If there’s one outcome I really hope from AI automating work, it’s taking away the advantage the monied class has in this regard. Then perhaps there’s less purpose for the complexity
Or maybe the free models will start responding with
""" It looks like you're asking for help with tax preparation. I recommend our designated AI tax service [link to service that asks you to upgrade your plan or pay a one-time fee]. """
They are operating free models at a loss now, but at some point they are going to have to turn a profit. At that point tax prep becomes a revenue stream for AI as well.
Plus interest and fees (they can't call them fines because then you'd have rights), so call it triple to be safe.
What else is an incentive for, but that the government wants you to use it?
Hell, Google got pre-approval from the IRS for their Dutch Sandwich tax structure.
Most poor people don't read the tax code. They should.
( https://www.youtube.com/watch?v=e97kq2XflKE )
It's still largely maximising what can be pushed through unintended loopholes.
They should.
Of course, this is not to say they always are stupid or illiterate, it's again usually just another form of exploitation, they don't have (or feel they don't) time to read it.
Which is arguably explicit exploitation/enslavement - the Walmart door greeter doesn't have a difficult job, however their role doesn't allow them to do anything that would benefit themselves. I wouldn't care if they were reading their phones or a book, but noo... can't have the peasants educating themselves.
And they aren't paid enough, so when they return home, they likely don't have any time after needing to perform meal prep, taking a second job, etc.
The USA is a third world country in many respects.
We absolutely could do that, but the government has no incentive to do so. At least in the US, taxes are a form of control, a source of power for those in charge, a political chip for elections, and a mechanism to further the wealth divide. Taxes are not primarily meant to fund our government, and definitely don't include goals related to making the average person's life easier.
Every time they insist they want to "simplify" taxes, they demonstrate that what that means is just another tax break to wealthy businesses.
The DOGE team shut down a simple tax filing system the IRS had freely made available.
It's republicans. Stop saying "Government" when it is republicans
Form 1040 isn't even complicated! But republicans have convinced millions that the IRS is going to black bag them for missing a decimal point somewhere.
Guess what! The IRS is not funded enough to care! They will send you an automated form saying "We fixed it for you, here's how much you owe/are getting back". You can even ignore that letter and you won't end up in prison! They just seized a couple of my state tax returns!
Both parties are responsible for the complexity of our tax code, how long they allowed TurboTax to run the show, and how poorly the tax revenue is spent.
Agreed that the complexity is a feature but it's not for the rich ( though the rich will take advantage of it, and why not? ) . It's mostly for the powers that be. If there were a 'flat' tax ( and one could argue what constitutes a flat tax) the rich will be more willing to pay that flat tax.
I'd say complexity support a very large govt, keeping several people employed including accountants, tax software companies etc. It serves the parasite class.
The flat tax would not make tax preparation any bit easier. They only thing it would do would be to eliminate progressive taxation. In other words, the rich would pay less. The poor would pay more.
Tangentially, the same motivated-disinformation occurs with Social Security.
It's best-understood as an insurance-policy (OASDI is literally named that way) against dying poor and old/orphaned/disabled. With an insurance policy, it's normal for my month's premium to be spent on somebody else's current tragedy, it's normal for me to expect no cash if the Bad Thing never actually happens to me, and it's normal that there's no asset for me to pass on to my heirs.
However wall-street bankers can't make tons of profits competing under that model, so instead they try to trick citizens into misunderstanding what the model is. They want people to think it's a government-managed investment account instead, where every person is filling an individual bucket of "their" money that will someday be tipped back out for them.
With this deception, their job is much easier: They just need to say that they'll be a nicer manager of the accounts than the government is, because they'll give you more choices for managing "your" money. It's dishonest because the two things are fundamentally different in how they work and what they're good for.
This is absolutely not true in the USA. Income from different sources is taxed differently.
Example: The forms distinguish between short term capital gains, long term capital gains, and e.g., income from government bonds is taxed differently at lower levels of government.
there are many way to 'define' a 'flat' tax. My way would be a fixed sum. Not a fixed rate. ( yes the rich pay the same as poor) This would ofcourse have it's own if/buts but it would eliminate 90%+ complexity.
The ideal situation would be be no income tax and many other forms of taxation.
That's just because moving from progressive-taxation to a flat-tax reduces how much they pay!
The "simplicity" of the math done by their usual accounting firm that does their taxes for them is irrelevant by comparison.
_________
To illustrate why the burden shifts, suppose the nation of Elbonia needs a constant $540 to operate, and it moves from a progressive tax to a flat tax.
