> Could the federal tax laws — 74,608 pages of legal gray areas and welters of credits, deductions and exemptions — be accurately rendered in an algorithm?
Funny how the discussion is never to simplify the code
Government is very good at creating their own problems. Then they get to complain about how there's not much money for actual benefits to the population
The tax code should be designed to fit into 100 pages (or even better, 20 pages)
Reducing nominal taxes AND complex deductions would probably result in a net gain in revenue
In the US our office of tax simplification would also need an oversight committee on tax simplification regulation, an office of tax simplification administrative affairs, a center for tax simplification reform, and an office of tax simplification simplification.
Why not just build a big platform contains all the data, then write kernels for each type of 'violation', learn a pattern, find suspects, then use results to improve the kernel. Human labor + Machine intelligence, Yay! Eventually you'll have all kinds of tax law text covered, and patterns of violations.
Funny how the discussion is never to simplify the code
If you simplify the code, it's bound to adversely affect some people, even if it helps others. The losers will loudly protest the changes and you will be a very unpopular politician. So it rarely happens.
Not exactly. This is an example of a change that would positively benefit millions of people a little bit and likely negatively impact (tens of?) thousands of people greatly. The overall benefit would be positive, but the majority aren't impacted quite enough to be very vocal, whereas the minority is and would be extremely vocal.
This is not the case with all potential policy changes. Some go the other way (e.g. introducing trade tariffs - large benefit to minority in manufacturers, small negative impact on majority of consumers). And some changes benefit or hurt the majority greatly (e.g. minimum wages help a lot of people quite a bit).
> Funny how the discussion is never to simplify the code
This has been the conversation in every political debate for (at least) the past decade. It could be the one broad sentiment shared across party lines.
Almost everyone agrees on simplifying the tax code, especially corporate tax, it just becomes more difficult when vested interests are adversely affected when the rubber meets the road.
Also, "simplify the tax code" is too often used as code language for wiping out progressive taxation (on the right) or wiping out corporate subsidies (on the left). Which makes the politics of the issue that much more intractable.
Everyone wants to simplify the tax code. They just want to simplify the parts other people like. We could cut out a big chunk by getting rid of farm subsidies. My wife (went to high school and college in Iowa) doesn't think that's acceptable. We could simplify by getting rid of all the handouts for older people (mortgage interest deduction). My parents, who save tens of thousands in taxes each year from their McMansion, don't like that idea. I'd love to have a flat tax with no brackets. But my liberal friends like the whole progressive taxation thing. The tax code is a soup but it's one that reflects an equilibrium of all these interests.
Also, the idea of government creating a complex tax code just for funsies is naive. The tax code is huge because accounting is complicated, and taxation is basically a superset of accounting. The GAAP rules are 25,000 pages. That's probably the lower bound in how much you can simplify the tax code (without incorporating the GAAP by reference, which basically would outsource writing tax law to a private organization).
Mortgage interest deduction isn't so much a handout for "older people" as it for middle and upper incomes, ie those who can afford to buy homes and who have the income level to be in a higher bracket.
The mortgage interest deduction is a ridiculous, market-distorting handout to higher income people. And I say this as someone who bought an absurdly expensive bay area house last year.
Tons of people in cheaper areas pay so little in interest and property taxes that they don't even itemize their deductions.
I don't know how it ever seemed like a good idea. If everyone can afford x% more housing cost, what happens? Housing costs get bid up by x%.
"the idea of government creating a complex tax code just for funsies is naive."
yes.
"The tax code is huge because accounting is complicated"
I'm not sure I buy that. How much active coordination is there between legislators and the Financial Accounting Standards Board for example? If the board says I need to keep records quarterly, does that necessarily imply that taxes must be collected quarterly? If I declare revenue as part of one fiscal year or the next, but the reality of when money hits my bank doesn't change, does that mean tax law must follow the accounting reality and not the bank's reality?
