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I'm always amazed, when the-tax-system-sucks posts come up on HN, how quickly most commenters are to trash the author and/or lecture the complainer on how wrong

I'm always amazed, when the-tax-system-sucks posts come up on HN, how quickly most commenters are to trash the author and/or lecture the complainer on how wrong they are. There is a impedance mismatch at work in our system of governance that's not going away any time soon. The government makes laws by sticking people into little boxes and making rules for those boxes. This system of boxes and rules -- the tax code -- is becoming more and more removed from reality by the day. You make 10K a year selling things at yard sale, nobody is the wiser. You make 10K selling pot, nobody is the wiser. You make 10K by putting little bits on a server somewhere, you're a business. Why? Because Google can report you, that's why. You buy socks from Amazon from a house in one state, you have to pay taxes. Buy the same socks from another state, pay no taxes. Order overseas, no taxes no matter which state you are in. In fact all of these are businesses -- or none of them are. It's like arguing about how many angels can dance on the head of a pin. We have this word "business" which has some kind of vague meaning, so we attach a bunch of rules to the abstraction. We have a 1900s view of how things work that we are desperately trying to take a hammer and pound into a 21st century reality. In point of fact, the economy works because people are constantly adapting to new circumstances, trying to do the best they can. As the rules get more and more complex, more and more people will end up being quite surprised at the situation they end up in. Personally I think the system is broken beyond repair -- too many politicians are architecture astronauts -- but however it turns out, I have immense sympathy for the author of this article.