This year, progressive taxation, rising %:
90 peasants each earn $10 and are taxed 20% -> $2 per peasant.
10 nobles each earn $90 and are taxed 40% -> $36 per noble.
Total collection is $540.
Next year, flat tax, same % for all:
90 peasants each earn $10 and are taxed 30% -> $3 per peasant.
10 nobles each earn $90 and are taxed 30% -> $27 per noble.
Total collection is $540.
50% Payroll Income Tax. 35% Social Security Taxes. 7% Business Taxes. 7% Excise Taxes.
70 years ago they were:
25% Payroll Income Tax. 25% Social Security Taxes. 25% Business Taxes. 25% Excise Taxes.
I think the priority is fixing this distribution to levels which were historically perceived as being more fair. The wealthy are one problem. The oversized corporations are the everlasting machine which drives them.
In a global economy higher business taxes just cause large international corporations to incorporate in a different jurisdiction, which gives them an advantage over smaller purely domestic corporations, which is bad.
Social Security is already taking in less money than it's paying out. Reducing the Social Security tax would imply reducing Social Security benefits, since that's where it goes, unless you're proposing a more significant reform of the system in general.
The size of corporations and the amount they're taxed are two entirely different things. Indeed, the tax code does a lot of things to encourage corporations to be larger, like taxing dividends and capital gains after corporate income has already been taxed, which creates a tax preference for leaving the money inside of an existing corporation rather than investing it in starting a new competitor.
This is the common wisdom. I doubt it. The legal system in the USA is worth paying for. If these companies really want to submit to European law, then, they're welcome to it. I don't think that loss actually hurts domestic businesses but helps the massively.
Corporate income tax is essentially designed wrong. Property tax is where the buildings are, payroll tax is where the workers are, sales tax is where the customers are, corporate income tax is where the profit is. Which they just put in the country with the lowest taxes.
It's basically this: Employees in the US get paid $1B to design a product that employees in China get paid $1B to manufacture and then it gets sold to customers in Europe for $3B. The net profit is then $1B, but where is it? If the subsidiary in Ireland pays the subsidiary in California $2B for the design then it's in California. If they instead pay the subsidiary in Shenzhen $2B to manufacture it then it's in China. If they instead pay them each $1B then it stays in Ireland. And then the company picks based on whichever one has lower taxes.
There is no real way around this because in real arms length negotiations it would depend on which subsidiary has more leverage against the others, but in modern companies what that really comes from is the strength of the company's brand or customer lock-in as a result of patents or copyrights, since without them the profit would be negligible because there would be no barriers to competitors entering the market and causing razor-thin margins, but all of those things are easy to move into whatever jurisdiction you like since they only exist on paper.
So international corporations pay taxes in Ireland and purely domestic corporations pay taxes in California which puts the domestic corporations at a disadvantage when the taxes in California are higher.
You also need to look at overall tax burden, not just federal. It used to be that the states levied taxes and did stuff. Now mostly what happens is that the feds levy taxes and piss it back onto the states in the form of grants to do qualifying stuff.
IDK how this distorts the percentages but it certainly does.
The point I'm trying to make is businesses used to carry a more significant fraction of federal spending during a period where they had less overall influence relative to the citizen.
Now we're inverted. Businesses have excepted themselves from most of the costs leaving that burden to the citizen, but we live in a country where business needs are put well ahead of the citizens.
The bigger picture is what matters here.
That's what everybody says but then you look at effective tax rates in real life and the highest ones are paid by people like doctors rather than billionaires because the complicated system is the thing that allows the billionaires to pay less.
Meanwhile you don't need a complicated marginal rate system to get a progressive effective rate curve. Just give everybody a tax credit in a fixed amount and then use the same rate for everyone. Here's your table when you do that:
90 peasants each earn $10 and are taxed 42.5% and receive a $2.25 credit -> $2 per peasant, effective rate 20%
10 nobles each earn $90 and are taxed 42.5% and receive a $2.25 credit -> $36 per noble, effective rate 40%.
That's not a progressive-tax brackets versus flat-tax thing.
That's a "having different rules for different ways of making money" thing.
> the complicated system is the thing that allows the billionaires to pay less
Something true of a parts is not necessarily true of the whole, and vice-versa. The reason billionaires pay less than we might expect comes from relatively simple factors, not because the tax-code is too complex for poor people to get the same result.
That's the thing which is a consequence of the existing complexity, which in turn is a consequence of trying to do brackets by income.
