Why are Taxes so Complex and Who Benefits

Abstract

The author argues that U.S. tax law is complex because both the IRS and tax professionals have a vested interest in complexity. A general model determining the type and level of tax law complexity is presented and the effects of complexity on the resolution of tax disputes and on incentives for taxpayers to evade taxes are explored. The IRS is shown to prefer that tax law be complex both because it enables the IRS to collect more in disputes with taxpayers and because complexity discourages tax evasion. Tax professionals are shown to prefer that tax law be complex because complexity raises their incomes.