Comment by Xcelerate | Hacker News Reader

Comment by Xcelerate | Hacker News Reader

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> It's easy for people (especially the kinds of people who gravitate towards engineering) to get all worked up about the necessary implications of the regulations as-written

I was once trying to figure out taxes owed on some RSUs granted in California that vested in North Carolina (and some other edge case that I can’t remember). Hoh boy. What a rabbit hole. I didn’t think the CPA that I hired to do my taxes handled it correctly, so I started digging into the tax laws and regulations. Couldn’t find anything that covered my specific case. So I started digging into court cases involving disputes over RSU taxes owed in North Carolina and found conflicting outcomes.

I brought what I had found back to the CPA who basically said something along the lines of: there is no absolute “rule” for what to do in this case like you’re looking for. We make a good faith effort to mirror what was done in similar prior situations, write a number down, and then forget about it unless you hear from the IRS.

Did not make me feel very confident about the legal system.

>...In the real world, people usually attempt to solve problems by forming hypotheses and then testing them against the facts as they know them. When the facts confirm the hypotheses, they are accepted as true, although subject to re-evaluation as new evidence is discovered. This is a successful method of reasoning about scientific and other empirical matters because the physical world has a definite, unique structure. It works because the laws of nature are consistent. In the real world, it is entirely appropriate to assume that once you have confirmed your hypothesis, all other hypotheses inconsistent with it are incorrect.

> In the legal world, however, this assumption does not hold. This is because unlike the laws of nature, political laws are not consistent. The law human beings create to regulate their conduct is made up of incompatible, contradictory rules and principles; and, as anyone who has studied a little logic can demonstrate, any conclusion can be validly derived from a set of contradictory premises. This means that a logically sound argument can be found for any legal conclusion.

The Myth of the Rule of Law:

https://drive.google.com/file/d/1I-JhqpU3_0r_HL06hP-5DABhEtG...

Thanks for the link! I have been thinking a lot about topics related to this lately and this looks like an interesting read. Skimming through it I might not agree with all the ideas of the author I very much welcome new ideas about how to organize our society and our legal system. I have especially been thinking about how the legal system is mostly fiction and what makes it work is not so much what the laws say and what the punishments are for breaking them, but rather our shared belief in the system. And I think this is problematic because it takes away our agency to imagine other ways of doing things, we think our current legal system is the only possible system because it has to be. Thoughts of anything else would cause a collapse.

I have also been thinking about how basing morality on following laws is a bad idea. You should not be afraid of breaking laws or rules if they are stupid. All of modern workers rights, women's rights, etc are based on brave people of the past that were not afraid of breaking stupid laws of their time, why should today be any different.

I think this illustrates an issue in common law systems in general. Contrary to what we’re taught in school about how actions are generally legal by default, and only illegal if a law has been passed to prohibit them, in reality, actions exist in a superposition of legal and illegal until someone challenges that position and a court finds out (subject to any appeals). You can only evaluate in practice whether something is legal based on copying others in similar situations. The further you get from the known outcomes the fuzzier this all becomes.

This tends to be something people encounter a lot around tax, complex business structures, and various international dealings where you’re more likely to end up in an edge case that hasn’t been well explored.

And it's worth emphasizing that this is a good thing.

Civil law systems (which are used in the non-English-speaking parts of Europe for example) don't have this property. In such systems, court precedents don't really exist, so if something isn't clearly defined by law, and there's no extremely ubiquitous legal interpretation that everybody seems to follow, you don't know whether it's legal or not.

For example, the Polish tax authority lets you ask for a tax interpretation for cases that aren't legally obvious, something that I believe the US would have handled via the court precedent system. It's not unusual for two people in identical situations to receive opposite rulings, and Those rulings are not binding on the authority that issued them.

In other words, you don't know how to handle your tax situation, you ask your tax authority, they tell you "hey, we're the tax authority, we're telling you to do x", you do x, they audit you, they say "this isn't clearly defined in law, we now believe you should have done y instead, here's your orange jumpsuit."

Individual tax interpretations are not binding (in the way that they don't alter the law, and they might be rescinded at any time), but they grant immunity from prosecution (art. 14k of tax law).

And eventual orange jumpsuit would be decided by the court, not tax authority.

It took me a while to accept that the law is not a consistent system with hierarchical top-down rules that can be used to determine legality in an unambiguous way.

If you're a software engineer and you're knee-deep in analyzing court cases to find out how to file some tax correctly, you're definitely overthinking it. The CPA was exactly correct.

Yeah but now I just switch my perspective from thinking of it as a formal deductive system to thinking of it as an optimization problem.

Chances are your CPA was not correct. CPAs routinely violate the law as a regular course of duty and the IRS is fine with it, even encourages it, because it gives them more revenue. If you are looking to go down a multi-year rabbit hole on this, then try to find the law that imposes any tax on __your__ domestic income.

(Hint* You can't)

Yes, that's right. It's a Bayesian Game and you are attempting to reduce risk to an acceptable level (not under paying) while minimizing loss (not over paying tax) with only partial information (what the results of a lawsuit would determine).

If you move from Germany to Brazil you might also hit edge cases.

Yes that is 2 different countries. But it is similar. States have their own laws.

You can't expect the law across 3 jurisdictions to work out every permutation and legislate for it. There are 52 (I guess more... lots of territories) * 51 permutations of moves so 2652 moves that are possible.

In addition you are talking RSUs and not some vanilla thing like claiming an expense.

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