enjo 16y ago
You make 10K a year at a yard sell or selling pot, you owe the IRS money on that income. Just because you're less likely to get caught doesn't make it any less illegal. Probably the closest "real world" example would be a flea market. Those large flea markets are the google, and the vendors are the independent folks putting ads on their sites. You sell $10k worth of goods at a flea market, you bet your ass that market will have the mechanisms in place to ensure that the IRS knows. It's the same thing here.
- pinksoda 16y ago
  There was a guy who got caught selling a lot of marijuana and didn't get in much trouble because he was paying taxes on it since day 1.
  - icco 16y ago
    That sounds hilarious, source?
    - earl 16y ago
      I don't know about the not getting prosecuted bit, but drug taxes are real -- see eg http://www.time.com/time/nation/article/0,8599,1578857,00.html http://www.time.com/time/nation/article/0,8599,1578857,00.ht... http://marijuanastamps.com/state-stamps.htm http://marijuanastamps.com/state-stamps.htm Mostly, it's another way for pigs to steal from people. The idea being they can not only throw you in prison for dealing, but then use tax forfeiture laws to take everything you own.
      - chopsueyar 16y ago
        You can buy the collectible stamps on Ebay, too.
      - icco 16y ago
        I was just looking at a similar article, I totally didn't know that, but I find it very interesting none-the-less.
      - poet 16y ago
        Arguing with facts, good. Using terminology for the police that an angsty teenager would use, bad. Moreover, the target of your animosity is misguided. Baring obvious ethical problems, I expect our law enforcement to enforce a law to the fullest extent. And as determined by the nation as a whole, Marijuana laws are not an obvious ethical problem. It's not a police officers prerogative to ignore the law, even when it will probably change in the next decade or two.
      - 16y ago
smokeyj 16y ago
If you sympathize with the tax code it's probably because you've never bootstrapped a start up. It's hard enough to make it, even without financing the government. A high quality of living is enabled by technology and innovation, and the process that stifles innovation - taxes - should be regarded with extreme caution. If trading with each other is a taxable offense you can expect a severe impediment on innovation. Does anyone really need examples of the failures of centralized economies?
- earl 16y ago
  Come on, your post is stupid on it's face. If a high quality of living is enabled by technology and innovation, said technology and innovation is enabled by stuff the government does -- a huge quantity of technology has it's roots in US government spending, and education is one of the 3 big things that states spend money on. Further, you conflate taxation laws and laws that prohibit things, eg "trading with each other is a taxable offense". In the real world, someone has to pay for the government and businesses pay a piece of the cost.
  - smokeyj 16y ago
    And you know where the U.S gets those gobs of cash to throw at building new technology? The markets of course! Governments need a marketplace, the marketplace doesn't need the government. The internet is largely unregulated, but we use creative solutions to overcome barriers, and this should be a model for other industries as well. A market solution is always better than a government solution, because with the first you can always opt out.
    - Locke1689 16y ago
      the marketplace doesn't need the government This is also stupid on its face. The market needs the government if only to ensure that bad actors don't corrupt it.
    - poet 16y ago
      The richest man in Rome once said that you can't consider yourself truly rich unless you can afford your own private army. ;) Even more interesting is the fact that Crassus acquired his wealth by (1) declaring rich people enemies of the state and seizing their assets and (2) purchasing houses that were burning down and then putting out the fire with his own men. Unless you're an anarcho-capitalist, you'll certainly recognize that a representative government is necessary to put a stop to such behaviors.
kls 16y ago
Order overseas, no taxes no matter which state you are in This is not entirely true, I ordered a good deal of hand carved furniture from India one time and a hand carved bed from China another, both times I received a letter from the State of Florida letting me know exactly what I owed the state in taxes.
M1573RMU74710N 16y ago
If I'm not mistaken what happened was this person was the one reporting the income, they were just reporting it incorrectly.
tedunangst 16y ago
Nobody ever writes long blog posts saying "I paid my taxes. End of story." There's a definite bias in that only bad news ever gets reported. One anecdote about is not an indictment of the whole system.
- chc 16y ago
  Nobody ever says, "Ted Bundy didn't kill me. End of story." There's a definite bias in that only bad news ever gets reported. One killing is not an indictment of the whole person. Just because something works OK (not great, but OK) in the average case doesn't absolve it of terrible behavior in less common cases.
mechanical_fish 16y ago
We have this word "business" which has some kind of vague meaning, so we attach a bunch of rules to the abstraction... It isn't quantum mechanics. The rules which the OP professes not to understand boil down to this: 1) Everyone owes income taxes and Social Security/unemployment ("FICA") taxes on all of their income. To restate this in a fun but cartoony way: everyone is a "business". [1] No philosophical debate necessary. 1a) Except: If you get a W2 form along with some of your income, that income already had the FICA taxes paid on it (and, if the estimate is accurate, most of the income taxes, too). This feature is designed (among other things) to make the accounting so easy for most people that, if they are minimally numerate and are willing to actually read the IRS instructions, they can pay taxes with a one-page form without hiring an accountant. 1b) If you can't understand what I have said so far, hire an accountant. 2) If you earn more than a few hundred bucks without getting a W2 form for it, you owe FICA taxes. If you can't or won't figure out what Schedule C is, hire an accountant. [2] 3) Business expenses are deductible. If your non-W2 money is going right back out the door to pay business expenses, you may owe nothing. Keep track of those expenses (throw the receipts in a box, buy everything on a special credit card, hire a part-time bookkeeper, or -- god help us -- learn how to keep an account book). Then declare them; if you can't figure out the forms, hire an accountant. --- Still too abstract for you? Here's rule zero: 0) Hire an accountant. Do what the accountant tells you. One hour of accountant time, at any point over the last few years, would have been enough to save the OP. --- Now we are in a position to discuss your other point: Why do people often get so harsh when folks propose to "simplify" the tax code? Let's not ignore the elephant in the room: Mostly, it's because so few of these proposals are in good faith. Most of the tax-related writing that crosses one's field of vision is the direct or indirect result of politically-motivated lobbying efforts by individuals who are trying to lower their own taxes relative to others. We try to block these for the same reason that we block spam. But another reason is that many people want to pretend that accounting isn't important. They ask: Why does there need to be so much accounting? Why can't life be simple? These are very likely the same people who don't understand the need for so much computer programming. Shouldn't computers just be simpler? Can't we just write it all in Visual Basic? Can't it all be done by kids on minimum wage? Can't we just hand it all over to Microsoft and let them handle it? Why can't we just outsource all that stuff to some foreign country? Why can't computers program themselves? Shouldn't it all just "work"? Weren't things so much better back before we had all these terribly complicated things like the personal computer? It gets tiresome. Society is complicated. Deal with that. Learn basic accounting, or hire someone who did. --- [1] Note: I am not an accountant and you should hire a real one. You can detect the real ones by the moan of despair that they just made when they read my last sentence. [2] I can, but I won't. Accountants are not expensive relative to my time. In fact, they have an astonishing tendency to pay for themselves.
smutticus 16y ago
The system isn't broken. It just wasn't written with individuals in mind. The system works wonderfully if you're a CPA or large financial institution. If people understood their best interests and elected officials acted on behalf of those best interests we would have a simpler tax code. The opacity of law benefits only those who can understand it. Clarity of tax code is simply not in the interest of those who pay for laws to be drafted.
- smackfu 16y ago
  OTOH, the tax code is complicated mainly because of all the special cases that were introduced to pander to people's individual best interests. Like the whole deductions side of the 1040.