I'm sure you're right that "innovation" in the accounting space is taken advantage of in tax law, but I'd like to hear more about the degree of causal relationship that truly exists.
That's because its most likely way harder to do than create that algorithm. Politics is not a rational game and can't be dealt with as a rational discipline. Instead it's a constant changing organism that tend to become more and more complex.
I agree it should be simpler, but that would probably require a crisis bigger than the 30's.
Why do you think that politics is irrational? Because people don't bother to inform themselves what is really good for them and vote irrationally? This is rational behaviour actually - the expected value of their vote is so minimal that it does not matter - so they might as well use voting to improve their mood.
It's irrational because it's not about being right but about getting it your way. So even if you are right about ex. the rules should be simpler from the perspective the general taxpayer, then someones special interest might trump that.
The ability to navigate in the complexity is a good thing for those who can afford the financial advisor.
And because there is not one truth because there are not one interest it become impossible to look at it from a rational perspective.
Let's not forget one significant driver of complex tax code: the IRS almost always has dirt on people with pretty one-side results when they come after you. Rather than speculation, a number of ex-IRS auditors made this claim. The idea was that they have a limited amount of resources to find tax cheats and it's hard to prove on some of them. So, they first make the tax laws favor them by creating lots of uncertainty which already appears for other reasons. Then, they hit hard in terrifying ways when they come after people with little resources to fight back: huge fine, people kicking in their doors, seizures of property, etc. One agent wrote that the goal was a form of terrorism where the few hits they made would scare others into compliance despite the fact they didn't have resources to get to them all.
So, it won't get simpler. It benefits IRS's strategy and many stakeholders using exemptions, too.
They have influence on that process. They also decide on the grey areas which implicitly defines laws. Main point, though, is that they benefit from and ruthlessly exploit the situation. For that reason, they won't push hard to change it.
Heck yeah! Matter of fact, I proposed this when the tax shelter boom was happening a long time ago and I said then I doubted it was original. The reason is that scandals like BCCI show the accounting has to be a maze as much as possible. So, logically, the next trick is to have software that automates creating that maze while still able to get the truth out of its for parties with access. And get money to the right place.
At the time, I saw malware authors doing it with program obfuscation kits. Accounting information systems were often boring programs following simple rules. The obfuscation of accounting similarly followed straight-forward rules albeit with different rules for different schemes. Automating them should also be straight-forward. And need no AI whatsoever: just templates, heuristics, and maybe source code in Unlambda or INTERCAL.
While Rand isn't the most likeable of charachters and her argument is often persented as anti-povery, on a high level contributing to society through your work is an amazing privelege. Financial contributions to society may not need a large monolithic arbitrater to handle all of the granular details with limited oversite.
Maybe governments should stop being such a big spenders. The problem is that they never cut their costs and people seem to accept that (at least in Europe). What are these people (politicians) even doing the whole day? Most countries in Europe are super small and quite easy to manage.
Well this is how it works: there's an economic boom and profits are up and payrolls and bonuses are up and because these things are taxed as percentages tax revenue goes up too. Some of it gets spent on stuff, like schools and hospitals or whatever, but most of it goes on the salaries of public sector workers.
Then there's a downturn, profits are down, people are getting laid off, no bonuses are paid and because these things are taxed as percentages, tax revenues are down. But your public sector workers demand to be kept in the style to which they have been accustomed, and the money has to come from the government's "real" spending.
Then the next cycle rolls around, and every time the public sector ratchet up their pay and benefits a little more, until eventually that's all the government can spend money on. There is a very good case that people employed by the government, should not get a vote, because they cannot be objective.
Not really, governments regularly cut back in the short term. The real long term ratchet is people keep wanting the government to do more, ex the EPA did not exist in 1969. Health benifits don't get to provide 1990's levels of care they need to keep up with an ever expanding array of new and more expencive treatments. Domestic partners now qualify for government benifits. The public never says, we don't need you to do this anymore.
Hell we have started doing DNA testing for Robbery's.
