IRS Compliance Costs $546 Billion Per Year

Editor’s note: This is a lightly edited transcript of the accompanying video from professor Peter St. Onge.

Americans spend over $500 billion per year defending themselves against the IRS.

That’s spitting distance from the $800 billion the Defense Department spends protecting us against foreigners—well, failing to protect, in the case of the border.

So, forget Ukraine. Forget ISIS. The calls are coming from inside the house.

The number comes from my based colleague Richard Stern, who reports on a new Tax Foundation study that the income tax costs Americans $546 billion per year in compliance alone. Compared to
our national defense budget of $849 billion, which is supposed to protect the American people
yet completely fails to protect us from the IRS.

Note this $546 billion is on top of the $4.9 trillion the IRS actually took from us in taxes. And, of course, it’s separate from the economic impact of taxes, which might add another $15 trillion in lost income.

Breaking it down, the $546 billion is made up of 7.9 billion hours Americans spent complying with
the tax code. Which, at 10 million words, is the length of 21 “Lord of the Rings” trilogies.

Of course, nobody actually understands the tax code—that’s why big corporations hire $500-an-hour tax lawyers. But regular Americans—many of whom cannot name a state, thanks to government schools—are assumed to have complete mastery of the entire 10 million words of legalese, or the IRS will
throw you in a cage.

For perspective, an entire lifetime of work is 86,000 hours—40 hours times 48 weeks times 45
years. So, tax compliance entirely consumes almost a million lifetimes of work. Every single year.

Put differently, that’s equivalent to nearly 4 million Americans working full time and without pay
doing nothing but tax paperwork.

That’s the population of Los Angeles. It’s also 46 times the workforce of the IRS.

Meaning for every tax bureaucrat we pay to steal from us, another 46 Americans have to spend
their evenings and weekends helping the IRS steal instead of playing with their kids.

On top of the hours, Americans spend another $133 billion a year out-of-pocket on things like tax
software—about $1,000 per year per household.

So, you could have bought groceries; instead, you bought TurboTax.

Note, $546 billion doesn’t begin to estimate the cost of the IRS. In previous videos, I’ve mentioned studies estimating that we lose $3 in production for every dollar taken in taxes, since taxes discourage production.

Why work? Why build or expand a business if the government just takes it?

That suggests the $4.9 trillion in taxes the IRS takes actually cost us roughly $15 trillion in
lost output.

So, $546 billion in compliance, $4.9 trillion in lost taxes, and $15 trillion in lost output.

Rarely have so few taken so much from so many.

For perspective, that comes to roughly eight times what Americans spend on housing. It’s 10 times what we spend on food.

So what’s next?

A constant theme in our administrative state is spending trillions protecting us from threats that aren’t real—Ukraine, climate, transphobia. While it ignores the threats that are very real, from inflation to street crime to predatory taxation, that forces us to run on a treadmill until we’re 70.

Between Donald Trump’s promised tax cuts, Elon Musk’s spending cuts, and slashing the administrative state that strangles the economy, we can see the light at the end of the tunnel.

But there’s a lot of special interests—from uniparty politicians to millions of parasitic bureaucrats—who desperately want it to keep going.

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