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Comment by dr_petes | Hacker News Reader

I don’t think bigger always needs to be more complex.

For simplicity sake, a 10% tax on income would scale infinitely, no matter how big an economy grows (I’m not arguing in favor of this tax).

But the point of the article, in my opinion, is that US has a large problem, costing tax payers an estimated 40 billion in labor figuring out their taxes, where other countries have almost automated the entire process.

I think there is something to be learned from there, as most people would agree that the US tax system is a mess.

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> I don’t think bigger always needs to be more complex.

And yet, the bigger a software company gets, the more labyrinthine its systems get. Ask any software or IT engineer who was at, say, Amazon, Facebook, or Google, as the company grew from serving a few hundred thousand customers to hundreds of millions of customers.

Similarly, the bigger a country is, the more labyrinthine its systems are (tax, legal, regulatory, etc.). Large distributed systems tend to become very complex, even though no one wants them to be. There are always many competing interests negotiating with each other and reaching compromises that no one likes.

> Ask any software or IT engineer who was at, say, Amazon, Facebook, or Google, as the company grew from serving a few hundred thousand customers to hundreds of millions of customers.

It's not the number of customers so much as the number of diverse things they do. Ditto for a country's taxes. I expect the Faroe islands' industry is fairly limited compared to the US, so they may not need as many exemptions, tax credits, deductions, etc. No doubt there's still considerable room for streamlining though.

What percent of that $40B is relating to “taxes other than ordinary earned income” (the part that the Faroes have simplified)?

I suspect it’s very high 90s of percent.

Maybe the US could stop taxing labor and investment and simply tax consumption (sales tax). That would simplify everything.

This is simpler but tends to favor the wealthy because such taxes do not impose the same burden proportionately. Moreover the poor rarely invest--I think 401k uptake is only 50% in the US?--and would in present circumstances be challenged to do so. Maybe incentives would change for them under a new system. Another difficulty is that investment income grows over time and governments stand to lose a great deal if they don't tax it.

1. some basic needs like food and clothing could be exempt from sales taxes, like it is today in many US states.

2. Taxes should only grow in relation to the growth of identifiable government needs. There is no reason that the government ought to grow linearly in proportion to the net wealth of the country.

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