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Thread: Tax Complexity : Helpful or Hurtful?

  1. Default Tax Complexity : Helpful or Hurtful?

    I got to thinking the other day about the complexity of our tax code, and regulations in general. It's easy to make the argument that it stifles money that would otherwise be spent on innovation and/or R&D and instead has to go to pay experts on compliance. Additionally, the complexity and cost of compliance creates barriers to entry into a lot of industries

    On the other hand, there are huge industries who make a great deal of money on filling out other peoples taxes and being up to date on regulations affecting a business. Entire market segments now exist to facilitate this complexity.

    So what say you, does the jobs and industries created by this complexity outweigh the costs of compliance?
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  3. #2

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    Quote Originally Posted by Anikdote View Post
    I got to thinking the other day about the complexity of our tax code, and regulations in general. It's easy to make the argument that it stifles money that would otherwise be spent on innovation and/or R&D and instead has to go to pay experts on compliance. Additionally, the complexity and cost of compliance creates barriers to entry into a lot of industries On the other hand, there are huge industries who make a great deal of money on filling out other peoples taxes and being up to date on regulations affecting a business. Entire market segments now exist to facilitate this complexity. So what say you, does the jobs and industries created by this complexity outweigh the costs of compliance?






    I don't think the nation is served by folks making money, rather it's served by folks making the value they trade for money. When so many folks make money, but offer no more value in return for it than filling out forms... well those folks are contributing nothing to the cost of maintaining the American lifestyle. As a nation we are less effective for it.

    The complexity that wastes so much effort is a result of American's lying to ourselves about what taxes should accomplish. We say we want to tax wealth to pay a government that treats us all equally, we approximate wealth as income... but then are dissatisfied with the inherent unfairness of taxing income. We don't want to ask the farmer who spent $200,000 to produce a $250,000 income to contribute more than the insurance salesman who made $100,000 in income without spending anything to do so. So we start adding deductions and credits for farm equipment and mortgage to make an income tax approximate a profit tax. Maybe some more tweaks to try and make life 'fair' for folks dealing with bad luck or bad choices... and then find out our exceptions have now let the insurance salesman write off his new Humvee.

    America would do better with a simpler tax system. But that system won't come along until we stop using income as a basis for taxation and just ask folks to pay for what the nation provides us all equally.
    Henry George's theories were based on land ownership and how far a business was from a public resource like a mill or waterway. The man lived and died a decade before the model T was produced much less modern transportation and communication. Not only did Henry George never hear of the Internet, he barely lived long enough to see the electric light. Applying the theories of Henry George to modern nations is about as risky as letting the most brilliant caveman design your next airport.

  4. Default

    Quote Originally Posted by Anikdote View Post
    So what say you, does the jobs and industries created by this complexity outweigh the costs of compliance?
    Depends on what your job is and what industry you work in. If the tax code is scrapped and replaced by something less than 1,000 pages a few million people would lose their jobs almost overnight. There is a lot of vested interest in keeping the tax code complex and obscure, and a lot of money to be made.


    The tax code is complex for a number of reasons but mostly because of a lack of political sanity. Since the political parties are unwilling to agree on any sort of broad based tax reform and politicians are subject to personal influence there is a continuous accretion to the tax code of exemptions, credits, rules and regulations sneaked into other legislation by politicians seeking to satisfy these influences.

  5. Default

    Quote Originally Posted by unrealist42 View Post
    Depends on what your job is and what industry you work in. If the tax code is scrapped and replaced by something less than 1,000 pages a few million people would lose their jobs almost overnight. There is a lot of vested interest in keeping the tax code complex and obscure, and a lot of money to be made.


    The tax code is complex for a number of reasons but mostly because of a lack of political sanity. Since the political parties are unwilling to agree on any sort of broad based tax reform and politicians are subject to personal influence there is a continuous accretion to the tax code of exemptions, credits, rules and regulations sneaked into other legislation by politicians seeking to satisfy these influences.
    Lack of political sanity? Are you kidding?

    The personal influence the politicians are "forced" to suffer is campaign contributions, future employment for them or family members, insider trading tips (which politicans are exempt from - gee, wonder why), etc.

    The government has become hugely corrupt.

    Where is the media on this? They have been similarly influenced by money and lawyers.

  6. #5

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    Quote Originally Posted by Anikdote View Post
    I got to thinking the other day about the complexity of our tax code, and regulations in general.
    When a tax is inherently as unjust and economically destructive as a tax on earned income must always inherently be, it must be made complex in order to make it tolerable.
    So what say you, does the jobs and industries created by this complexity outweigh the costs of compliance?
    Of course not, as tax compliance/avoidance jobs and industries are not productive.

  7. Default

    Quote Originally Posted by Anikdote View Post
    I got to thinking the other day about the complexity of our tax code, and regulations in general. It's easy to make the argument that it stifles money that would otherwise be spent on innovation and/or R&D and instead has to go to pay experts on compliance. Additionally, the complexity and cost of compliance creates barriers to entry into a lot of industries

    On the other hand, there are huge industries who make a great deal of money on filling out other peoples taxes and being up to date on regulations affecting a business. Entire market segments now exist to facilitate this complexity.

    So what say you, does the jobs and industries created by this complexity outweigh the costs of compliance?

    In a simple analysis, both. The American dream is to always find ways to lower their tax liability while shifting their tax liability onto other taxpayers. That is how it is helpful.

    However, in an effort to shift their tax liabilities, the tax codes becomes complicated and burdnensome to the administrators of the system. This inefficiency creates frustration to those that cannot take full advantage of the system while those that do increase their shift on their burden to more of the "undesireables."

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