> But your public sector workers demand to be kept in the style to which they have been accustomed, and the money has to come from the government's "real" spending.
In America, public workers took pay cuts for the past 5-6 years since the federal pay tables were frozen (not increasing for inflation, so spending power decreased) and mandatory health care costs went up!
In America, I haven't seen any evidence of public sector employees (the public sector is huge, NASA engineers, Air Force pilots, National Park Rangers, etc) 'demanding' more pay. The only thing I've seen that can be categorized as evidence of this is top tier engineers leaving NASA & FFRDCs to work in the private sector. Not once have I seen a NASA employee go "We successfully lobbied Congress for more pay!".
I don't think the problem is big spending. It's their's not much oversight on how the money is spent.
I worked at a federal park, and every year employees would damage equipment, and throw it into a dumpster. Why, so they could get money to buy new equipment the following year.
My county is loaded with professional grant writers. You would be amazed at what a 501C3, and a well written paragraph will get an organization. I would list off some rediculious examples, but afraid I might expose my identity, or hurt low level employees who don't benefit from these grants.
I still think about those two companies, one was Dick Cheney's former stomping ground, who literally got more money, the more they spent. It was an open ended contract?
All they needed to show was receipts, and they were paid?
So, I expect the government to spend tax money, but not throw it away.
I am no angel, but in the last two decades I see a complete lack of morality in too many people. It's almost like, "Hay, it's not illegial, so I feel fine doing it!" Maybe it's always been there, and I was naieve?
It's always been there. There is a surprisingly large population of people who take pride in their ability to eek out personal advantages with little 'schemes' at the expensive of the public. Many of these people think they're rebelling against a government that is too wasteful (which is ironic) or evil in various other ways. "If the government is going to waste money, it should waste it on me!" Or "everyone does it!"
Yet when the problem is corruption and lack of oversight, you can't fix that for free, and more money can lead to more opportunities for corruption. Which is why I feel it's so important to build AI's that can detect and manage this stuff.
The elected politicians spend all their time raising money for the next election. Might be time to rethink the two-year terms for House members in the US.
Also, since tax rules are so simple there are no ways to cheat, because that usually comes with complex and vague rules of tax deductions, which Singapore simply does not have.
A friend of mine drives a company car there (because it costs so much to own). It cost the company $100,000 for a license and this was after getting picked in a lottery. There is also a government black box in the car that will track where you drive and determine your tax rate.
unless you are rich or are an employee of a big company, you pretty much don't drive there.
> A recent paper by Mr. Rosen and four other computer scientists [...] demonstrated how an algorithm could detect a certain type of known tax shelter used by partnerships.
The tax code should be simplified, and tax rates should be flattened as well.
A vast improvement over the status quo would be that everyone pays the same low percentage, no matter the amount they make. If you make your money honestly (and the vast majority of us do), it isn't morally right that you get soaked from the very moment you begin to succeed.
Of course it's morally right--the people who are doing best in society have the highest obligation to society, just like the strongest and most capable in a family should be the one bringing in the bread. We even instinctively recoil when we see the deadbeat who won't work, forcing their children/siblings/whatever to support them.
We even used to have a common phrase for it, noblesse oblige, though that's fallen out of favor in the last generation.
Society is not your family. Your responsibilities are very different in both. But the main issue is who decides what your social obligations are? Helping people is a moral issue and right for "me", but may not be a moral issue for somebody else.
So, I disagree, this is not an obligation. I know that this is the debate of the likes of Rawls versus Rothbard. Just could not help replying.
Well, ultimately, we all decide what our social obligations are, because we live in a democratic society. We discuss, we persuade, we elect, we vote, and so on. The conversation never really ends, and each new generation chooses again for itself where to draw the line.
But things, historically, have gone pretty good for everyone, the more the rich chip in, and pretty badly for almost everyone(though better for the rich, of course), the less they do.
