Can Computers Be Used To Optimize the US Tax Code?

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."

Re:Why?

[Kjella]

In what way? The power to tax is in the constitution itself and "general Welfare of the United States" is pretty much "whatever you think is good".

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

Also they added this amendment which is very, very broad:

The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

So do tell... what is unconstitutional?

Re:Better solution

[shri]

FYI, this is how it works in Hong Kong. Tax calculator [ird.gov.hk].

Re:End result:

[Wandering Idiot]

It's the same reason why we don't replace the income brackets [20k-30k$/year], [30k-50k$/year], etc by an exponential formula. It would be more correct mathematically, more just when you go from 29999$ to 30001$ but people are too dumb to understand it.

Going from 29999$ to $30001 means you would only be taxed the higher rate on $1 of income, not the whole amount. If it wasn't your intent to imply otherwise I apologize, but I see people making that mistake all the time for some reason.

Re:Well then, who does create jobs?

[AuMatar]

The real problem with the tax system is not in its complexity, its just how high our taxes truly are.

We're the lowest taxed generation since WWII. The highest rate now is 35%, and few pay it. The highest tax bracket in the 90s was 39.6. The highest tax bracket under most of Regan was 50%. Under Nixon was 70%. Kenedy was 91%. Eisenhower was also 91%. The rate coming out of WWII was 94%.

Try doing actual research before spitting out far right talking points.

Re:End result:

[larkost]

Just to respond to one small point that most people miss, but it is never a penalty to move up a U.S. tax bracket (well... excluding some deductions). Assuming the same deductions if you start out with more money, then you always end up with more money. Yes, always, every time. You might pay a slightly larger overall percent, but you never wind up with less money.

The way this works is that you start at the bottom tax bracket and pay taxes on the money you made in that bracket at that percentage. Then you set asside that money and move up to the next tax bracket and pay in that. It is probably clearer in a made-up example:

With the following hypothetical tax bracket system:
0 - 10,000: 2%
10,001 - 30,000: 5%
30,001 - 85,000: 10%
85,000+: 15%

If you have an (adjusted) income of $30,001 then you pay:
10,000 * .02 = $200
20,000 * .05 = $1,000
1 * .1 = $0.1

So if we compare a $30,000 vs. a $30,001 income, the tax difference is 10 cents, leaving you with 90 cents more than you would have had. While my hypothetical numbers are way off... the principal holds. Oh... and for the math pendants, all brackets are inclusive and rounded.

Re:My version

[SleazyRidr]

You mean it's a higher proportion of their disposable income. Case study:
Family A makes 30k per year, and spends 20k per year on the essentials, leaving 10k free. Any more than a 33 1/3% tax rate cuts into their ability to live.
Family B makes 100k per year, and spends 40k living a nicer life than family A, leaving 60k. They could afford a 60% tax rate without cutting into their standard of living.

Of course, KermodeBear probably thinks that Family A is pretty much worthless and deserves to live in the gutter, while Family B are the only productive members of society.

Re:Short Answer

[Maxo-Texas]

Here...

http://fairtaxfraud.com/fair.asp [fairtaxfraud.com]

The clever but dishonest presentations of the FairTax Book never tell the reader that there are two tax rates that the FairTax is proposing. Under the old income tax, your individual tax rate varied but covered everyone's income (100 percent) minus deductions. Under the FairTax we have two tax rates: 1. A sales tax rate of 30 percent for everyone. 2. An income tax rate that depends entirely on how much you consume.

This next part has what I think is an error but I'm not sure...
INCOME plus PREBATE X 12 minus NECESSITIES divided by INCOME mult by 100 equals PERCENT LEFT TAX RATE
$30,000 + 2244 - $30,000) divided by 30,000 X 100 = 7.5 92.5% working poor
$70,000 + 2244 - $56,000) divided by 70,000 X 100 = 23 77% middle
$10M + 2244 - $500,000) divided by 10M X 100 = 95 5% rich

Here's the errors-
if raw food is exempted from sales tax like it is now, then these numbers are less accurate.
you won't pay taxes on any other taxes you pay (phone tax, property tax)

With these errors corrected, a more realistic estimate is 45% for the working poor, 40% for the middle income, and 4% for the wealthy.
---
That being said, it would still be brutal on the poor and way too light on the wealthy. Any tax proposal that results in a lower rate for someone who makes more money is wrong. Trivial case- let's split the $30,000 annual cost of running the federal government equally. Wow- the poor have no income after taxes and many do not make enough to pay their $30,000 annual bill. So taxes MUST be progressive, or we must lower the cost of running the federal government to about $2,000 per citizen (i.e. about 6% of what it is now... which would be absurd-- imagine cutting 94% of the government, military, social programs, even just passing and enforcing laws).