The Flat Tax fable

Flat tax fable

For decades I have heard politicians claim that we need to rid the US of the tax code and implement a different system.  I remember Ross Perot, who ran for the US Presidency in 1992, using taxes as a main platform issue.  “Your tax form should be the size of a Postcard” was his slogan.

Every politician since then has claimed they would make some type of tax reform.  Taxes should be simplified, taxes should be fair, taxes should not have so many loopholes for special interests.  It seems everyone knows that the tax code is broken, yet we never see any positive change.  In fact the US tax code has grown to just shy of 75,000 pages in 2015.  This is up from near 35,000 pages since Ross Perot ran for office, demonstrating that our problems are continually getting worse.

To get an idea of how complex today’s tax code is, if your full time job was to read the tax code it would take you almost two years of full time work to do.  This is not taking notes, this is not cross referencing information, and this is not attempting to make any sense of the data.  It is just reading the tax code.  You would barely be halfway through the current tax code when you would be holding an obsolete regulation, and you would need to start over with a new book.

I won’t get into the cronyism and favoritism which is making the problems worse.  I will acknowledge that they exist, and acknowledge that we must address that issue.  There are plenty of papers and articles tackling the subject of corruption around the US Tax code.  The purpose of my work is to determine if something else is involved.  If the right person was voted into office, could we really expect a change?  

The answer to this is sadly “No”, at least not any time soon.

The loopholes inserted into the tax code allow the wealthiest and most capable of paying taxes to do the opposite, and not pay at least a portion of their  taxes.  Because of those loopholes, a massive economy has grown around the US Tax code.  Law firms, Lawyers, and CPAs make their living off of the system.  In addition to people being paid to find the loopholes, people pay for directions on how to take advantage of those and other loopholes.  Of course another market made up of Government offices and bureaucrats  is ensuring that the paperwork exists to make the use of the loopholes all legal, and lobbyists to generate more loopholes for special interests.

Outside of direct beneficiaries, we have a separate market which exists to support those who can’t afford to use the loopholes, but still need assistance in making sense of the US Income tax forms and ensuring everything is in order when they submit their forms.  Lawyers and law firms for representing those people when needed.

Not to be left out, we have a massive number of Government employees who would lose their jobs because they too are supported by this massive, and corrupt, system.  There are Government courts which would no longer be needed, IRS agents and auditors would no longer be necessary, accountants, computer programmers dealing with automating the processing of these complex forms.  

We should not neglect that with all of those closing businesses, the supporting infrastructure would also be out of work.  Offices would close leaving buildings vacant and displacing building staff, restaurants who supported those buildings would close, garages and gas stations supporting the drivers would close, leaving millions more people out of work.

The US Tax “problem” is a massive industry worth at least 100 Billion a year.  The reality is that anyone attempting to drop the system in favor of a flat tax would cause a massive economic collapse.  It is sadly a broken window fallacy taken to the extreme.

As we enter a new generation of political candidates making promises, remember that any claim of moving quickly to a flat tax is a fable.  Correcting the tax problems will take time to transition a very large economy to a new source of income.  Candidates should be focused on how to make this transition, and not make promises they won’t be able to keep.

Everything you need to know about Apple vs. FBI, in simple terms

Encryption and Apple vs. FBI

All the hype and sabre rattling about this case shows the frustration we have with our current Government, and the Government's desire to maintain their current level of control. 

The US Constitution 4th amendment.
The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.

Analogy is the best way to argue technical cases, and I have yet to see a good analogy presented on this subject.  Here is my safe analogy, which presents an accurate view of this case specifically for the non-technical person.

Consider that a person commits a crime, and the Government suspects that evidence to that crime is being stored in the person's personal safe.  The Government may obtain a warrant from a court requesting that a safe maker attempts to open a safe.  It might go without saying that the Government must compensate the safe maker for their work which can only be done by taxing the populace, but I'm saying it for more points later on.

The US Constitution is clear that the Government has such authority, and it implies that the safe maker should be required to comply with the warrant.  I'm sure that even the "Progressives" would agree with my analogy up to this point, but here is where a Constitutional scholar will divert from the "Progressive" view.

The safe maker can, and should, attempt to open the safe as we said is legal the obligation.  There is no guarantee that the safe maker does open the safe, nor can that be the expectation by any party.  The safe maker can not guarantee that the client has not modified the safe in such a way as to prevent the manufacturer from opening it.  In fact a safe maker who wanted to assure customers of a desire to protect their belongings may provide tools to customers for the purpose modifying the safe and removing manufactured settings.

Would you find a bank that modified it's vaults so that the people who built the vault could not open it "bad"?  If your money was being held in that vault, of course not.  You would most likely compliment them on their wit and ingenuity, more so if one of the vault builders attempted to rob the bank and was thwarted.

The courts and Government can not mandate that the safe maker opens the safe because that task may not be possible.  They may only mandate the attempt to do so.

The long and short of the issue is twofold.  First, the FBI in this case is demanding that Apple open the safe, not simply make an attempt.  The second, in the demands for both the iPhone source code and a permanent Government back door, the FBI is demanding that a Government door exists in every safe phone Apple produced or produces in the future.

A door is a door, is a door.

It is important to understand that a door, front or back, does not have prejudice on who walks in or out.  The existence of the door can allow bad actors in and out as easily as good actors.  Each year billions of dollars are spent by Governments trying to find and exploit back doors in order to spy on each other (as well as their own citizens).  Each year many millions of dollars are traded on black markets for those same back doors.  The criminals find them in the same way as Governments do, and uses them the same way.

Let us not attempt to fool anyone, a key does not negate a door.  A key only delays the amount of time it takes someone to open the door. 

Let us also not pretend that everyone in the Government is a good person with altruistic motives at all times.  In fact the Government is regularly found guilty of violating it's own Laws, paying constituents who have suffered at the hands of people holding positions of power and terminating employment.. after the fact.

All of these attempts to thwart the US Constitution costs you and I money.  Lots and lots of money, both in higher costs for goods as companies have to pay to fight these cases and higher taxes for the Government to fight these cases.

People will attempt to convince you that the Founding fathers never saw this one coming, and that the Constitution should change.  If a person spends time reading the US Constitution and all of the History surrounding this incredible foundation for our Government, there really is no mystery and the myth of the "living" Constitution needing to change disappears.  The spirit of the Constitution is very clear.  The Government must be limited in power.