Now, I get that a lot of people decide "these are the principles I think are important, and damn the consequences," but I think that's silly--if a principle I like ends up leading to a crummy society in one way or another (e.g. I don't think pollution should be regulated, full stop, and suddenly everyone has shitty air quality), then I'm going to rethink that principle. Others stick to their guns no matter what.
I do not want to be anyone's keeper, nor do I want to be kept. All I'm asserting is the moral right to make the most of my life without taking advantage of others, or having them take advantage of me.
Each of us has the right to exist for our own sake.
You live in society and are a part of it whether you think it's right or not. That's unavoidable, just like breathing air or drinking water is unavoidable.
I'm not really sure what you think you'd gain by somehow being independent from everyone around you. How do you think your life would be better?
"Independence" does not mean living like a hermit, alone in a shack in the mountains. I am all for friendships and collaborations with others, and I recognize the economic benefits of the division of labor.
Obviously these relationships do not depend on the government taking from some and giving to others. It is well-known that people had friends, co-workers, families, and specialized occupations in the 19th century, prior to the advent of social programs, the income tax, and public schools.
What is the role of government in human relationships? It may surprise you that I think it has an essential role, via the justice system. In a properly functioning state, everyone can count on the government to retaliate against predators. After all, it is only when two strangers know that an objective arbiter will handle disputes between them that Hobbesian nightmares are prevented.
When the government goes beyond the role I just outlined, relationships between some people suffer. When the government unjustly takes from some and gives to others, people have no recourse but to see each other as resources or burdens, as threats to be avoided or saps to be taken advantage of. I can think of nothing more corrosive to goodwill and friendship than this, and we see it all around us in the world today.
Thanks for giving me a reply that you've obviously put some thought into. I think your view that government's proper role is to retaliate against predators is probably one shared by very few. Being more of a pragmatist myself, I'd rather narrow in on views and ideological positions that could get more widespread buy-in.
I think you had a good representative line in there, that you think the government's role is to retaliate against predators.
I submit that that is a view shared by very few people, and likely no one
Don't be afraid to adopt a position because you think it will make you a pariah, or because you don't believe that other people are likely to accept it. Neither of those things makes a true thing false.
Where would the civil rights movement be if popularity were the yardstick by which an idea is to be judged? Every movement starts out by being unpopular, with ideas no one has heard before.
I make no friends among conservatives when I retweet a pro-choice/#shoutyourabortion post on twitter or express support for gay rights. But the fact that some don't like it doesn't matter to me, and if you search deep down, you may find that the immediate approval or buy-in by the majority of others doesn't matter to you either.
This might sound like an impractical approach to take, but if your goal is to live in a truly better world, it is by far the most practical thing you can do.
72 comments
[ 2.6 ms ] story [ 129 ms ] threadFunny how the discussion is never to simplify the code
Government is very good at creating their own problems. Then they get to complain about how there's not much money for actual benefits to the population
The tax code should be designed to fit into 100 pages (or even better, 20 pages)
Reducing nominal taxes AND complex deductions would probably result in a net gain in revenue
Naw, they do upon occasion simplify it, see e.g. the Tax Reform Act of 1986 (https://en.wikipedia.org/wiki/Tax_Reform_Act_of_1986) ... which allows them to start another cycle.
Except there are new changes to the tax code with some frequency
Not sure if it would be easy to find violations or to filter out 'correct usage' (which seems to have some level of subjectivity as well)
Benford's law seems to be a nice proxy for some kinds of frauds as well https://en.wikipedia.org/wiki/Benford%27s_law
If you simplify the code, it's bound to adversely affect some people, even if it helps others. The losers will loudly protest the changes and you will be a very unpopular politician. So it rarely happens.
This is not the case with all potential policy changes. Some go the other way (e.g. introducing trade tariffs - large benefit to minority in manufacturers, small negative impact on majority of consumers). And some changes benefit or hurt the majority greatly (e.g. minimum wages help a lot of people quite a bit).
