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Comment by nathan_long | Hacker News Reader

This reminds me a lot of the tax code. One special case is painless. A whole pile means that millions of worker hours are wasted trying to fill out the forms correctly, and millions of dollars paid to CPAs to do what any citizen ought to be able to do in minutes.

Both with taxes and regulations, it's death by a thousand cuts. If you try to fix it, you'll hear "but soy farmers need tax breaks" and "but workers need to have good office chairs". Individually, each claim sounds reasonable. Collectively, it's a mess.

I sometimes fantasize of ways to limit this. Eg, have all laws sunset, so we have to prioritize renewing the most important. Or set absolute size limits on areas of regulation - like a one-page tax code (with specified font and margins). But likely none of it would work, humans being so good at exploiting systems for personal gain.

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I appreciated this description of the difference between American and Swedish tax preparation by some who files both:

Our US federal and state forms tax forms were more than 30 pages long last year, downloaded completely blank. During the two weeks we'll spend in Wisconsin this summer, our main job will be to get our taxes done.

I'll wade through stacks of bank and credit card records line by line, documenting all professional income beyond our wages and scanning for every possible business or charitable deduction. Once this is done, we — like the majority of US taxpayers — will hire a tax professional who charges us $500 to review and co-sign our work.

Tax-preparation services cost American taxpayers more than $32 billion per year. My wife, Betty, and I each have a PhD, but that's not enough to understand IRS instructions. Finally, with a great sigh of relief, our marriage still intact, we'll sign the forms and send them to the IRS.

Of course, despite our great efforts, we don't know whether the IRS is going to be happy or not. We might get audited and have to dig up all this stuff again, because the government has three years to check and revise our returns.

In Sweden, the four-page tax form comes in the mail already filled out. On a Saturday morning, Betty and I take our coffee to the couch and review the forms. Seeing they look reasonable, as they always do, we "sign" with a text from our phones. In 15 minutes we are done. We don't have to hire a tax consultant, and we avoid fights about whether a print cartridge bought at the drugstore is a business expense or not.

http://www.vox.com/2016/4/8/11380356/swedish-taxes-love

In fairness, that's a lot of information that Americans would consider private, going out through the mail in clearly marked envelopes. They can only be so casual about it in Sweden because they also have the social practice of being less secretive about how much they make.

With that said, if we could nail down the authentication process, we could do here (and should). It wouldn't improve everyone's situation -- e.g. if you have a lot of income from hard-to-track sources -- but for most people it would be a godsend.

Alternatively, you could do it over the internet. Not totally unprecedented that ;)

As a Norwegian, I think sending a text is a little too much work. Here, silence is a confirmation in itself. That said, if you have foreign bank accounts or own foreign shares then you still have to do your taxes here too. I think they should get an information sharing agreement with other governments in place to get rid of that. Should be doable within the EU at least.

Don't you have to submit them by mail anyway?

By the way, in Portugal we download a cross-platform Java app that fetches the data over HTTPS and lets you fix it (if needed) and submit. Of course, that has its own problems, so paper submissions are still allowed.

Most people file online these days, and no forms are sent.

However, many people still send in their forms by mail.

W-2s are usually sent in the mail currently, which have all the stuff you would want to keep private. I have never heard anyone complain that W-2s in the mail are dangerous.

In fact, what extra information would be on this pre-filled form that isn't already being sent via mail? Bank statements, retirement statements, pretty much all financial info is sent in the mail every day.

>>W-2s are usually sent in the mail currently, which have all the stuff you would want to keep private. I have never heard anyone complain that W-2s in the mail are dangerous.

That's because opening someone else's mail is a federal felony. https://www.law.cornell.edu/uscode/text/18/1708

I'm not a fan of income tax, but this is a bizarre quote.

I don't think that the Swedes track his ink consumption -- nobody forced the guy to deduct his print cartridge expenses.

I have a reasonably complex return. I think it's like 10 pages long if printed. I pay about $30 for software and spend 2-3 hours, unless I've had a year with an unusual volume of capital gains/losses or some weird delay in getting partnership forms.

Presumably the idea is Swedish taxes are simpler, but also reasonably fair, such that how many ink cartridges you bought doesn't matter.

Like itemizing vs the standard deduction in the USA.

Is it fair? If I'm running a business, money I spend on consumables is not income--it's a cost of generating revenue. Why shouldn't I be able to deduct it?

