This is another problem that would simultaneously be solved with simpler tax. Government pays for things by paying for things, and also effectively pays for things by giving tax breaks hidden in the 50,000 pages of tax code that now simultaneously how the government collects revenue and pays for things, and is completely incomprehensible to most people.

See ~26 minute into this interview for a more in depth proposal that makes a lot of sense. Separate collecting money and spending money. https://www.econtalk.org/john-cochrane-on-economic-growth-an...

> The problem with (too much) simplification is that it removes political steering capability.

This is not a problem, this is a benefit. If you separate tax collection from tax policy you are still able making economic and social policy via other tools.

Simple tax policy is a very tough political sell.

Basically tax policy is a low bar to entry way to get the laws you want but in a lossy capacity. Instead of making something legal/illegal outright you can just make it "illegal unless you jump through hoops and/or pay money" or you can provide a tax incentive for something you like (easier to sell than a subsidy). This lets you get dumb policy that would otherwise never pass. Big business benefits from this by getting carve-outs that make them more money or by getting policy that lets them use scale to their advantage. The authoritarian upper middle class benefits from this by using tax policy to create a carrot/stick system to kinda sorta make the poors act the way they want. And of course the government and politicians benefits from the current system because it gives them influence and power.

So right now we've got big business, the top ~30% or so of society and politicians/the government benefiting from the status quo. In order to remove politics from taxes big business is going to have to pay more (or everyone else will have to pay less, an equally large pill for a lot of people to swallow), the upper middle class will have to lose a set of carrots/sticks to kick the poors around and the government will have to accept a net decrease in power. The only way to get these groups to accept this is to spend a century boiling the frog. I don't think we'll ever get simple tax policy overnight.

They could do that by direct subsidies. That would be transparent. Or should transparency be required only of the corporations, but governments could get a pass?

It is more efficient to let people keep money than it is to take it from them and give it back. Even if the laws that allow the former would (/might) be simpler.

I don't think we can take that as a given. Moving money has its overheads, of course, but so does every added complexity in law.

Ok let’s do away with withholding then. Instead of just letting the government keep the money we will all take it from the government and give it back at one time on tax day. Much simpler.

I believe you severely underestimate the complexity of actually administering a complex tax system.

Especially because the way a lot of deductions end up working in practice is that you withhold the money from people in the first place and cash it out in the end of the year when you calculate your actual tax burden.

It is not a problem. Just give subsidies as a tax credit.

That's still a problem, if you think companies minimising their tax is a problem. The game shifts to creating the correct structure to qualify for tax credits.

Uhm, I am not sure what you are talking about. Frictions that arise from taking money and giving them back by design don’t arise if you don’t take anything because you provide a tax credit.

I'm talking about the fact that this doesn't address the base problem.

Sure, I simply addressed this point

>It is more efficient to let people keep money than it is to take it from them and give it back

Direct subsidies in the form of tax credit don't incur any costs of moving money because no money are moved, but functionally it is almost the same.

The base problem being that tax law is gameable. That's what the article and comments are about.

My reply was inside a thread on direct subsidies. I still don’t understand what’s your problem.

I don't have a problem, but if you're phrasing things like that then perhaps you're seeing an exchange like this as the equivalent to squaring up outside a pub. Disengaging.

How would be more transparent than tax deductions?

If the tax law gets complicated enough, the incentives might not work because people don't know about them. I personally don't optimise my taxes to government incentives because figuring out what they are is too difficult.