Intuit would lobby against it.
http://techcrunch.com/2013/03/27/turbotax-maker-funnels-mill...
This has been the conversation in every political debate for (at least) the past decade. It could be the one broad sentiment shared across party lines.
Almost everyone agrees on simplifying the tax code, especially corporate tax, it just becomes more difficult when vested interests are adversely affected when the rubber meets the road.
Also, the idea of government creating a complex tax code just for funsies is naive. The tax code is huge because accounting is complicated, and taxation is basically a superset of accounting. The GAAP rules are 25,000 pages. That's probably the lower bound in how much you can simplify the tax code (without incorporating the GAAP by reference, which basically would outsource writing tax law to a private organization).
Accounting in large part is complicated because of the tax code. Revenues - Expenses = Profit is not complicated otherwise.
LOL. Nope.
Tons of people in cheaper areas pay so little in interest and property taxes that they don't even itemize their deductions.
I don't know how it ever seemed like a good idea. If everyone can afford x% more housing cost, what happens? Housing costs get bid up by x%.
yes.
"The tax code is huge because accounting is complicated"
I'm not sure I buy that. How much active coordination is there between legislators and the Financial Accounting Standards Board for example? If the board says I need to keep records quarterly, does that necessarily imply that taxes must be collected quarterly? If I declare revenue as part of one fiscal year or the next, but the reality of when money hits my bank doesn't change, does that mean tax law must follow the accounting reality and not the bank's reality?
I'm sure you're right that "innovation" in the accounting space is taken advantage of in tax law, but I'd like to hear more about the degree of causal relationship that truly exists.
I agree it should be simpler, but that would probably require a crisis bigger than the 30's.
The ability to navigate in the complexity is a good thing for those who can afford the financial advisor.
And because there is not one truth because there are not one interest it become impossible to look at it from a rational perspective.
So, it won't get simpler. It benefits IRS's strategy and many stakeholders using exemptions, too.
At the time, I saw malware authors doing it with program obfuscation kits. Accounting information systems were often boring programs following simple rules. The obfuscation of accounting similarly followed straight-forward rules albeit with different rules for different schemes. Automating them should also be straight-forward. And need no AI whatsoever: just templates, heuristics, and maybe source code in Unlambda or INTERCAL.
http://www.madore.org/~david/programs/unlambda/
There is a ton of money in writing something that does this.
Then there's a downturn, profits are down, people are getting laid off, no bonuses are paid and because these things are taxed as percentages, tax revenues are down. But your public sector workers demand to be kept in the style to which they have been accustomed, and the money has to come from the government's "real" spending.
Then the next cycle rolls around, and every time the public sector ratchet up their pay and benefits a little more, until eventually that's all the government can spend money on. There is a very good case that people employed by the government, should not get a vote, because they cannot be objective.
Hell we have started doing DNA testing for Robbery's.
In America, public workers took pay cuts for the past 5-6 years since the federal pay tables were frozen (not increasing for inflation, so spending power decreased) and mandatory health care costs went up!
In America, I haven't seen any evidence of public sector employees (the public sector is huge, NASA engineers, Air Force pilots, National Park Rangers, etc) 'demanding' more pay. The only thing I've seen that can be categorized as evidence of this is top tier engineers leaving NASA & FFRDCs to work in the private sector. Not once have I seen a NASA employee go "We successfully lobbied Congress for more pay!".
I worked at a federal park, and every year employees would damage equipment, and throw it into a dumpster. Why, so they could get money to buy new equipment the following year.
My county is loaded with professional grant writers. You would be amazed at what a 501C3, and a well written paragraph will get an organization. I would list off some rediculious examples, but afraid I might expose my identity, or hurt low level employees who don't benefit from these grants.
I still think about those two companies, one was Dick Cheney's former stomping ground, who literally got more money, the more they spent. It was an open ended contract? All they needed to show was receipts, and they were paid?
So, I expect the government to spend tax money, but not throw it away.
