Tax day thoughts on complexity in American life

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April 15. Tax day. All over America today, people are amusing themselves with “tea parties“. And that is great fun, to be sure. Part of our creation myth is that the country started with a tax revolt, as we rugged individualists stood up to those imperial tyrants. So let’s put on our costumes and play.

But let’s then talk seriously about taxation as part of our ongoing ‘freedom lover’s critique of America‘. To do that intelligently, I feel I must remove one important distraction upfront:

I don’t believe we are overtaxed in America. I believe that some of us could pay even more. But the amount or rate of American taxation is not the problem.

What, then, is the problem? Make no mistake that there is a problem. America’s tax system is a scandal. It is incompatible with freedom.

The problem is complexity, and its effect, opacity.

Today I heard the IRS commissioner say on NPR that America’s tax code is four times as long as War and Peace. 5.5 million words, apparently. The wordcount, however, is a very abstract and bad way of grasping the complexity of the system. We don’t read the code.

The complexity begins hurting, and enslaving, us as we live–that is, as we participate in our society and economy, have children, work and save, and so forth. Young Americans probably don’t know what the fuss is about. That’s because they are not yet participating fully in society. Some adult Americans–probably the spouses of the one “doing the taxes” in any given household–might also feign surprise. That is because they have chosen not to inquire into this scandal. But they are fooling themselves.

The only legal American way to keep things simple in matters of tax paperwork and hassle is not to live. That’s the only way. Don’t work, save, have children, move, and so forth. (Above all, never ever contemplate hiring a nanny!) So I think we can agree that a country that torments its citizens just for trying to make their dreams come true (might I say, for “pursuing their happiness”?) is not … free!

Short meditation on complexity and simplicity

Regular readers of The Hannibal Blog already know how important simplicity is to me, in all things aesthetic, creative, or administrative. Simplicity to me accompanies freedom. I feel free when I am free of clutter.

But I also recognize that nature is full of complexity. and that complexity can be beautiful. However, it comes in three very different kinds:

  1. Natural. Our bodies, for example, are extremely complex. The two nervous systems, the immune system, each organ, each cell, each organelle within each cell–all these are beautifully and mysteriously complex. However, this complexity has evolved, and comes with a “user interface” that remains extremely simple. We do not compute how to attack a virus in our body or how to inhale, we just do it. The complexity is hidden.
  2. Manmade, but following the path of nature: Our cars, for example, are constantly getting more complex. I might have been able to fix a Model T, but I can’t begin to comprehend the 20-odd computers that together represent my Prius. However, just as our bodies hide their complexity from us with a simple user interface, my Prius hides its complexity, so that driving (and bluetoothing, GPSing, etc) is simpler than it was in a Model T. Such complexity is actually sophistication. It works for us, and thus is humane.
  3. Manmade, and going against the path of nature. This is the bad one. This is where our bureaucracies reside. They get inexorably more complex, as surely as entropy increases anywhere in nature, but away from sophistication and toward oppression. They are inhumane. Our tax system is the best (meaning worst) example.

Symptoms of denial

So they arrive, the W2s, W4s, W8s, the 10this and 10thats, the Schedules A, B, C, D, E, F, the worksheets and other papers, and above all, those truly weird, out-of-nowhere, can’t-even-indentify, forms of the sort that we just got and now have the pleasure of disputing and investigating.

People respond in one of three ways.

  1. Take deep breaths, fire up TurboTax and just do it. Those of us who are youngish tend to do it, because we are the do-it-yourself generation, or don’t trust that a tax preparer would do it as meticulously as we will, or actually want to understand (gasp) our affairs.
  2. Get an accountant, forward all that dreadful crap to him, sign whatever he produces, and push the whole thing out of our consciousness.
  3. Break down and give up completely, not filing at all.

In my opinion, 3 is the worst, 2 is the second-worst, and 1 is merely bad. Why? Because all those in Number 2 are fooling themselves. They are accepting that they cannot, and never will, understand their own relationship to government. They are acquiescing in a subtle form of serfdom.

