The One Big Beautiful Bill Act changed the rulebook for Medicaid, housing and clean energy tax credits, along with state and local tax deductions, while also complicating the regulations.
The toll on productivity caused by increased complexity is important because of both the broader economic effects and the uncertainty it injects into the budgeting processes for issuers of municipal bonds.
"Put in dollar terms, the 6.9 billion hours needed to comply with the tax code conservatively computes to $387.5 billion each year in lost productivity," according to numbers crunched by the Tax Foundation.
"When we add the $157.1 billion in out-of-pocket costs, it raises the total tax compliance cost to American taxpayers to $544.6 billion."
Researchers came up with the numbers by analyzing estimates from the White House Office of Information and Regulatory Affairs that shows Americans spending almost 6.9 billion hours complying with tax filing and reporting requirements in 2026.
According to the research, figuring out the rules governing "proceeds from broker and barter exchange transactions," on form 1099-B account for the biggest chunk of time and totals over 2 billion hours.
Filing individual tax returns comes in second with 1.9 billion hours followed by business taxes with 857 million.
The escalation of time spent on 1099-Bs started during the Biden Administration as a byproduct of the Infrastructure Investment and Jobs Act.
In a separate study, The Tax Foundation games out the future effects of OBBBA's temporary "no tax on," provisions which includes no tax on overtime. OBBBA calls for them to expire in after 2028.
The no tax provisions also include an enhanced senior deduction, the tips deduction and an auto loan interest deduction.
The nuances of the overtime rules have proven to be especially problematic to state and local governments who have to weigh the federal rules their own regulations.
While the temporary effects had many municipalities scrambling for clarity, the Tax Foundation posits that extending all the "no-tax-ons," would increase the primary deficit by $577.3 billion from 2027 through 2036."
They estimate the reduction in federal revenue would by roughly $577 billion over 10 years.
"Beyond the fiscal cost, these deductions make the tax code more complex and less neutral, and they have inspired additional carveout proposals that would further complicate the code," said the Foundation.
An increasingly complex tax code and revenue cuts would wreak more havoc on an economy currently experiencing record bending high yields on Treasury notes that haven't been seen since the 1990's.
Last week the Congressional Budget Office issued a report showing that if interest rates grow 1% point above their current projections the national debt will be 222% of the gross domestic product by 2056.
The current ratio is just over 122%.
The higher rates are also complicating the budgeting process for municipal bond issuers.
"In this post golden age realignment, state, local governments, other public entities have really had to work hard to realign their ongoing spending or their ongoing revenue," said Tom Kozlik, head of public policy and Municipal Strategy at Hilltop Securities, in an interview with Asset TV.
"The higher interest rates are going to make it more difficult for them to do that."
Kozlik believes the hike in yields is going to continue and the market is already showing cracks in some key sectors.
"We've seen downgrades outpaced upgrades for several quarters," he said. "That is mainly being driven by the K through 12 school district sectors, the higher education sector, and the healthcare sector. I'm not telling investors to stay away from those sectors, but credit selection is very important."
