Between 1966 and 1977, anyone who prepared a return was required to sign it in addition to the taxpayer, meaning many unpaid relatives or friends signed the returns. Therefore, the data for the first few years probably overstates paid-preparer participation, because undoubtedly many unpaid people who had signed returns for years kept doing so even after the law had changed.

Tax preparation software has grown in sophistication as Windows has come to dominate the PC market, enabling more taxpayers to sit in front of a computer and answer a seemingly endless stream of questions while the computer figures out how to prepare the return.

In 1980 no individual taxpayers used computers to prepare their taxes. Yet today, when accounting for paid preparers and computer returns combined, about 80% of all returns are prepared with such assistance.

Tax preparation fees have increased substantially, largely due to the increased complexity of the average tax return. One way of tracking the trend in fees is to examine the average fees charged by H&R Block, the nation's largest tax preparation firm.

This rise in complexity has boosted profits at H&R Block, a publicly traded company. Last month, the company again raised its dividend and announced a two-for-one stock split. Its average $112 fee has increased 146% since 1985, or 48% after accounting for inflation. The sharp rise in fees is even more remarkable considering the huge increase in the capability of computers, tax return software, and printer speed. The efficiency gain of computers and printers has likely been overwhelmed by the increases in complexity.

Tax complexity probably will get worse before it gets better. Although the tax relief legislation enacted by Congress and the President this year would cut tax rates, it increases complexity. The long phase-in of the tax cut and long phase-out of the death tax will cause new tax planning headaches.

Income taxpayers will consider timing their incomes to take advantage of later-year tax rate cuts, while those concerned about the death tax must revise their estate plan to account for the gradual phase-out of the tax and its possible temporary repeal.

Because the tax cut would sharply reduce middle-class taxes, over 18 million more taxpayers (and 35.5 million by 2010) would be forced to complete a second tax return for the Alternative Minimum Tax (AMT), a parallel and complex tax system once aimed at ensuring the rich paid a substantial tax bill. As if one tax return weren’t difficult enough already.

There are some positive steps that were taken to simplify the law. Notably the new law repeals the phase-out of the personal exemption and itemized deductions, though even the repeal of the phase-out is itself phased-in later this decade. The repeal was due in part to a fortunate coincidence of an excellent report by the Joint Committee on Taxation that contained recommendations for tax simplification with the need for a compromise on the highest tax rate bracket under the new law.

In an attempt to bring the paperwork burden under control Congress passed the Paperwork Reduction Act of 1995, which set annual goals for federal agencies to meet. According to the Office of Management and Budget, the new law "set an annual government­wide goal for the reduction of the total information collection burden of 10% during each of Fiscal Years 1996 and 1997 and 5% during each of Fiscal Years 1998 through 2001. The baseline is the total burden of information collections as of the end of FY 1995."

By that measurement, the law has been a failure, largely due to the increasing burdens at the IRS. Burden hours at all agencies are expected to increase from 6,901 million hours in 1995 to 7,435 million hours in 2000.

Instead of declining by double-digit rates, tax paperwork burdens will have soared by about 15% during the five years ending in 2000.

An earlier Paperwork Reduction Act passed in 1980 required federal agencies to track the paperwork burden imposed on citizens and business by their forms and recordkeeping requirements. In order to comply with the law, the IRS commissioned Arthur D. Little to undertake a comprehensive estimate of tax compliance costs for the tax year 1983, and this survey served as the basis for the methodology used to track tax paperwork burdens that the IRS finalized with the 1988 tax year.

While the Little study is by far the most comprehensive available, James Payne estimated in his 1993 book Costly Returns that even it may understate the real burden "perhaps by about 20-30 percent."

While no figures are separately published for the IRS, tax form paperwork burdens alone account for roughly 80% of the total paperwork burden hours of the United States Government. The IRS is part of the Department of the Treasury and very nearly accounts for the Department's entire paperwork burden.

In Fiscal Year 2000, total paperwork burdens for all agencies were estimated at 7,447.20 million hours, and the Treasury Department accounts for 6,131.85 million of these hours, or 82%.

