10 Things I Hate About Taxes #1: Lost Productivity

This entry is part 1 of 12 in the series Ten Things I Hate About Taxes

Today we begin a series of short articles leading up to Tax Day, April 15. Most of these ideas have come from readers, so I’d like to thank everybody thus far who responded either through blog comments, Twitter, or Facebook with something they despised about taxes… I hope you enjoy this series.

Ever wondered how much time and money are lost through federal tax returns? It actually is rather astounding even by conservative estimates. Let’s run the numbers in back-of-the-envelope style calculation.

Consider that I, a moderate income citizen, have spent nearly eight hours thus far on my taxes. This includes going to the store to buy Turbotax, organizing all my papers, making calculations, typing, figuring out where things go – and I’m not even done yet. I anticipate I have at least four hours of work left, but for the sake of our conservative calculation we’ll assume that most people spend about eight hours on their taxes per year.

According to the latest census data on Wikipedia, roughly 300 million people live in the USA. I would estimate that about half of them work and do tax returns, which is roughly 150 million. (It appears that the number may be closer to 168 million according to Wikipedia.)

Consider, then, that around 150 million work or leisure days have been lost due to tax preparation. It’s hard to estimate how much lost productivity there is embedded in this number, but suppose we can put a value on that time… A little digging through Google seems to indicate that the average wage per hour in the USA can be very conservatively estimated at $15 per hour. This translates to $120 per day, that’s roughly $18 billion in lost productivity.

That’s a pretty large number, but in reality I’m just scratching the surface. I can’t even begin to imagine how the number increases when you add in purchases of tax software, purchases of tax services, and the expenditures of the IRS in processing and auditing. I think it’s probably safe to say that we are talking about a 10’s-of-billions-of-dollars industry of nothing but waste. Of course, that’s the function of the “state” in a nutshell – plus injustice, rights abuse, death, and destruction of private property.

Strangely enough, doing tax returns is, in another sense, a rescuing of productivity as well. The fact that this much effort is being put into getting as much of our hard-earned money back from the Federal Government is indicative that there is more to be gained in doing the tax return than not. How unfortunate that this must happen in the first place…

Thanks to Clear_Mark for inspiring this installment of 10 Things I Hate About Taxes.

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