How Taxing Is Tax Filing? Using Revealed Preferences to Estimate Compliance Costs.
This paper uses a quasi-experimental design and a novel identification strategy to estimate the cost of filing income taxes. First, using US income tax returns, I observe how taxpayers choose between itemizing deductions and claiming the standard deduction. Taxpayers forgo tax savings to avoid compliance costs, which provides a revealed preference estimate of the compliance cost of itemizing. I find that this cost increases with income, consistent with a higher opportunity cost of time for richer house- holds. Second, using my estimates and estimates of the time required to file other schedules, I estimate the cost of filing federal income taxes. I find that this cost has been increasing since the 1980’s and has reached 1.2% of GDP in the most recent years.
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Copy CitationYoussef Benzarti, "How Taxing Is Tax Filing? Using Revealed Preferences to Estimate Compliance Costs.," NBER Working Paper 23903 (2017), https://doi.org/10.3386/w23903.
Non-Technical Summaries
- Author(s): Youssef BenzartiThe total cost of taxpayers' compliance with the U.S. tax system may exceed 1 percent of GDP. Many Americans complain about how...
Published Versions
Youssef Benzarti, 2020. "How Taxing Is Tax Filing? Using Revealed Preferences to Estimate Compliance Costs," American Economic Journal: Economic Policy, vol 12(4), pages 38-57. citation courtesy of 
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