This is a very important point:
The truth is that most reformers prefer fairly simple rules. In the tax world, they’d prefer to simply tax all income. In the environmental world, they’d prefer to set firm limits for pollutants. In the financial world, they’d prefer blunt rules that cut off risky activity at its knees.
But businesses don’t like simple rules, because simple rules are hard to evade. So they lobby endlessly for exemptions both big and small. This is why we end up with tax subsidies for bow-and-arrow makers. It’s why we end up with environmental rules that treat a hundred different industries a hundred different ways. It’s why financial regulators don’t enact simple leverage rules or place firm asset caps on firm size. Those would be hard to get around and might genuinely eat into bank profits. Complex rules, conversely, are the meat and drink of $500-per-hour lawyers and whiz kid engineers. If the rules are complicated enough, smart lawyers can always find ways around them. And American corporations employ lots of smart lawyers.
The same thing is true for taxes. Pretty much each campaign season brings out a Republican call for flat taxes, as if the reason income taxes can be complex is because it’s a graduated system. You want a simple tax plan, here’s one (obviously I’m just making up numbers, the real percents and limits would depend on real data):
if the total money coming into the household is less than $30,000: 0% tax (where the total money includes interest, capital gains, …)
30-$50,000: 10%
50-100,000: 20%
…
This could be done on a postcard just like a flat tax. What makes income taxes complex is all the exemptions and differentiations for different types of income. And most of the benefit of the added complexity is to the rich. The rich would love to have the vast reductions they would get if a flat tax was instituted, but if that doesn’t happen they want the complexity.
