Yeah, a desire for tax simplification seems popular across virtually the whole political spectrum (leaving out a few ideologues at the fringes who want communism or the complete elimination of taxation).
I suspect part of the reason for the political inertia on this topic (besides all those sweet, sweet lobbying $$$) is that the tax code is now so complex that it's enormously difficult to assess what the net effects of simplifying it would be.
This a really classically difficult political problem of concentrated benefits with diffuse costs. The complication of the tax code comes from a zillion little exceptions added over the years, and every little exception has a beneficiary who doesn't want the existing system to change.
Imagine you're a congressperson trying to simplify the tax code. If you want to remove a single little exception, you're going to piss someone off a whole lot for not much benefit. If you want to do a big refactor and lower everyone's rate while cutting a ton of exemptions, you need to fend off zillions of loud, empowered interest groups.
As recently as 2017, congress tried to simplify the tax code with the TCJA. Paul Ryan and co tried very hard to make the tax code simpler while also cutting rates, and the process failed under the enormous pressure from interest groups. They ended up leaving pretty much every exception in place, and only cutting a few high-value tax benefits (like the SALT deduction) that benefited people from the other political party.
When there's no clear path to actually solving the problem, a hack that makes things better in the interim can be a really helpful solution.
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.
Good point. But I think lobbyists and special interests would throw a wrench into all of that.
If we simplify the tax code, some group somewhere will no longer benefit. I'm sure they and their lobbyists will fight extremely hard to make sure this part of the tax code remains. Multiply this by all the different groups that would be in a similar position and now you might see why I think simplifying the tax code would be extremely difficult.
This is the problem with a complex and byzantine tax code: entities that can manage and manipulate the complexity profit by it. Entities that don't have those kinds of resources are stuck.
It would be good if folks from all political walks of life could come together for some kind of tax simplification. I highly doubt this will ever happen, though, as tax law is used as just another club by big businesses to beat down the small. They have the money, and they're willing to pay-off the political class to make various arguments about how simplifying things would be bad for the little guys. That's not changing. (This has nothing to do with current politics, by the way. I am not following the U.S. tax discussion and it's not relevant to my point. My point is that whether it's business, tech, or government, complexity itself is an enemy)
I think the most that can be said without much of anyone besides accountants disagreeing is that simplifying the tax code would actually do a lot of good.
now you might see why I think simplifying the tax code would be extremely difficult.
Of course. You are 100% right. I was describing a fantasy world, you are describing practical reality.
Edit: just to be clear, I'm not trying to be sarcastic in this post, even though it contradicts what I said earlier about how "trivial" it would be to simplify.
The reality is as you describe. Any serious simplification would be extremely difficult to achieve.
Reducing the burden for those filing their taxes is nice, but an effect of simplifying the tax code that I am more interested in is that it restricts the power of the government (and so the reduces the attractiveness of lobbying politicians). The complexity provides opportunities for lobbyists to design rules that distort markets in their favour.
Simplify? The only ones working to simplify the inane and uncompetitive U.S. tax code, which largely hurts working families and enables the politically well connected, are those rare and few politicians working toward complete structural overhaul.
The complexity of the tax code is a result of negotiations between various political and commercial interests and lawmakers at the federal and state level. Simplifying it means changing a whole lot of laws touching taxation, which is practically impossible when the people negatively impacted by each change will be lobbying hard against. It's hard enough to get a single bill through congress. If they somehow achieved the impossible feat of changing all bills that touch taxation, the code will start accumulating complexity again starting from the next day.
Came here to say this, except the real fix is to simplify the tax code. It’s like app dev - over the years has built up lots of bloat, some due to legit social interests, some due to back room shenanigans with special interests. Needs an overhaul and mass simplification, but pointy haired ones not willing to take on the project.
While it's hard to argue against simplifying the current tax system somewhat, I think proposals like this are missing something, intentionally or not. An extremely simplified system may not be the most effective.
One purpose the tax code serves is to incentivize behavior. If that tool is taken away from the government, what will the unforeseen costs be? Do they outweigh the benefits?
I very much want this to happen. Tax code is intentionally made more difficult by tax-prep lobbyists who want to ensure that doing it without them is impossibly difficult.
With a free solution direct from the IRS, there is no incentive to keep the system complicated and maybe we all benefit.
I imagine that the rich will fight tooth and nail against simplicity though. Part of the complexity is around the loopholes which keep companies and the very wealthy from actually paying their fair share. A simple, straightforward tax code would cost them a huge amount of money… more than just buying off politicians.
It would be easier if the tax code was simplified, oh wait the tax-prep companies are also lobbying against that. Maybe we should dismantle them, take their money away and use that to pay lawyers and tax specialists to simplify the tax code and create a nice and easy filing interface.
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