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Can Computers Be Used To Optimize the US Tax Code? 730

Posted by Soulskill
from the improvement-through-iteration dept.
FatLittleMonkey writes "Science fiction author David Brin wonders whether the US tax code, described by President Obama as a '10,000-page monstrosity,' could be dramatically simplified. His idea is about using computers to shuffle the existing system: 'I know a simple way the sheer bulk of the tax code could be trimmed by perhaps 70% or more, without much political pain or obstructionism! ... it should be easy to create a program that will take the tax code and experiment with zeroing-out dozens, hundreds of provisions while sliding others upward and then showing how these simplifications would affect, say, one-hundred representative types of taxpayers... Let the program find the simplest version of a refined tax code that leaves all 100 taxpayer clades unhurt. If one group loses a favorite tax dodge, the system would seek a rebalancing of others to compensate. No mere human being could accomplish this, but I have been assured that a computer could do this in a snap.' With all the talk about Open Government, perhaps the computer code currently used in tax modelling could be released to the wider community, leading eventually to a Folding@Home type project."
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Can Computers Be Used To Optimize the US Tax Code?

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  • Sure. (Score:5, Insightful)

    by drolli (522659) on Tuesday May 17, 2011 @04:24AM (#36150826) Journal

    That procedure would lead to the same results. Maybe some redundancy would be removed, but obviously he doe not understand why the Tax system is complicated. Its the politics, stupid. Many of these 10000 pages are just small little promises somebody has given to *his* voters at some point. And nobody wants to cut such things, because one time this starts, it could be soon the promises to *your* voters. So no matter how absurd something is, it will stay there forever.

  • by Haedrian (1676506) on Tuesday May 17, 2011 @04:26AM (#36150834)

    Would work at face value. Genetic algorithms can easily be used to solve something like that.

    However I think taxes have more of an effect than just bringing in money, if the system decides to highly tax something, it might cause an economic downturn on that item, which could have ramnifications. In fact, the more popular the item is, the more cash you'd get if you raise the taxes on it.

  • End result: (Score:3, Insightful)

    by leuk_he (194174) on Tuesday May 17, 2011 @04:30AM (#36150868) Homepage Journal

    The system will still not be understandable, but this time computers will be blamed.

  • Re:Short Answer (Score:5, Insightful)

    by azalin (67640) on Tuesday May 17, 2011 @04:36AM (#36150890)
    Slightly longer answer:
    Maybe
    Would politicians accept the solution without re-bloating it first? No
  • Better solution (Score:5, Insightful)

    by bryan1945 (301828) on Tuesday May 17, 2011 @04:38AM (#36150906) Journal

    Scrap the whole thing and start over. All the cruft is from decades of putting in and taking out different provisions for thousands of groups of people. Start with whatever rates you want. Then stop. What's the point of taxing someone 30%, then giving them a mortgage deduction, education deduction, horse rodeo operator deduction, etc.? Same with corporations; if you're going to give them all tax breaks on their water coolers, just drop the rates. The IRS will be pissed, thousands (millions?) of accountants will be pissed, and everyone else get 4 hours of their lives back from stupid paperwork each year.

  • Re:Why? (Score:5, Insightful)

    by Dachannien (617929) on Tuesday May 17, 2011 @04:50AM (#36150964)

    Yes, you're the only person who has done research on this topic. Out of the hundreds of millions of people affected by the tax code, nobody has ever thought to sue the federal government over income taxes or to use this as an affirmative defense against charges of tax evasion. You could be the hero who leads us all into a tax-free future by finding that honest judge of which you speak.

    Get to work on that. Good luck, and let us know how it turns out.

  • by Shivetya (243324) on Tuesday May 17, 2011 @04:54AM (#36151008) Homepage Journal

    It certainly has to be someone who has the resources to do so. No offense, but your statement leaves only the poor and I doubt they create jobs. Usually those who create jobs do so because they have exhausted their personal abilities and need an extension of themselves, hence employees. Corporations are merely that process grown over a longer period of time.

    Your flat tax rate is a bit low to sustain the government we have now.

    The real problem with the tax system is not in its complexity, its just how high our taxes truly are. Adding the embedded taxes; this is the taxes rolled into every product and service you buy; to your income taxes, medicare, medicaid, social security, sales taxes, fuel taxes, and associated fees and such, and you would probably have open rebellion if people knew just how much it really takes from them.

