The Economic Cost of Our Income Tax

The General Accountability Office (GAO) estimates that direct compliance costs associated with the Federal Income Tax are at least $100 billion per year and lost economic efficiency (or welfare loss in economic parlance) approaches half a trillion dollars--amounts comparable to the economic cost of Hurricane Katrina. Though this will support those wanting to substitute a consumption tax for the income tax, the GAO warned that consumption taxes would have their own compliance costs--particularly in regard to state and local income taxes which have been tied to the Federal Income Tax.