There is a lot more to taxes than simply paying the bill. Taxpayers must spend significantly more than $1 in order to provide $1 of income-tax revenue to the federal government.

To start with, individuals and businesses must pay the government the $1 in revenue plus the costs of their own time spent filing and complying with the tax code; plus the tax collection costs of the IRS; plus the tax compliance outlays that individuals and businesses pay to help them file their taxes.

In a study published last week by the Laffer Center, my colleagues Wayne Winegarden, John Childs and I estimate that these costs alone are a staggering $431 billion annually. This is a cost markup of 30 cents on every dollar paid in taxes. And this is not even a complete accounting of the costs of tax complexity.

Like taxes themselves, tax-compliance costs change people's behavior. Taxpayers, whether individuals or businesses, respond to taxes and tax-compliance costs by changing the composition of their income, the location of their income, the timing of their income, and the volume of their income. So long as the cost of changing one's income is lower than the taxes saved, the taxpayer will engage in these types of tax-avoidance activities.

A complete accounting of compliance costs would also include the efficiency losses created when individuals and businesses invest in tax-avoidance activities that lower their tax liability at the expense of creating more jobs and economic growth. These lost opportunities are impossible to measure but could be the largest cost of all.