    Simply put, the Federal Government has grown too large from over promising everyone something. There is not enough taxable income in the United States to sustain the promises made on the local, state, and federal levels of government.

    The reason Obama and Washington love to talk about reforming the tax system is not to reduce our tax burden but to increase government revenues. If they were truly serious about fixing the system they would be talking primarily about how to fix entitlement programs. Then top that off with a system where either we have a flat tax rate for all combined taxes at the Federal level with no corporate tax to hide even more or go to a consumption tax.

    A flat tax will work but it must be honest. To be honest it means we cannot tax corporations. Every dollar a corporation pays in taxes comes from its customers, that means we pay those dollars. Whether or not you buy a particular company's product or service someone you do buy from may. This is the problem Washington faces, showing Americans their true tax load scares them. They don't want to admit the size of the beast. Also, everyone must have some skin in the game as the old saying goes. This means there must be a rate, I would not go below 10%, applied to all incomes. This must not be offset with give backs and entitlement programs. Everyone needs to know they are paying for it all.

    An alternative to a flat tax would be a consumption tax. Even the rich would have no method other than not spending money to avoid this one. Using ideas brought forward with the Fair Tax we would rebate the cost of living to every family using the IRS. It is a simple process that far too many claim is impossible. After all, if they can track the current system they surely can trace a prebate system. The shock here again is that people will see their real tax costs. This is why Washington routinely has their sycophants in the media and academia falsely portray this plan. When they shoot this down it is fun to watch them march over to the flat tax and start over there too.

    Ask yourself, why does he want to fix the tax system. If he uses the word "fair" in the conversation you can be assured of one thing, he does not intend to reduce the burden on the American people he merely wishes to increase the revenues to the Federal Government hiding behind common class warfare tactics

  • Re:Simple solution (Score:2, Insightful)

    by AuMatar (183847) on Tuesday May 17, 2011 @05:37AM (#36151234)

    And such a system is grossly unfair to the low wage earners, would make poverty line people struggle to feed themselves while being a windfall for the wealthy, and would shatter the economy as 75% of homewoners, who depend on the mortgage deduction, would go bankrupt.

    A lot of deductions can definitely go away, and probably should. But the idea of "moving to a flat tax solves all problems" is so naive that to even suggest it you have to be a fucking idiot or have major external motivations.

  • Re:My version (Score:5, Insightful)

    by SwedishPenguin (1035756) on Tuesday May 17, 2011 @05:49AM (#36151298)

    We do have "slightly" more government services to compensate though, or at least we do in Sweden. Our "marginal" tax rate is about 55%, though of course no one actually pays that much, the tax bracket up to about 380,000 SEK is about 30%, then 50% up to about 540,000 SEK, after which it's about 55%. When I take into account the things Americans have to pay huge sums of money for out of pocket (health care, education, daycare, parental leave, sick leave, etc) I'd say we got the better end of the stick.

  • by muffen (321442) on Tuesday May 17, 2011 @05:51AM (#36151318)
    Interesting, we really have different views on tax. I don't enjoy paying them, being in the highest income-tax bracket in my country (not hard to accomplish, trust me, not making millions) I sometimes think about how much better it'd be if I paid less taxes.

    However, I survive on the amount I have left after I pay my taxes. I may not be in the category of richest people but I feel that health care, infrastructure, police, ambulance and so on, are services worth paying for. Why should I pay more (in %) then someone who makes less, well, because the money is needed, and where will it come from otherwise? There certainly are things I want, like a better car and a bigger house, but really, what I have now is not bad.

    I believe in two basic things, freedom and helping those that cannot provide for themselves.
    I do not believe that everyone has the same opportunities in life, even if my country provides free education (including uni) to all it's citizens.

    I pay taxes because I think that free education should be the foundation of any country, I pay them because I think health care should be free for everyone. You shouldn't have to die of a disease because you cannot afford the healthcare, and I believe in helping those who come from countries that require help (I seem to be a minority in Europe having this opinion these days).