Summary

We can say, speaking for adult Americans who participate fully in life, society and economy, that:

Nobody truly understands why they pay what they pay

The tax system, in short, has become a black box.

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Black boxes are profoundly and inherently illiberal. Propaganda about “lands of the free” is empty when you’re shouting it over black boxes. (And there are other black boxes in American life, to which I will get.)

Finally, recall my two comparisons to Hong Kong: 1) There, my tax return was two pages, counting the bilingual translation, and I understood exactly what it contained. 2) This despite Hong Kong not being a democracy. How intriguing. As it turns out, it is our peculiar American brand of democracy that has caused this mess.

Of that, and of the possible ways out of this mess, more in posts to come.

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6 thoughts on “Tax day thoughts on complexity in American life

  1. I understand this post at a feelings level.

    The spiritual escape you allude to (even the type described by Viktor Frankl in Man’s Search for Meaning in which we escape to our imagination where our captors may have no power) is one of the coping tools for those of us running small businesses. Like me.

    Seems that most of the folks feeling comfortable with higher taxes 🙂 are often those tucked comfortably in large governmental or corporate beds. Now there is nothing wrong with that choice…I opted for that way of life for 26 years. But in the liberal sense, I didn’t like other people telling me what to do, how to do it, and when to do it.

    Those of us who carry (albeit by choice) the weight of small business expense resent paying even more taxes to the very government you discuss in this post.

    Rent $6700.00 per mo.
    Employees: $5000.00 (they are all part time)
    Copy Machine: $350.00
    Insurance: $300.00
    Books/supplies/etc: $1000.00
    Security/permits/etc: $200.00
    IT: $300.00
    Website: $500.00
    Telephone,etc. $190.00

    In short, I have chosen a work life where I call the shots (freedom) in exchange for bearing some burdens (taxes).

    In economic terms, when the benefits exceed the costs, we like what we do.
    In psychological terms, when the cost exceeds the benefit, we reevaluate.

    The spiritual escape you have shared every now and then is familiar to most of us who deliver our briefcases of data to our accountants every year. 🙂 The Number 2’s.

    Breathe…go home and drink…breathe….meditate…go home and drink…and so on.

  2. I spent about six hours doing my taxes last weekend and I still got it wrong – there is a new caclculation required starting from 2006 for persons with Foreign Earned Income that I didn’t know about that effectively doubled the amount of tax I was required to pay. Fortunately for me, I was able to show my forms to someone at work who did know about it so that it could be corrected before I mailed everything to the IRS.

    It’s truly insane that the tax code contains 5.5 million words. I can imagine that very few people are capable of understanding it all, let alone motivated to try. I think a lot of money could be saved by making taxation simpler – make it a standard rate for everyone of something reasonable, like 15%, and no loopholes for anyone. This would probably have the effect not only of increasing overall revenue, but also of reducing the number of IRS employees thus reducing this area of government spending.

    I wholly support your two-page tax form idea, Andreas!!!

  3. One day Cheri will roll her barrel up to a desert mountain top and prepare to enter it like Diogenes, only to hear somebody say ‘Psst, this is where my straw mat usually is.’
    ‘Who the f*** are you?’ Cheri will say.
    ‘Kluth, according to my tax return,’ says the dude in the loin cloth. ‘Now just some guy breathing for freedom. You can put your barrel over there.’

    Marain: There are even simpler proposals out there (including one where there is no IRS at all!). I might review those here (although I have to make sure that the Hannibal Blog does not get too wonky.) But believe me that, as a long time expat, I know what you went through. have you even heard of the so-called “T-bar”?

  4. I took “personal income taxation”, a course for pre-CPA accountants, at my University, and it was the only textbook that I have ever bought for class. Even with a 3.5 in the course it took a new year’s resolution on top of $800 of incentives to put myself in category 1 .

    • Bingo. And I’m guessing that you, being young and a student so far, have relatively simple affairs on top of your quasi-CPA background! It’s a scandal that anybody less equipped than you should be systemically unable to file his taxes correctly…

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