This article, by Prof. Steven M. Teles, argues that America’s government has become overly complex. For examples:
The articles find various actors to blame: both parties and lobbyists:
Recently Prof. Julian Zelizer called attention to this “Kludgeocracy” problem in connection with Obamacare.
My opinion? I agree with these two professors. Mine was a lonely voice during health care debates: Bad reform is worse than no reform at all.
I would agree with the kludgeocracy idea.
I’m not sure I’d agree with all of the individual points without doing some more reading on it (like the house-welfare state to benefit the rich… I’m not sold on that without seeing the whole argument).
But I also want to point out it’s not just businesses that benefit. The Earned Income Credit is often cited as a “tax cut” for the poor, but it doesn’t just reduce tax. It’s a refundable credit, meaning that you can receive money from the government that you never paid in as tax. It’s just welfare administered through the tax code, with the burden of enforcing and reporting it largely shifted onto tax preparers, who then shift their burden to the taxpayer through higher fees.
It is definitely a system built around euphemisms, complex interactions and multiple layers to obscure the real purpose of the law.
I don’t buy it. If by “complexity” we mean the government (particularly the federal government) has its fingers in a lot of pies, then it’s true that as it becomes harder to follow everything the government is doing, well-organized narrow interests can benefit. Under those circumstances, powerful interests are able to take advantage of the lawmaking and regulatory process for pretty obvious reasons: it’s expensive and they can pay to do it, often they embody the expertise necessary to do it, and often they are the only ones paying attention.
But if given the choice between having the government involved in a given area at all or not, I imagine most of those same interests would just as soon have the government out of the picture. I find it hard to argue that they prefer the broad involvement.
If by complexity we mean that laws are long and the regulations are longer, then it is still hard to make the case that this is a result of industry capture. The complexity of government has tracked the complexity of society. When you want to pass a law affecting the most complex economy the world has ever known, you need to write a lot of pages explaining exactly how that’s going to work. That’s just the nature of our world. In particular, the notion that single-payer would be less complex–an assertion made by some liberals in the healthcare debate-- is terribly naive. It would be many times more complex, as far more decisions would be made by the government under that system.
The tax code is potentially a special case, but that’s only because for decades we’ve used the tax code as an easy way to achieve different policy ends. If they weren’t in the tax code, they’d probably just be in different statutes. The complexity of the tax code is just a corollary to the fingers-in-many-pies issue.
All systems tend toward entropy.
Is that what he’s saying? Because once you internalize this message, there is really nothing more to say. It’s not just America, or governments, you would find the same phenomena in any sufficiently large matured organization.
Law gets complex for much the same reason software gets complex: it’s easier to tack something small onto an existing system than it is to completely rewrite that system to incorporate the new detail. But once you get a bunch of “small details”, especially ones that can affect each other in originally unintended ways, it becomes a clusterfuck.
Large parts of the legal system would likely benefit from a complete rewrite (or at least review) every couple decades, but it would also take away from dealing with whatever the pressing issue of the day is. It wouldn’t be a simple task.
Yes, I think the US’ legal system, tax system, etc is overly complex and could be pared down to a simple, yet equally or more effective system, but then you have the cost of doing research, figuring out what would work but still fund what needs to be funded, educating people on the brand new tax code, and so on. If you do this semi-regularly, then that’s a lot of expense.
My guess is that in the long run it ends up better and cheaper than the alternative, but nobody wants to go through that hassle, especially not as regularly as would be required. And I don’t think that’s unique to the US. It’s a problem in software too, as I mentioned, I think it’s just a side effect of any gradually expanding system of complex interactions. It may be a little worse in the US given how we treat the Founding Fathers like Jesus and the Constitution as the Bible sometimes – and thus proposing to change old law can be seen as somewhat blasphemous, but I don’t think that’s the primary driving factor behind it.
Let me try. First you must agree that if a program benefits a special group, then everyone else is subsidizing that group. So if I can show that the home-owner welfare benefits home owners, then it follows that people paying rent are subsidizing home owners.
Let me begin with a true story. A good friend of mine who lives in central Mass arranged a sabbatical exchange with someone from Colorado. They exchanged houses without either party paying anything to the other. My friend never gave this exchange another thought when he filled out his tax return the following year. I assume neither did the Coloradan. Several years later, someone who understood the tax laws better than my friend pointed out that both parties to the exchange should have declared and paid taxes on the fair rental value of their homes. For that year, they exchanged ownership for tenancy and therefore should have foregone their subsidies. Don’t you think there is something amiss there. Assuming you own your home and that it is similar to your next door neighbor’s then should you each decide you would prefer living in the other’s house, you thereby become a tenant and suddenly owe a considerable tax liability. You have exchanged ownership for tenancy and foregone the ownership subsidy.
I am in a situation where I own a home of considerable value (this is in Canada, but the tax rules are sufficiently similar to use this example). I am getting to the point that I would prefer to sell it and move into an apartment. I could invest the proceeds of the sale and use part of the money to pay rent and the rest to live on.