    I fear that compassion is become rare, it seems to be gone from politics, and especially when talking about taxes. The debate now is often focused on cost, how much immigration costs, how much does free health care cost... rarely do I read debates asking how many lives were saved because we have free health care or because we let people from countries that are at war stay in ours.
  • by fnj (64210) on Tuesday May 17, 2011 @06:01AM (#36151362)

    Horse shit. Add payroll tax to that - both halves - state income tax, state sales tax, local income tax, local sales tax, property tax, and taxes masquerading as fees such as water, sewer, automobile registration, automobile insurance surcharges funneled straight into state coffers, and so on ad nauseum. I'm not much concerned with how high the top federal income tax bracket is. I'm more concerned with the total tax burden on the middle class.

    Finally there's the unfairest tax of all - inflation. That's the one you get when the federal gangsters print money to cover their unrealistic runaway budget.

  • Re:Short Answer (Score:4, Insightful)

    by locofungus (179280) on Tuesday May 17, 2011 @06:09AM (#36151404)

    It won't work for the very simple reason that the rich are much more able to optimize their tax paying to take advantage of what is in the tax code.

    For example, in the UK the rich pay 50% tax on income (42.5% tax on dividends) but only 28% tax on capital gains (might even be 18% if they can get their taxable income low enough - I'm not absolutely sure what happens at this extreme)

    So it currently makes sense for the rich to buy shares that tend to generate capital gains in favour of shares that tend to generate income - especially if there intention would have been to reinvest the dividends anyway.

    Change that around and the rich will shift their investment strategies around to get the best deal they can. The poor (and in this case I mean almost everybody) will typically only have a single source of income (their job) and no opportunity to optimize their tax rates because they'll be "trapped" in a single taxation regime.

    So if you try and optimize it so that nobody ends up better or worse off, what will actually happen is that the rich will then optimize their tax rates and end up paying less. The only way to recover the missing tax will be to put up rates so that, for at least some people, they will end up worse off.

    Tim.

  • by berashith (222128) on Tuesday May 17, 2011 @06:10AM (#36151412)

    This. I always laugh when people talk about how high European tax rates are compared to the US. If we count all of our taxes, and not just the federal rate, and we cat get competitive on high rates quickly.

  • Re:Sure. (Score:2, Insightful)

    by thijsh (910751) on Tuesday May 17, 2011 @06:12AM (#36151428) Journal
    The outcome of a good algorithm can be predicted already: a flat tax that is the same for everyone (that is after enough iterations of reduced redundancy). The algorithm won't care for the promises to voters, only about a fair optimum where the people pay as little tax as possible and the taxation costs the state as little as possible netting the highest 'bang for your buck'. The problem is for every 1000 people that will need to pay less and have less paperwork there is always one specific example of some person that does not profit from this optimization. And one of these people will find the spotlight and become a 'representative' (a la Joe the plumber) of a specific group of voters... and the game of adding layers of complexity starts all over again. At the very least this group of disadvantaged will include all the unneeded accountants and IRS personnel, so the tax code needs to stay complex for their job security!
  • Re:Why? (Score:4, Insightful)

    by gomiam (587421) on Tuesday May 17, 2011 @06:19AM (#36151502)

    it requires all appropriations to be made for the benefit of the people as a whole, not favoring any region or group at the expense of another.

    Naive questions: if you look to benefit the people as a whole, isn't it to be expected that sometimes some regions or groups will be benefited more than others? Does this inequality in benefits mean that sometimes a group will benefit at the expense of another?

  • by RoFLKOPTr (1294290) on Tuesday May 17, 2011 @06:30AM (#36151588)

    The income tax was introduced in 1913 at levels of like about 2% , for only the super rich.

    90% of people didnt have to pay so didnt complain.

    Govts got greedy, kept increasing the taxes, and lowering the thresholds.

    Welcome to 2011, 110% of you taxes and more goes directly to banks, and none of it gets spent on 'society'

    I'm not a fan of our current tax system, but that's the stupidest thing I've ever read.

  • by TheRaven64 (641858) on Tuesday May 17, 2011 @06:32AM (#36151606) Journal

    I look at taxes from an entirely selfish perspective. I benefit immeasurably from living in a stable society with relatively low levels of poverty and a high standard of living and free or cheap education. I can walk into the doctor's surgery and be given - either for free or for a token amount - cures for diseases that would have killed the richest man in the world a hundred years ago. I was paid by the state for the last stages of my formal education (my PhD).

