As April 15 looms, financial advisor Kahler explains how the Internal Revenue Service's tax code got so complicated
If you’re wading through the process of preparing your tax return, you may well be asking, “Why does this have to be so complicated?”
I hear some version of this from clients every year. The forms feel endless. The rules seem arbitrary. Even financially savvy people find themselves second-guessing what qualifies, what doesn’t, and what changed this year.
It’s hard to grasp the scope of what we’re dealing with. The U.S. Tax Code, plus the policy rules, interpretations, and case law necessary to fully understand it, was estimated at over 70,000 pages more than a decade ago. That’s equivalent to roughly 50 copies of Tolstoy’s famously long novel War and Peace. And it doesn’t include recent additions like the hundreds of pages of new provisions in the so-called One Big Beautiful Bill. Reading it would take years. Understanding it would take longer.
To understand the source of this complexity, imagine a three-bedroom, one-story house built in 1913, the year that ratification of the 16th amendment authorized a federal income tax. It has no electricity or plumbing and is heated by a wood stove.
Over the years, various owners make large and small changes. Plumbing and electricity. Central heating. Additions: a porch, a utility room, another bedroom, a second story, a garage, another bathroom, closets, a sunroom, a detached office connected by a breezeway.
Individually, each change makes sense. It solves a real problem or meets a real need at the time.
Over time, though, the foundation carries more weight. Old wiring and plumbing are updated and added to. Ductwork extends through tighter spaces. Floors no longer quite match. Old windows leak air. Utility bills and maintenance costs keep going up.
That is our tax code.
Congress did not design a 70,000-page system in one sitting. Complexity built up over decades. A credit for one industry. A deduction for a social goal. A carve-out to address a crisis. A temporary provision that became permanent. While each addition made sense in isolation, the overall result was inefficiency.
The financial cost is significant. According to a Tax Foundation report from August 2025, Americans spend an estimated 7.1 billion hours each year complying with the tax code. Lost productivity alone approaches $388 billion annually, with additional out-of-pocket costs nearing $150 billion.
Combined, that’s roughly 1.8 percent of U.S. gross domestic product. We are spending more to navigate the system than some taxes actually raise.
Arguments about regressive taxation aside, it’s easy to see why alternatives like a national value-added tax or higher tariffs occasionally gain traction. Whether one agrees with those approaches or not, they would reduce the time and expense required to comply with the current income tax system. None would recover all of the lost productivity, but they would eliminate much of the annual ritual of form-filling and rule interpretation.
Of course, replacing the income tax entirely is highly unlikely. The political hurdles would be enormous. Given that Congress struggles to pass a routine budget on time or enact something as widely supported as permanent daylight saving time, rebuilding the entire tax code from the ground up may be next to impossible.
When you remodel a house, you may disappoint or please various family members by making changes. When you rewrite the tax code, you affect industries, donors, and voting blocs. Every deduction benefits someone. Every credit has a constituency. Every loophole has a lobbyist. So we keep adding rooms and tweaking old wiring.
A tax system should raise revenue efficiently, transparently, and fairly. When it requires billions of hours simply to comply, it may be time to ask whether we have built something too complicated for its own good.
Rick Kahler, CFP, is a fee-only financial planner and financial therapist with a nationwide practice, Kahler Financial Group, based in Rapid City. His co-authored books include “Coupleship Inc.” and “The Financial Wisdom of Ebenezer Scrooge.”
The information provided is for educational purposes only and should not be construed as investment advice. The views expressed are subject to change based on market or economic conditions. Past performance is not indicative of future results. Any reference to potential benefits is illustrative and may not apply to your individual circumstances. You should consult with your financial adviser before making any investment decisions. KFG, LLC is an SEC-registered Investment Adviser.
Photo: public domain, wikimedia commons
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