If the Treasury Department were to reduce its burden by the average amount mandated by the 1995 Paperwork Reduction Act, the burden would decline to 3,702 million hours in 2000. Instead, the Treasury has overshot that target by 2,429 million hours.

Paperwork burdens aren't the result of IRS bureaucrats mindlessly dreaming up new forms and regulations. Much of the burden increase is due to a flood of new tax laws, including the Taxpayer Relief Act of 1997. That law did reduce tax bills for middle-class taxpayers, but significantly increased their paperwork burdens. The 1997 Taxpayer Relief Act alone added an estimated 92 million hours to the paperwork burden.

These figures apparently only account for the time spent in keeping the necessary records and learning about and complying with the law. Yet a significant additional but uncounted burden comes from trying to exploit the law's loopholes to the maximum extent. For example, millions of citizens subscribe to personal finance publications and much of the advice offered deals with taxes. Taxpayers are often advised to consider the tax consequences of any major financial transaction, and this form of tax planning undoubtedly adds many millions of hours to the time spent coping with the tax system.

Despite the passage of the 1995 Paperwork Reduction Act, the time it takes to file commonly used individual income tax forms has increased.

The 1040 form is often filed with Schedules A, B and D where taxpayers report itemized deductions, interest and dividend income, and capital gains, respectively. From 1988, when the IRS started tracking this information, to 2000, the average paperwork burden hours climbed from 17 hours and 7 minutes to 27 hours and 2 minutes, an increase of 58%. The time burden has increased by 28% since 1995.

Even the short forms are becoming more complicated. The 1040EZ form, the simplest in the IRS inventory, now requires 3 hours and 53 minutes, up from 1 hour and 31 minutes in 1988, a jump of 156%. The 1040A and Schedule 1 (interest and dividend income) has seen a paperwork burden increase of 35% since 1995.

The Tax Code is so convoluted that no one inside or outside the IRS understands it. For many years Money magazine's annual test of tax preparers proved that paid professionals often make huge mistakes. In 1998, the last year Money administered the test, all forty-six tested tax professionals got a different answer, and not one got it right. The pro who directed the test admitted "that his computation is not the only possible correct answer" since the tax law is so murky. The tax computed by these pros "ranged from $34,240 to $68,912." The closest answer still erred in the government’s favor by $610.

While the 1998 IRS Reform and Restructuring Act requires Congress to at least consider complexity before passing tax legislation, that has not provided enough incentive for Congress to avoid additional complexity or encourage simplification. The report on complexity that accompanied this year’s tax legislation was an afterthought and an embarrassment.

The tax-writing committees should be required to quantify the costs of proposals that add complexity or the savings from proposals that simplify the law.

The report on simplification by the Joint Committee on Taxation this year proves the worth of giving Congress trusted recommendations on this important issue. Several of the report’s recommendations were included in the new tax cut law. Congress should look for ways to encourage both the Joint Committee and the Treasury Department to offer more such recommendations.

The National Commission on Restructuring the IRS suggested that Congress consider a quadrennial simplification process, and Congress and the President should implement such a process either through legislation or by executive order. The Commission found that many members of the private sector tax community were willing to volunteer substantial time to make suggestions for simplification.

A quadrennial simplification commission would harness this volunteer activity and give a broad group of people much more incentive to work for the adoption of simplification rules. This quadrennial commission would also give the Joint Committee on Taxation and the Treasury Department more incentive to suggest simplification of the law.

Fundamental overhaul of our tax system remains a critically important goal. As the Internal Revenue Code becomes increasingly incomprehensible, the intrusive measures provided to the IRS for enforcing it seem to become more draconian. Every detail of a taxpayer's private financial life is open for government inspection. IRS employees can make extraordinary demands on taxpayers, and can take extraordinary actions against them. Mixing such broad powers with a vague and complex law is a recipe for a civil liberty catastrophe. The threat of abuse is always present.

Until we change how we tax income, we will continue to have an intrusive agency with broad powers. It doesn't have to be that way. Our economy as well as our civil liberties would be better off with fundamental tax reform.