The Cost of Compliance


U.S. Attorney General Eric Holder has joined the long list of prominent Democrat tax cheats, which includes characters like Congressman Charlie Rangel of New York and Treasury Secretary Tim Geithner.  It turns out that Holder and his brother “failed to pay the property taxes on their childhood home in Queens, which they inherited last august after their mother died,” according to the New York Post.

Say, isn’t Congressman Anthony Weiner, whose district includes Queens, given to red-faced, eyeball-popping class-warfare tirades on the importance of grabbing a huge chunk of estates through heavy taxation?  He’s the guy Megyn Kelly of Fox News utterly destroyed in an on-air interview on the topic, during the lame-duck session of Congress.  He must be super angry about the Holders dodging taxes on this estate!

Weiner’s anger will be in vain, because Eric Holder already said he “wasn’t aware of the initial missed payments” and promised to catch up on them.  This is an absolute and perfect defense against tax evasion, at least for prominent liberal Democrats.  It doesn’t matter if they only issue their mild apologies after they’re exposed and publicly humiliated, as in Holder’s case.  “Oops, my bad” is all a Democrat tax cheat has to say… even when it’s the Attorney General, claiming he didn’t know he had to pay property taxes on a $400,000 town house.

It doesn’t work that way for the rest of us, of course.  Economist Arthur Laffer has a column in the Wall Street Journal today, outlining the cost of complying with our tremendously complex tax code.  “Taxpayers must spend significantly more than $1 in order to provide $1 of income-tax revenue to the federal government,” Laffer explains.  “To start with, individuals and businesses must pay the government the $1 in revenue plus the costs of their own time spent filing and complying with the tax code; plus the tax collection costs of the IRS; plus the tax compliance outlays that individuals and businesses pay to help them file their taxes.” 

The Laffer Center figures these compliance costs add up to “a staggering $431 billion annually,” which is “a cost markup of 30 cents on every dollar paid in taxes.”  Laffer goes on to detail the additional economic costs of behavioral changes caused by efforts to comply with, or avoid, high tax rates.  Virtually every action taken by business to avoid taxation has a negative economic impact, since the greatest economic value is obtained when money goes where it wants to go, and transactions are conducted for the maximum mutual benefit of all parties involved.  Dollars sheltered from taxation become pale and sickly, when they desperately want to go outside and play in the sun.

In all of our current discussions about spending cuts and reducing the size of government, the immense size of the tax system itself, and its machinery of compliance, is rarely discussed.  As Laffer suggests, a flat tax that could be filled on a postcard would burn most of that $431 billion in compliance costs out of our economy, and release a flood of eager dollars from their dismal tax shelters.  The stimulating effect this would have on the economy would be far greater, and faster, than any of the useless “stimulus” schemes Obama and the Democrats have dumped on us.  Isn’t Obama supposed to be focused like a laser beam on job creation these days?  What could create more jobs, more quickly, than lifting thousands of pages of tax law from the backs of American business?

Liberty is offended by a body of law that not even well-meaning citizens can obey.  Look at the sad history of Democrat tax cheats, which now includes our nation’s Attorney General.  Either the architects of our current system are a band of crooks who take every opportunity to defraud it… or, if we accept the excuses they give when caught, the system is so complex that not even its authors can comply with it.  Either way, the current system should be junked and replaced.  Every politician who argues otherwise should be made to defend the thirty cents of extra cost lumped on top of each dollar the government takes in.  If we are serious about making the government smaller, let us make it simpler.