The trouble is that then that investment income suddenly becomes fully taxable.
What is actually going on here is that I have money invested in my home the untaxed income of which is paying my rent. This is a substantial subsidy for home ownership. And the more my home is worth, the larger the subsidy. One point that should be made is that, contrary to popular opinion, tenants pay real estate taxes too. Did you think landlords paid it out of their pocket? Of course not. It is part of the rental cost.
How can this be equalized? You could make rent a deduction from income. Sure, the wealthy guy paying huge rent would get a larger tax break that Joe Schmo, but he already is if they both own homes. It is just not as obvious. I have heard that for the purpose of Swiss income tax (or at least in the Canton of Zurich) if you own a home, the fair rental value of that house is added to your income. I imagine that the fair rental value is based on the assessed value and might be thought of as an added real estate tax. But hold: it would not be added to the tax on rental property since the tenants would not receive the subsidy. It creates a system in which the poor do not pay taxes to help the rich. Much healthier IMHO.
This. Yes, everyone has an agenda and it trying to get their bit added, but it becomse complex because of this.
Yup. Sure is. That article by Steven Teles is excellent. I wish everyone would read it.
That said, I disagree with him on one point. He seems to think that the debate of big vs. small government is fundamentally different than the the debate about simple vs. complex government which he wants Americans to have. It’s true that big government and complex government aren’t exactly the same. There can be big government programs that remain relatively simple, such as Social Security. But obviously there’s a strong relationship between big government and complex government. Trimming the size of government would be the obvious way to eliminate many of the problems that he describes.
I think the identification of Social Security as a simple program is exactly what’s wrong with their argument.
It’s true that Social Security is simple in principle. In practice, it has thousands of pages of regulations, and tens of thousands of pages of controlling rulings and program implementation guidelines–all vulnerable the exact kind of problems inherent in any very complex system of rules.
The problem isn’t some philosophical choice about complexity or some nefarious scheme on the part of powerful interests. The problem is just that a very complex society requires very complex implementation of even simple policies.
Much overstated. It sounds like you didn’t read the linked-to articles.
As one example, public health insurance would be very simple to introduce with minimal complexity. (A first, trivial step might be to allow people to pay for VA insurance.) It’s not “big” government which makes ACA complicated but just the opposite: weak government, managed by vested interests and politicians, managing complex private systems.
Sorry. From your comments I can’t decide whether my longish excerpts should have been even longer … or omitted altogether so you’d read the articles.
Europe also has simple and non-simple policies. 
Did you miss or disbelieve the first quoted sentence in OP?
I directly addressed it in my first post to this thread.
I did read the articles. I’m well aware that my proposal to trim the size of government is not what Teles argues for. But it’s what I argue for.
Consider our system of federal handouts to farmers. That’s an attempt to manage a private system, run by vested interests and politicians, if there ever was one. Moreover there’s no advantage to the nation of having such a system in the first place. If we simply tossed all handouts to agriculture into the garbage can, we’d be free of it. Government spending would be reduced, food prices would go down, and the environment would benefit.
I’d have to disagree.
A homeowner has a personal asset that they use for their own benefit. The personal expenses for this home are not deductible*, just like the personal expenses for rent are not deductible.
*Obviously, there is an exception for mortgage interest. This does subsidize mortgage-holders, but mortgage-holders are not necessarily rich. In fact, the US mortgage deduction limits it to only two properties, only $1 million in total acquisition indebtedness and only $100,000 in home-equity indebtedness.
To use the example of your two friends to say that a homeowner is deriving rent income from himself and rent expense for himself is absolutely ridiculous. Does a person derive house-cleaning income from himself when he does the dishes? Does a person derive taxi-driver income from himself when he commutes to work in the morning? No. You are taxed when there is an exchange of value between two people - and your friends did in fact exchange value between two people.
(But I’ve also argued with you about this example in other posts in the past. I don’t believe your interpretation is the correct tax position to take.)
Your argument about investment income being taxable but home equity not being taxable is also wrong under the current tax code. If you invest money in a stock that pays no dividends, you have no taxable income until you sell the stock at which point you pay a capital gains tax on the net proceeds. A personal residence is a capital asset and is also taxed only when you sell it.
Investment income like dividends and interest are earned from some types of investments. These earnings are paid by a party other than yourself for the use of your money or in recognition of your ownership. And what about a home? You would only be taxed on a home you still owned if you were deriving current income from it paid by a party other than yourself. Current income from a home is called “rent”. So rent and interest are actually comparable in this example, and they’re comparably taxed. There’s no subsidy here.
That’s not correct.
A house standing empty is comparable to an investment that pays no dividends. It is a capital asset, but it’s not currently providing any recurring value to the owner.
A house that has someone living in it is comparable to an investment paying dividends, except in this case it’s providing value to the resident (not necessarily the owner). If that resident is the owner, the value is provided without taxation. If the resident is a renter, then the rent paid is taxed.
No.