enjo 16y ago

You make 10K a year at a yard sell or selling pot, you owe the IRS money on that income. Just because you're less likely to get caught doesn't make it any less illegal. Probably the closest "real world" example would be a flea market. Those large flea markets are the google, and the vendors are the independent folks putting ads on their sites. You sell $10k worth of goods at a flea market, you bet your ass that market will have the mechanisms in place to ensure that the IRS knows. It's the same thing here.

pinksoda 16y ago
There was a guy who got caught selling a lot of marijuana and didn't get in much trouble because he was paying taxes on it since day 1.
- icco 16y ago
  That sounds hilarious, source?
  - earl 16y ago
    I don't know about the not getting prosecuted bit, but drug taxes are real -- see eg http://www.time.com/time/nation/article/0,8599,1578857,00.html http://www.time.com/time/nation/article/0,8599,1578857,00.ht... http://marijuanastamps.com/state-stamps.htm http://marijuanastamps.com/state-stamps.htm Mostly, it's another way for pigs to steal from people. The idea being they can not only throw you in prison for dealing, but then use tax forfeiture laws to take everything you own.
    - chopsueyar 16y ago
      You can buy the collectible stamps on Ebay, too.
    - icco 16y ago
      I was just looking at a similar article, I totally didn't know that, but I find it very interesting none-the-less.
    - poet 16y ago
      Arguing with facts, good. Using terminology for the police that an angsty teenager would use, bad. Moreover, the target of your animosity is misguided. Baring obvious ethical problems, I expect our law enforcement to enforce a law to the fullest extent. And as determined by the nation as a whole, Marijuana laws are not an obvious ethical problem. It's not a police officers prerogative to ignore the law, even when it will probably change in the next decade or two.
    - 16y ago

smokeyj 16y ago

If you sympathize with the tax code it's probably because you've never bootstrapped a start up. It's hard enough to make it, even without financing the government. A high quality of living is enabled by technology and innovation, and the process that stifles innovation - taxes - should be regarded with extreme caution. If trading with each other is a taxable offense you can expect a severe impediment on innovation. Does anyone really need examples of the failures of centralized economies?

earl 16y ago
Come on, your post is stupid on it's face. If a high quality of living is enabled by technology and innovation, said technology and innovation is enabled by stuff the government does -- a huge quantity of technology has it's roots in US government spending, and education is one of the 3 big things that states spend money on. Further, you conflate taxation laws and laws that prohibit things, eg "trading with each other is a taxable offense". In the real world, someone has to pay for the government and businesses pay a piece of the cost.
- smokeyj 16y ago
  And you know where the U.S gets those gobs of cash to throw at building new technology? The markets of course! Governments need a marketplace, the marketplace doesn't need the government. The internet is largely unregulated, but we use creative solutions to overcome barriers, and this should be a model for other industries as well. A market solution is always better than a government solution, because with the first you can always opt out.
  - Locke1689 16y ago
    the marketplace doesn't need the government This is also stupid on its face. The market needs the government if only to ensure that bad actors don't corrupt it.
  - poet 16y ago
    The richest man in Rome once said that you can't consider yourself truly rich unless you can afford your own private army. ;) Even more interesting is the fact that Crassus acquired his wealth by (1) declaring rich people enemies of the state and seizing their assets and (2) purchasing houses that were burning down and then putting out the fire with his own men. Unless you're an anarcho-capitalist, you'll certainly recognize that a representative government is necessary to put a stop to such behaviors.

kls 16y ago

Order overseas, no taxes no matter which state you are in This is not entirely true, I ordered a good deal of hand carved furniture from India one time and a hand carved bed from China another, both times I received a letter from the State of Florida letting me know exactly what I owed the state in taxes.

