George Gibbs Center for Economic Prosperity

STATEMENT RELEASE: On Eve of Tax Day, Amer⁠i⁠cans Largely Unaware of ⁠t⁠he Benef⁠i⁠⁠t⁠s of Tax Reform, New James Mad⁠i⁠son Ins⁠t⁠⁠i⁠⁠t⁠u⁠t⁠e S⁠t⁠udy F⁠i⁠nds

By: Dr. J. Robert McClure / 2018


April 16, 2018


Shelby Boyd

(850) 222-1996

On Eve of Tax Day, Americans Largely Unaware of the Benefits of Tax Reform, New James Madison Institute Study Finds

TALLAHASSEE, Fla. – As the final Tax Day under America’s old tax system looms, a new survey and study reveal significant misunderstandings about the newly passed income tax reforms, including whether it will be simpler and will save middle-income Americans money.

The study by The James Madison Institute, a free-market think tank dedicated to the principles of economic freedom and limited government, also found that states with more complex tax codes have higher preparation and filing costs for individuals and higher administration costs for state governments.

Predictably, the survey found Americans evenly split between feeling stressed, annoyed, or relieved about their taxes. But many of those surveyed see no relief in sight, despite the benefits in store next year. Although the tax reforms will substantially simplify income tax filings and will return an estimated $1,000 in additional tax payments to the average middle-income American, many taxpayers – including conservatives – aren’t convinced.

A third of those surveyed believe Americans will pay more under the new tax law, while another third are unsure. Even among self-identified conservatives, 1 in 5 believes median-income families will owe more next year under the reform, a view shared by nearly half of self-identified liberals.

A central feature of the tax bill is the near-doubling of the standard deduction, a move that for most Americans will simplify the process of preparing their income tax return. Yet few are aware of this potential impact: Just 1 in 3 expect a simpler system, while the remainder believe there will be no change or even more complications.

The JMI survey found that Republicans and Democrats alike generally support the idea of a simplified income tax system. Specifically:

56% of survey respondents support efforts to simplify the federal income tax code to the point where the return could fit on a postcard (59% of Republicans and 54% of Democrats).
71% of those surveyed find the current tax code to be complicated, with only 15% finding it simple and the remaining 14% unsure.

“Two central features of the federal tax plan include a lower burden on middle-income households and a simpler process – yet few Americans are aware of these improvements,” said Dr. Robert McClure, JMI’s President and CEO. “The survey findings show that many Americans assume their taxes will become more burdensome and more complicated. Yet while the federal government has simplified the tax code, 6 in 10 Americans live in states with their own complicated state income tax codes. Such complexity comes at a price – for families and states alike.”

The JMI study analyzed each state’s income tax system, identifying variations in complexity based on the number of tax brackets and nuances and calculating the estimated tax burden on families living at that state’s median income.

Regarding complexity: 17 states have a simple or non-existent individual income tax, including nine with no state income tax on wages and eight with a simple, flat income tax rate. The remaining 33 states and D.C. have more complex income tax codes containing between three and 10 tax brackets and varying levels of nuance.
Regarding burden: Among those states with individual income taxes, households living at the median income in three states are expected to pay less than $1,000 each year; families in 22 states pay between $1,000 and $2,000 each year; and families in 16 states pay between $2,000 and $4,200 each year.

The survey found that Americans living in states with simple individual income tax codes spend an average of $201 to prepare and file their state and federal income taxes each year, while those living in states with more complex tax codes spend an average of $316 to do so. This means that Americans living in states with complicated individual income tax codes pay 57% more to file their taxes than their neighbors living in simpler tax states.

The JMI study found that the price of complexity is also felt by the states themselves. States with complex individual income tax codes spend an average of approximately $28 per person to administer their state’s tax programs, compared with an average of $18 per person in states with simpler income tax codes – 56% higher to administer the more complex systems.

Further, for every $1 spent to administer state tax programs, those with flat individual income tax codes bring in $63 in state income tax per year, compared with just $49 among states with more complex tax codes (29% less).

“States spend billions of dollars to run the bureaucracies that collect tax dollars. It turns out that having a simpler tax code not only lowers the cost of administration, but may also substantially increase the state’s return on that investment,” McClure said. “Simplicity is a win for taxpayers,who can expect a less stressful experience in April, and a win for states so they can direct tax dollars back to the public good and not just toward their own operations.”

Noting that approximately one-third of Americans feel “stressed” about Tax Day, one-third feel “annoyed,” and one-third feel “relieved,” McClure added: “We’re hopeful the number of Americans who can say they feel relieved will increase in the years ahead as they learn more about the benefits of tax reform and the state and federal governments become more dedicated to simplifying their respective tax codes.”

To read more about this study click here:

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As Florida’s premier free-market think tank, The James Madison Institute is a 501(c)(3) nonprofit, nonpartisan research and educational organization. The Institute conducts research on such issues as health care, taxes, and regulatory environments.