From the taxpayer's perspective of economy, the federal income tax does not fare so well. The income tax is often criticized for the compliance
costs imposed on the taxpayer. Indeed, for certain taxpayers, record-keeping costs, accountant fees, attorney fees, etc. can be quite substantial.
Economy requires that a good tax system should minimize the compliance and administration costs associated with the tax system. Economy can
be viewed from both the taxpayers' and government's perspectives. From the government's perspective, the federal tax system fares well with
respect to economy. For example, the current IRS budget represents approximately ½ of a percent of every tax dollar collected. Compared to the
typical costs of a collection agency, this is quite a low percentage cost.
However, the federal income tax is often criticized as being complex. What are taxable/nontaxable forms of income? What are deductible/
nondeductible expenses? When should income or expense be reported? For many taxpayers (e.g., wage earners with few investments), the answers
to these questions are straightforward. For other taxpayers (e.g., business owners, individuals with a lot of investments), the answers to these