    Unfortunately, this costs money, and I have to pay for some of it. If it could be funded entirely by pixie dust, that would be great, but since that's not the case, this society is an expense that I consider worthwhile. I'd rather avoid paying taxes, in much the same way that I'd rather avoid paying for a new laptop, but I consider the price I pay to be very reasonable for the benefits that I receive in both cases.

    Oddly enough, your line of reasoning from an altruistic perspective seems to reach the same conclusions as mine from a selfish perspective.

  • Re:Short Answer (Score:5, Insightful)

    by DarenN (411219) on Tuesday May 17, 2011 @06:36AM (#36151630) Homepage

    So it currently makes sense for the rich to buy shares that tend to generate capital gains in favour of shares that tend to generate income - especially if there intention would have been to reinvest the dividends anyway.

    This is not a bug, this is intended. And if it isn't, it really should be. It makes sense that that taxation regimes should be designed to encourage the re-investment of surplus wealth into economic activities. After all, you might lose the 22-32% on income tax, but this is expected to be beaten by the increase in tax take from the recipients of the investment in the form of corporation tax, VAT where applicable and the income tax on employees of the organisation that was invested in. Having anyone simply sitting on huge piles of cash benefits no-one.

  • by donscarletti (569232) on Tuesday May 17, 2011 @06:40AM (#36151656)

    Wow, it's great that you exposed him for the liberal he is. That is obviously not classical liberalism because it seems that he wants to justify higher levels of taxation, but perhaps it is social liberalism and he craves greater government revenues to support gay marriage or whatever it is that liberals like these days. Oh well, he's bound to be a liberal because you don't agree with liberals and he said something you don't agree with.

    When did it become fashionable to display such a stunted view of politics by saying that "liberals/conservatives say X". As a self-confessed social and economic conservative I have to say that my own views are certainly not the same as most other "conservatives" and would much rather be in the company of a socialist or libertarian that can justify their position than someone who agrees with my own views for the wrong reasons.

  • by Rich0 (548339) on Tuesday May 17, 2011 @08:58AM (#36152954) Homepage

    Would work at face value. Genetic algorithms can easily be used to solve something like that.

    I'm not convinced it would work.

    Such an algorithm might detect 15 different tax breaks for education, then notice that a huge percentage of college students own iPods, and thus conclude that the best simplification is a $5k tax credit for anybody who buys an iPod, or something equally dumb. Now, if such a break didn't change public behavior, then it might even work out the same in the end. However, any change in tax rules will definitely change public behavior, which means that the algorithm would have to be run iteratively.

    The problem is that a set of a few hundred million people will itself implement what amounts to something like a genetic algorithm to game the tax code. So, which do you have more confidence in:

    1. The ability of a computer program to come up with an un-gameable simple tax code?
    or
    2. The ability of a few hundred million people to collectively figure out how to game the new tax code faster than the computer can fix it?

    People still game the tax code, of course, but the current code at least targets the breaks where they are intended to go, which makes this a little harder.

  • Re:Short Answer (Score:5, Insightful)

    by hedwards (940851) on Tuesday May 17, 2011 @09:11AM (#36153106)

    Except that the tax code doesn't encourage that, in fact I'd go so far as to say that it discourages it by offering tax breaks for all sorts of antisocial behavior. For instance corporations like GE can book their losses in the US from foreign operations and offset their gains in the US without having to book profit from international operation, which makes it trivial for them to pay no taxes in the US.

    Most of those bits of the tax code ought to be eliminated in favor of something less unwieldy so that people can actually understand what it is that they're doing without need for a professional.

    And while we're at it, why doesn't the IRS just fill out our tax forms for us? Given that they already have most of our information in large databases, I see no reason why they can't fill them out like they do in other countries.

  • Re:My version (Score:4, Insightful)

    by j-beda (85386) on Tuesday May 17, 2011 @09:51AM (#36153658) Homepage

    50%?!? I don't understand how anyone can justify giving up half of your income to the government.

    If you think of "the government" as some outside thing, that does seem pretty unreasonable. If you think of it more as "society" or the "community" then it doesn't necessarily seem so unreasonable. What percentage does the publisher charge the author? The community provides the entire ecosystem within which each member operates. No individual can succeed to any great extent without the entire community around them working well enough to provide all the bits and pieces necessary for that success to happen.