Perhaps your tax system gives you a standard deduction for your business. Perhaps it scales with the size of the business. Who knows, but itemizing isn't the only way.

But the whole concept of business expenses being deductible is just another set of special cases in the tax code. Why does a business not have to pay taxes on the money that it spends to maintain its existence but a person does? Why is one way for an individual person to generate income a business but another way for an individual person to generate income not a business?

Taxing revenues instead of profits would privilege high margin businesses over low margin ones which would implicitly mean that customers would pay a much higher tax rate on their groceries than on an iPhone.

Literally no one thinks that would be a good idea.

I wasn't saying that businesses should be taxed on their revenues. I was asking why natural persons are taxed on their revenue.

The orthodox explanation is that with individuals, it is very difficult to distinguish between consumption and expenses incurred for the purposes of producing income. A business entity gets to deduct everything necessary to its upkeep because it exists solely for the purpose of producing income. A person, on the other hand, does not. Some part of what you spend on housing is attributable to your need to be near work, etc, but you have an interest in securing shelter for reasons that have nothing to do with your work.

As a practical matter, individuals do mostly get to offset the costs of producing income. Individuals who own houses effectively get to deduct the cost of housing through the mortgage interest deduction. Individuals who don't own their own house probably don't itemize either, and get the standard deduction. At $12,000 for a family, it probably a reasonable proxy for the component of living expenses attributable to the need to work to produce income.

There are some obvious gaps, child care being the main one, which is almost entirely attributable to working rather than consumptive.

In theory, things like EITC and progressive rates should account for the fact that low income people spend all their income on living, while high-income people accumulate capital that they can invest and create more income. Also, in theory, this approach is less intrusive than asking people to account for their spending and try to find which spending is actually a "cost" the way it would be for a business, and what it some frippery that should (for some definition of "should") be taxed.

To be completely fair, most Americans can fill out either the 1040A or 1040EZ, which are short (the 1040A is two pages, the 1040EZ is one page). And while they don't come pre-filled, these forms are extremely simple ("look at the form your employer gave you; fill in the value from this box"-type instructions).

The complexity doesn't kick in unless you hit higher income brackets, need to declare income from a business you run, or want to itemize rather than take the standard deduction.

With Health care requirements even that is becoming harder. Besides, if it's so easy why doesn't the government just do it automatically for you?

The usual explanation cited is lobbying by tax-preparation companies to prevent moves which would cut their business. Also, on the short form there's just a box you check to say "I had health insurance all year".

Ugh.

What kind of business person waits until their personal taxes are due to find their expenses? This should be done quarterly if not monthly. Use a separate account for business expenses. Hire a bookkeeper.

I think a sunset on all laws would be helpful. It would probably require a change to other parliamentary procedures or the representatives wouldn't have enough time to vote on everything. I expect the US would struggle with this more than most countries. The alternative is less government due to political gridlock. Perhaps that would result in more of these programs being managed at the state or local level.

Initially, every time a soy farmer support bill died due to a sunset time it could be a media issue. Some big bills will continue to die or be renewed amid a media frenzy; however, our capacity for sensation is limited. Many bills would die quietly. A delightful side effect could be the generation of enough actual news to keep the media busy reporting on useful topics.

A maximum word length or similar requirement sounds good; however, it might not be practical. If you prevented disparate pieces of legislation from being voted on as a single law, a limit on length might work and promote transparency.

As a citizen of a democratic country, I love the idea of mandatory sunsets. I hate how easy it is for legislators to pass laws but how very difficult it is to repeal them.

But, beyond that, I'd like to see the law be self-repairing. There's a legal concept that goes back to the Romans that ignorance isn't a valid defense. Maybe it worked well back then, but not when the legal code expands as it does in modern democratic countries. The law should be a manageable size that is largely understood and agreed to by everyone. In that vein, I've always wanted a built in system to 'garbage collect' laws that were dated or misunderstood. In a simple implementation, a government department would poll the citizen body for understanding or agreement with a law. If the polling doesn't reach a threshold, then the law is purged.

You mean in addition to jury duty, citizens would have legislation duty? Seems legit.

Sunsets don't have any effect in practice. All sorts of US laws have sunset provisions, and unless they've become somehow politically contentious they get renewed without debate every year.

At least the legislature has to spend some time renewing them. Everyone bears the cost of having to know and follow all the laws; lawmakers having to spend the time to renew every law would be a better alignment of incentives.

