The Wall Street Journal has a list of companies it suggests Warren Buffett should buy, including the payroll processing firm ADP: "market cap: $24.8 billion; gross margins, 51%."
If Congress and the states got rid of payroll taxes and withholdings and made individuals pay their own taxes quarterly or at year end, or replaced income taxes with a national retail sales tax or other consumption-based tax, that whole business would go away. I suppose you'd also have to make unemployment insurance optional or have it be individual-driven rather than employer driven. The government makes it pretty complicated for a business to pay the withheld taxes itself without going through a payroll company, and the payroll companies would certainly oppose the government taking steps to make it simpler for businesses to do this directly through a government Web site rather than through the payroll companies.
The point is that for some companies, tax complexity and the difficulty of complying with state and federal laws becomes a business opportunity, and quite a lucrative one — 51% gross margins, and a $24.8 billion market cap. That's one approach — having government set up a complex system, and let private companies arise as middlemen to guide other companies through the complexity, for a price. The alternative approach, having government set up a simpler system to begin with, would allow the money now flowing to the payroll processors to be invested some other way.