    How to reasonably account for all this sort of stuff is not particularly clear unfortunately. The current way we create and use money, and then tax it to fund the "community" is far from perfect.

    One interesting system that Heinlein mentioned in one of his early novels (published posthumously - it wasn't really very good from a writing point of view) was "Social Credit". As I understood the society in the novel, rather than tax anyone, at the end of the year they would calculate the increased value of the society based on some sort of GDP measurement, and then "print" enough new currency so as to keep the value of the "dollar" at the same level - so if the economy increased by 20% you would print 20% more money. The government then drew its revenue from this pot and distributed the rest on a per-capita bases. Of course in this future society there was massive automation and little need for most forms of manual labour, so most people just lived off of their yearly societal income (thus the "social credit" name) spending their large amounts of leisure time in uplifting artistic pursuits and other utopian activities.

    I don't really know if the wikipedia article reflects any of this understanding:
    https://secure.wikimedia.org/wikipedia/en/wiki/Social_Credit [wikimedia.org]

    It does seem as thought it ought to be possible to design a society where increases in productivity and efficiency and technological advancements could have wider societal benefits. Since the 1920s our industrial systems have advanced tremendously and as a society we are way way way richer and more well off - but individually we have not advanced much. It seems like with all of these advances we should have been able to come up with a way to provide full employment while at the same time reducing the working hours of us all. By now we should all have an 8-hour work week and three months of vacation. Maybe such a system would come at the cost of speed of advancement, but I am more than willing to trade the decreased personal labour requirements today for a 1980s middle-class lifestyle which might be our level of advancement if we had somehow done this since the 1940s.

    Of course I have no idea how to structure something like this in light of real human behaviour, greed, and the rewards of cheating any system we try to put into place.

  • by Hatta (162192) on Tuesday May 17, 2011 @10:04AM (#36153824) Journal

    Sure, the US was doing fine before the income tax. Let's go back to the way things were then. Let's see, the income tax was instituted in 1861. Hmm, the Emancipation Proclamation was in 1863. So how do you want to divy up the slaves?

  • Re:Short Answer (Score:5, Insightful)

    by Maxo-Texas (864189) on Tuesday May 17, 2011 @10:18AM (#36154034)

    Fairtax effecitvely cuts taxes massively for the wealthy. it has a lot of good press (aka the best propaganda money can buy) combined with a healthy dose of magical thinking.

    A real fair tax needs to address the fact that state taxes typically tax in reverse with the lower income paying 10%+ of their income in taxes while the wealthy pay under 1% of their income in taxes.

    The best form of a fair tax would be
    A fixed 20% tax on everyone with no deductions except ignoring all income at and below the poverty line.

    The poor and middle class listen to this nonsense and slit their own throats while the wealthy are turning into an oligarchy and new nobility class.

  • Redistricting (Score:4, Insightful)

    by goombah99 (560566) on Tuesday May 17, 2011 @10:20AM (#36154056)

    I tried to interest people in redistricting on the same idea. Have the politicians state what their trade-space is? state the value of having districts simply shaped versus ones that include more diverse/less divers people or follow natural contours like housing development or rivers. Then have a computer bark out lors of possible district maps.

    No interest.

    The problem is that politicians are interested in their own power not fairness. THey want certain companies in their districts. They want mayors that owe them favors in their districts. they want gerry mandered advantages.

    If you want this you have to impose it by referendum or other force. they will not agree on their own accords.

    In the case of the tax code. How is a politician supposed to promise intel a tax break if they give him a boatload of money? he can't unless the tax code is adjustable.

  • Re:Short Answer (Score:3, Insightful)

    by Curunir_wolf (588405) on Tuesday May 17, 2011 @11:36AM (#36155104) Homepage Journal

    No you didn't. You just shifted the entire burden of taxation onto the poor and middle class with your shitty, extremely regressive tax system that nobody but a few fringe libertarian types wants.

    Why not do your own research into the facts [fairtax.org] instead of just repeating what your socialist comrades claim. They don't like the fair tax because it shifts power and control away from the centralized government, not because it's regressive (it's not).

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