I am no angel, but in the last two decades I see a complete lack of morality in too many people. It's almost like, "Hay, it's not illegial, so I feel fine doing it!" Maybe it's always been there, and I was naieve?
Yet when the problem is corruption and lack of oversight, you can't fix that for free, and more money can lead to more opportunities for corruption. Which is why I feel it's so important to build AI's that can detect and manage this stuff.
Adding rules, regulation and loopholes that will only be read by a low level data-entry clerk and their new Artificial Intelligience.
Even better idea: simplify the tax code
owning a cars/road taxes are extremely expensive:
http://www.expatsingapore.com/content/view/1152
A friend of mine drives a company car there (because it costs so much to own). It cost the company $100,000 for a license and this was after getting picked in a lottery. There is also a government black box in the car that will track where you drive and determine your tax rate.
unless you are rich or are an employee of a big company, you pretty much don't drive there.
http://thehearttruths.com/2013/08/16/are-taxes-in-singapore-...
In reality, you are effectively paying a 60% income tax rate...although it looks like much less on paper.
Another article on living expenses in Singapore (from the same blog):
http://thehearttruths.com/2013/08/02/how-much-do-you-need-to...
https://webforms.ey.com/SG/en/Services/Tax/EY-singapore-budg...
Can someone provide a link to a 4-page tax code? It'd be rad to see.
The bit.ly link to the paper in the article is broken. The actual PDF can be found here - http://taxprof.typepad.com/files/taxpaper.pdf
A vast improvement over the status quo would be that everyone pays the same low percentage, no matter the amount they make. If you make your money honestly (and the vast majority of us do), it isn't morally right that you get soaked from the very moment you begin to succeed.
We even used to have a common phrase for it, noblesse oblige, though that's fallen out of favor in the last generation.
So, I disagree, this is not an obligation. I know that this is the debate of the likes of Rawls versus Rothbard. Just could not help replying.
But things, historically, have gone pretty good for everyone, the more the rich chip in, and pretty badly for almost everyone(though better for the rich, of course), the less they do.
Now, I get that a lot of people decide "these are the principles I think are important, and damn the consequences," but I think that's silly--if a principle I like ends up leading to a crummy society in one way or another (e.g. I don't think pollution should be regulated, full stop, and suddenly everyone has shitty air quality), then I'm going to rethink that principle. Others stick to their guns no matter what.
Each of us has the right to exist for our own sake.
I'm not really sure what you think you'd gain by somehow being independent from everyone around you. How do you think your life would be better?
Obviously these relationships do not depend on the government taking from some and giving to others. It is well-known that people had friends, co-workers, families, and specialized occupations in the 19th century, prior to the advent of social programs, the income tax, and public schools.
What is the role of government in human relationships? It may surprise you that I think it has an essential role, via the justice system. In a properly functioning state, everyone can count on the government to retaliate against predators. After all, it is only when two strangers know that an objective arbiter will handle disputes between them that Hobbesian nightmares are prevented.
When the government goes beyond the role I just outlined, relationships between some people suffer. When the government unjustly takes from some and gives to others, people have no recourse but to see each other as resources or burdens, as threats to be avoided or saps to be taken advantage of. I can think of nothing more corrosive to goodwill and friendship than this, and we see it all around us in the world today.
I think you had a good representative line in there, that you think the government's role is to retaliate against predators.
I submit that that is a view shared by very few people, and likely no one
Where would the civil rights movement be if popularity were the yardstick by which an idea is to be judged? Every movement starts out by being unpopular, with ideas no one has heard before.
I make no friends among conservatives when I retweet a pro-choice/#shoutyourabortion post on twitter or express support for gay rights. But the fact that some don't like it doesn't matter to me, and if you search deep down, you may find that the immediate approval or buy-in by the majority of others doesn't matter to you either.
This might sound like an impractical approach to take, but if your goal is to live in a truly better world, it is by far the most practical thing you can do.