M1573RMU74710N 16y ago

If I'm not mistaken what happened was this person was the one reporting the income, they were just reporting it incorrectly.

tedunangst 16y ago

Nobody ever writes long blog posts saying "I paid my taxes. End of story." There's a definite bias in that only bad news ever gets reported. One anecdote about is not an indictment of the whole system.

chc 16y ago
Nobody ever says, "Ted Bundy didn't kill me. End of story." There's a definite bias in that only bad news ever gets reported. One killing is not an indictment of the whole person. Just because something works OK (not great, but OK) in the average case doesn't absolve it of terrible behavior in less common cases.

mechanical_fish 16y ago

We have this word "business" which has some kind of vague meaning, so we attach a bunch of rules to the abstraction... It isn't quantum mechanics. The rules which the OP professes not to understand boil down to this: 1) Everyone owes income taxes and Social Security/unemployment ("FICA") taxes on all of their income. To restate this in a fun but cartoony way: everyone is a "business". [1] No philosophical debate necessary. 1a) Except: If you get a W2 form along with some of your income, that income already had the FICA taxes paid on it (and, if the estimate is accurate, most of the income taxes, too). This feature is designed (among other things) to make the accounting so easy for most people that, if they are minimally numerate and are willing to actually read the IRS instructions, they can pay taxes with a one-page form without hiring an accountant. 1b) If you can't understand what I have said so far, hire an accountant. 2) If you earn more than a few hundred bucks without getting a W2 form for it, you owe FICA taxes. If you can't or won't figure out what Schedule C is, hire an accountant. [2] 3) Business expenses are deductible. If your non-W2 money is going right back out the door to pay business expenses, you may owe nothing. Keep track of those expenses (throw the receipts in a box, buy everything on a special credit card, hire a part-time bookkeeper, or -- god help us -- learn how to keep an account book). Then declare them; if you can't figure out the forms, hire an accountant. --- Still too abstract for you? Here's rule zero: 0) Hire an accountant. Do what the accountant tells you. One hour of accountant time, at any point over the last few years, would have been enough to save the OP. --- Now we are in a position to discuss your other point: Why do people often get so harsh when folks propose to "simplify" the tax code? Let's not ignore the elephant in the room: Mostly, it's because so few of these proposals are in good faith. Most of the tax-related writing that crosses one's field of vision is the direct or indirect result of politically-motivated lobbying efforts by individuals who are trying to lower their own taxes relative to others. We try to block these for the same reason that we block spam. But another reason is that many people want to pretend that accounting isn't important. They ask: Why does there need to be so much accounting? Why can't life be simple? These are very likely the same people who don't understand the need for so much computer programming. Shouldn't computers just be simpler? Can't we just write it all in Visual Basic? Can't it all be done by kids on minimum wage? Can't we just hand it all over to Microsoft and let them handle it? Why can't we just outsource all that stuff to some foreign country? Why can't computers program themselves? Shouldn't it all just "work"? Weren't things so much better back before we had all these terribly complicated things like the personal computer? It gets tiresome. Society is complicated. Deal with that. Learn basic accounting, or hire someone who did. --- [1] Note: I am not an accountant and you should hire a real one. You can detect the real ones by the moan of despair that they just made when they read my last sentence. [2] I can, but I won't. Accountants are not expensive relative to my time. In fact, they have an astonishing tendency to pay for themselves.

smutticus 16y ago

The system isn't broken. It just wasn't written with individuals in mind. The system works wonderfully if you're a CPA or large financial institution. If people understood their best interests and elected officials acted on behalf of those best interests we would have a simpler tax code. The opacity of law benefits only those who can understand it. Clarity of tax code is simply not in the interest of those who pay for laws to be drafted.

smackfu 16y ago
OTOH, the tax code is complicated mainly because of all the special cases that were introduced to pander to people's individual best interests. Like the whole deductions side of the 1040.