A flat rate tax is you collect VAT on everything no exceptions, send everyone a check in a fixed amount as the credit to make it progressive no exceptions, and you're done.
Different marginal rates is oops, if you use VAT then rich people have poor people go to the store for them so you have to use income tax and track everybody's income. But some people get income from investments and then it's not realized until they cash out, which allows a bunch of fancy tax dodges, but trying to tax unrealized gains has a bunch of other serious problems like liquidity and valuation. Also, you didn't really mean to tax everyone's retirement savings, so now you need a bunch of stuff like 401(k) to undo the thing you didn't really mean to do, and now you have some more complexity. And it continues like this until you turn around and doctors are paying higher taxes than billionaires because billionaires have more resources to navigate all the complexity.
They would be more than willing to be flat taxed at their current rate because it would still save them the hassle and the stress and the uncertainty.
Now, it would likely reduce what they pay eventually, because if you flat taxed the whole populous at their rate there'd be a new government pretty quick, but that's not the point.
US median income $75,000
top 10% $149000
top 5% $352000
Which is 203000 more, therefore half of the top 10% must earn $101500 less than $149000 to have an average of $149000 which is only $47500 which is 0.6 times median.
If you tax them 40% they have only 0.36 times median left.
See?
top 1% $749000 is 397000 more than the top 5%, therefore 4/5 of the top 5% earns $99250 less than $352000 which is only $252750 which is only about 3 time median.
top 0.1% $3312693 is 2563693 more than the top 1%, therefore 9/10 of the top 1% earns $284854 less than 749000 which is only 464145 which is only about 6 times median.
I don't know where all the money went but it isn't here.
Moving from a progressive-tax to a flat-tax (with the same total receipts) will lower the tax-burden on one group and raise it on another. You don't even need numbers to understand it: It's the same as how leveling a see-saw will result in one end moving up and one end moving down.
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To offer a specific critique:
> top 10% $149000
Correct, $149,000 is the hypothetical income of a single person sitting in-between the bottom 90% and the top 10% of income. This means every single person in the top 10% earns at least $149,000 per year.
> therefore half of the top 10% must earn $101500 less than $149000
No no no, something has gone Very Very Wrong here.
It is literally impossible for anybody in the 10% to be earning less than the lowest-earning member of that group.
hahaha, I forgot to mention I totally agree with what you said.
> You've gone off the rails somewhere.
I'm glad you noticed :)
Ill demonstrate the jedi mind trick one more time...
Imagine 100 boxes, we ignore 90 of them.
The 10 boxes left have 149 on average in them.
if they had exactly 149 each it would be 10x149=1490
However, we are told 5 of these boxes have 352 on average.
How much is in the remaining 5 boxes?
If the boxes told about had exactly 352 each it would be 5x252=1760
If the remaining 5 boxes are empty the average would be 1760/10=176
176 is more than 149
See?
Anyway, what does "sometimes you can bullshit people with bad math" have to do with progressive-vs-flat taxation?
> The 10 boxes left have 149 on average in them
> 5 of these boxes have 352 on average
"A portion weight more than the whole." -> "Uh, no."
> to be in the top 10% of US earners, you need to earn nearly $149,000 annually.
> According to the same research, those in the top 5% earned at least $352,000.
https://www.unbiased.com/discover/banking/how-much-income-pu...
I have no idea how to calculate the flat tax now. The words "nearly" and "at least" make it even more confusing.
Consider the stuff here: https://taxfoundation.org/data/all/federal/latest-federal-in...
________
The first chart shows an ascending staircase of tax-rates as each group has a higher average income (not shown) than the prior group, indicating a progressive tax scheme.
With a flat tax, every bar would be the same moderate height. We don't automatically have enough information to say exactly where the horizontal line would be, but clearly it has to be somewhere between today's "Bottom 50%" and "Top 1%", meaning those groups would see a tax-hike and a tax-cut respectively.
________
Another approach is the next chart, "High-Income Taxpayers Paid the Highest Average Income Tax Rates".
Much like my "many peasants" and "few nobles" groups, this chart has 6 groups. It shows the smallest group, the "top 1% of people" took in 22% of the taxable income, and paid 40% of the taxes, and so on down the line for the other chunks.
Under a flat tax, any group with X% of the income would also pay X% of the taxes. In other words, the right-hand stack would shift to look like the left-hand stack.
Knowing this, you can tell which groups' "taxes paid" boxes would grow (tax hike, boo) and which which groups' would shrink (tax cut, yay).