction Act (PRA) that was intended to improve transparency and address the need for reductions in paperwork. The PRA requires the Office of Management and Budget (OMB) to provide Congress with reports on the actual burden imposed on taxpayers to complete the growing number of federal forms. These reports detail the number of hours Americans spend each year complying with paperwork, identify the agencies who produce the most paperwork, note violations by agencies that fail to properly provide information to the OMB, and outline the paperwork burden over time.
According to the most recent annual PRA report (drafted by the Office of Information and Regulatory Affairs (OIRA) within the OMB), Americans spent over 9.78 billion hours complying with the government-imposed paperwork burden during FY 2015. Looking to future years, according to OIRA’s live-tracker of “Government-Wide Totals for Active Information Collections,” Americans are projected to spend over 11.6 billion hours complying with paperwork regulations that have been approved, and are being implemented, which would cost $128 billion annually.
If you’re a taxpayer who files your taxes, it should come as no surprise that the department most responsible for the paperwork burden is the Treasury. The Treasury’s paperwork burden has grown from 6.4 billion hours to 7.3 billion hours over 10 years (2005 to 2015). Over that time span the Treasury’s paperwork burden has made up between 75% and 78% of the entire government paperwork burden. This is largely thanks to the Internal Revenue Service, which possesses extensive regulatory power pertaining to its responsibility to administer the tax laws.
| Treasury Paperwork Burden Relative to Government-Wide Total | |||
|---|---|---|---|
| Fiscal Year | Government Paperwork Burden (millions of hours) | Treasury Paperwork Burden (millions of hours) | Treasury Paperwork Burden, Percentage of Government Total |
| 2005 | 8,241 | 6,435 | 78% |
| 2006 | 8,924 | 6,966 | 78% |
| 2007 | 9,642 | 7,631 | 79% |
| 2008 | 9,714 | 7,785 | 80% |
| 2009 | 9,796 | 7,643 | 78% |
| 2010 | 8,783 | 6,780 | 77% |
| 2011 | 9,138 | 6,734 | 74% |
| 2012 | 9,467 | 7,062 | 75% |
| 2013 | 9,453 | 7,007 | 74% |
| 2014 | 9,433 | 6,989 | 74% |
| 2015 | 9,778 | 7,357 | 75% |
| Source: Office of Management and Budget. | |||
The opportunity costs of paperwork burdens are shared by millions of households across the economy, but small businesses are especially impacted by the federal government’s complex regulations and mandates. At a House Small Business Committee hearing, a number of experts noted how small businesses face 3.3 billion hours and $111 billion in compliance costs per year. Compared to larger businesses, small businesses lack the resources or manpower to comply with the paperwork in a cost-efficient way, and this burden is generally passed onto consumers in the form of higher prices or lower quality goods and services.
Additionally, the success of the PRA is completely contingent on government departments honestly and accurately reporting the paperwork burden they create for the public. Without this information it is difficult to highlight the burden being placed on Americans, and impossible to help alleviate this burden by reducing unwarranted paperwork costs. However, there have been a number of different violations from departments such as the Department of Defense, Department of Health and Human Services, and the Internal Revenue Service, which collectively composed 136 of the 283, or 48%, of all violations for FY 2015. Moreover, violations by departments increased by 58 violations between FY 2014 and FY 2015.
These complexities and time-consuming burdens are not only the reflection of an overly bureaucratic system, but also echo the need for comprehensive tax and regulatory reform. These mandates hinder economic growth and force businesses, especially small businesses, to use valuable time and resources complying with government paperwork. Tax and regulatory reform coupled with measures like simplifying the reporting process through online reporting can go a long way in reducing these paperwork burdens.