Complexification

Needless complexity, in any endeavor, leads to disaster. - Robert E.

A blog I follow closely is Charles Smith's Of Two Minds, a treasure trove of common sense regarding finance and how the system should be changed. In his last post, Income Tax Solution: Apply Social Security Taxes to the Super-Wealthy, complexification writ large is part of why we are in such desperate trouble regarding all things economic.

In terms of our response to financial crisis, compare our financial-sector fix of 1933, the Glass-Steagall Act (37 pages of legislation) and the current Dodd-Frank Wall Street Reform and Consumer Protection Act (2,319 pages of legislation). Does anyone seriously think these 2,300 pages of legislation and the thousands of pages of regulations the bill spawns will 'fix" what's actually wrong with America's financial sector?

We all know the current tax code is a complexity moat benefiting the super-wealthy financiers and the tax and accounting industries that live off the 5,296 pages of mind-boggling complexity. The total package of tax regulations and explanations weighs in around 70,000 pages, and attempting to comply with all this feeds one of the nation's largest industries, the equivalent of 3.8 million full-time workers toiling year-round on tax-related tasks.

What we pay to DO our taxes goes beyond imagining...

If we look up the United States GDP for 1995 and do the math, 2 to 5 percent of $7.3 trillion is quite staggering: between 146 and 365 billion dollars have been spent just filing taxes in 1995. That year, the total amount of tax collected was $1.135 trillion3. This means that in 1995, it cost between 12% and 32% of tax revenue to pay the taxes.

This calculation is confirmed by economics author Bruce Bartlett, who in a 2005 article, arrived at a figure "between $240 billion and $600 billion every year". If we assume the 12%-32% range has remained constant, in 2007 the amount of tax filing overhead was between $312 billion and $832 billion.

Everything should be as simple as it is, but not simpler. - Einstein