Except that it's all rolled into one bill. Which they haven't read (they don't actually read any of the bills).

If they spend more than about ten minutes on the whole exercise I'd be shocked.

Yeah, you'd have to combine it with a length limit on the text of bills.

Require that one of the people voting reads the entirety of the bill aloud in front of the whole group before 'yes' votes are valid?

Doesn't make the length boundary sharp, but still provides a limit of sorts.

Less restrictive than the one in Gulliver's Travels!

edit: whoops someone already said this

> they get renewed without debate every year

That should simply not be allowed. It's the legislative equivalent of handing out an inspection sticker without actually inspecting the car.

Yep. Idea: congress shouldn't be able to pass a law without reading every word of it aloud. If you weren't there to listen, you can't vote.

But those special exemptions aren't the core driver of tax code complexity. Rather, it's the intersection of:

a) high (enough) rates, and

b) taxation of business income (where you must allow deduction of legit business expenses like inventory)

This spawns sort of an arms race where businesses try to classify consumption as a "business expense" so they can deduct it, and the tax authority has to respond with ever-longer lists of "no you can't do that".

One naive scheme might be for the boss to go around and say "hey, what would you spend your next $50 on" and then buy it, classify it as a business expense, and silently give it to them. Then the worker doesn't show up as having that income, but the company has the expense to deduct. Now think about the regulatory apparatus necessary to prevent that, and any clever variant, from happening. (It's also why fringe benefits were so lavish for high earners in the high-tax 50s.)

The higher the rate, the more activity is diverted into this (socially wasteful) activity. Do you want high-IQ people designing self-driving cars or outsmarting the tax code?

Highly successful company's don't need to spend a lot of time on the tax code. The ROI of focusing on the tax code is finite and you really quickly hit diminishing returns. Accept you might possibly be paying a little more and move on.

Successful companies don't reduce their effective tax rate below the official 35% number?

> The ROI of focusing on the tax code is finite and you really quickly hit diminishing returns. Accept you might possibly be paying a little more and move on.

Tell that to the oodles of lawyers and accountants managing Irish subsidiaries at Apple and Google. There is literally nothing with a better ROI than pushing papers around to save tens of billions.

> Irish subsidiaries

This is actually fairly cheap and straightforward for a multi national to pull off. But, that's just the tip of the iceberg. Eventually you get into things that impact day to day operations for ever more marginal savings.

Maybe income tax is just a bad idea? Bad for humans, that is, not for maximizing government power. The U.S. got along without it for a long time, and economists have argued for other bases like a land-value tax or consumption taxes. I dunno, myself; it's not like I get to choose.

Unfortunately there is no perfect solution for taxes. Governments need funds to provide the things that government needs to provide in the modern world.

Can't do tariffs, those are bad for trade and bad for the economy. Consumption tax is hard because it encourages people not to spend money, which is bad for the economy. Income tax is bad because it makes income (and thus hard work and productivity to the economy) less valuable. Overall, income tax is something that works with some pitfalls, and better solutions are actually surprisingly hard. In the end taxes are necessary but difficult to do right.

Repeating https://en.wikipedia.org/wiki/Land_value_tax as it was my main suggestion and the one you left out.

But the bigger problem is that even if a simpler and less distortionary tax system were adopted, governments if permitted to will just gradually add all the other kinds of taxes on top, purporting to need to in this modern world.

Taxes could be automatically calculated. The reason they aren't is because of lobbying by tax preparation companies, not the complexity of the tax code.

Only in the simplest of cases. Yes, an employee with only W-2 income, some stock trades, some interest/dividends.

But the IRS has no data feed to tell them what I did for rental property (schedule E), my side business (schedule C), my charitable deductions (schedule A), nor other schedule A items, nor gift tax return information, nor many other cases that arise from tax law complexity.

You could possibly calculate my "most-pessimal" tax liability automatically.

The UK is for-real working on simplifying their tax code: https://www.gov.uk/government/organisations/office-of-tax-si...

At the moment they are trying to harmonize income tax and National Insurance (which is not entirely unlike income tax (especially because it all goes into the same pot), but it has exemptions for various groups which income tax does not (e.g. seniors collecting their pensions). So any change will invariably throw some group under the bus, which is why it's politically hard to do.)

Look at copyright laws. US corporations find a way to prolong useful for them laws to the detriment of the society.

Same goes for communication: one reply is a conversation, a million replies is harassment!

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