The Internal Revenue Code (IRC) is intimidating. It is massive, covering hundreds of sections within the federal statutes. It has also grown more complex. In 1955, the IRC consisted of about 400,000 words. Today, it grown to 2.4 million words. But as they say on TV, wait, there’s more. Those are just the tax statutes, passed by Congress. But those statutes demand interpretation and implementing regulations, written by the IRS, and those regulations are three times the size of the IRC, occupying 7.7 million words in the Code of Federal Regulations.
Behind all of that are the tens of thousands of cases interpreting those statutes and regulations as they apply to specific taxpayers. This is why when you ask your tax attorney what effect a change in your business or in the tax law will have, they will likely reply that they will have to do some research.
One of the strongest economic arguments made concerning the negative effects of the tax code is that all this complexity results in billions of dollars in time spent by businesses and individuals complying and paying the taxes assessed.
An analysis by the Office of Information and Regulatory Affairs estimated that American’s spend 8.9 billion hours for tax compliance. They noted that this is equivalent to 4.3 million full-time jobs.
Tax experts and professors have created various proposals to replace the existing tax code, but it is unlikely, no matter how potentially useful or economically advantageous they might be, that there exists the political will to actually make any significant revisions to the tax code.
One reason there are thousands of sections within the code is that special interests often obtain specific changes that provide a narrow set of benefits to a limited group of individuals or entities. and this creates vast inertia that inhibits any real change.
That constant incremental change to the code means that constant vigilance is necessary to ensure that those amendments and changes do not result in unexpected, negative tax consequence for your personal or businesses filings.