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First year of income tax code - max. rate is 7% . Tax code is >400 pages. Now - max rate is ~40%. Tax code is 13,000+ dense pages. Not to mention the red tape

First year of income tax code - max. rate is 7% . Tax code is >400 pages. Now - max rate is ~40%. Tax code is 13,000+ dense pages. Not to mention the red tape at the state level. Reducing the complexity of business formation would by itself, encourage entrepreneurship.

bryanh 16y ago
Absolutely, these "initiatives" simply give lip service to the idea of fostering true entrepreneurship. Too bad they are passed off as legitimate actions in most media outlets.
- moultano 16y ago
  He did mention simplifying the tax code in the state of the union address.
  - jerf 16y ago
    Talk is cheap. I don't mean that as a criticism of Obama specifically. There is a long history of people promising tax simplification. Very little has ever happened, quickly erased by further complexification. (Broadly speaking, they're doing it wrong. The solution to a too-complicated tax code is to fix the incentives Congress has to make a complicated tax code, then let the problem address itself incrementally over several years. Simply burning straight for simplication without addressing the underlying problems is doomed to failure. Of course, trying to address the underlying problems is also mostly doomed to failure, so shrug.)
    - Natsu 16y ago
      > Broadly speaking, they're doing it wrong. The solution to a too-complicated tax code is to fix the incentives Congress has to make a complicated tax code Controlling people's purse strings is a main source of congressional power. I don't see them giving much of that up any time soon...
      - jerf 16y ago
        It would take a very-well-thought out Constitutional amendment through a State-powered Constitutional Convention (since Congress isn't going to trim its own wings) at a minimum, I fear. Any one of "very-well-thought out", "Constitutional amendment", and "Constitutional Convention" seems pretty unlikely anytime soon; the combination of all even more so. Still, these are crazy times politically, who knows?
    - bryanh 16y ago
      They should create large tax write-offs based on how complicated your tax return was. That should simplify things! I think...
  - genieyclo 16y ago
    Heads of states say a lot of things they never do.
cyrus_ 16y ago
I'm not so sure this is true. For any startup founders here, some questions: 1. How much time did you spend incorporating your business? 2. How much time do you spend per year filing your income taxes, or do you hire an accountant? 3. If the latter, how many billable hours do they put into it? Was this a major expense for your business? There may be a huge step function if they somehow simplify the tax code such that small and medium business owners can do it themselves in a day rather than having to hire an accountant, but anything short of a major overhaul will leave people in roughly the same position I think.
- dantheman 16y ago
  Look at the entire tax infrastructure - H&R Block and all those accountants basically doing a make work job, that could be eliminated by simplifying the tax structure.
  - eli 16y ago
    Err, I don't think the H&R Block lobby is conspiring with legislators to keep taxes complicated. The tax code is complicated because it's layer upon layer of incentives and disincentives and hacks and amendments and loopholes and counter-loopholes built up over decades. It evolved into its current state, it wasn't built this way.
    - brown 16y ago
      Maybe not H&R Block, but Intuit (TurboTax) sure does... Why Can’t the I.R.S. Help Fill in the Blanks? http://www.nytimes.com/2010/01/24/business/24digi.html?_r=1 http://www.nytimes.com/2010/01/24/business/24digi.html?_r=1 Intuit's end-run http://articles.latimes.com/2010/jul/21/opinion/la-oe-ventry-intuit-20100721 http://articles.latimes.com/2010/jul/21/opinion/la-oe-ventry...
hinathan 16y ago
The problem I have with government using tax incentives as a way to spur entrepreneurial growth is that by their nature these incentives reward current activity with future benefits. But the payoff horizon — next year's tax filing – isn't actually useful for a new company. That's why I'm so bullish on using simplified health insurance as an incentive for new business. It provides value and reduces friction on day 1 and continues to do so through the earliest, highest risk phases of a company's lifecycle. Tax incentives reward success but don't help business attain that success.
- Benjo 16y ago
  Sounds good to me. Unfortunately, politicians have more to gain by giving tax breaks to successful company compared to helping new small businesses, which is probably why there's not a lot of political will for ideas like this.

bryanh 16y ago

Absolutely, these "initiatives" simply give lip service to the idea of fostering true entrepreneurship. Too bad they are passed off as legitimate actions in most media outlets.

moultano 16y ago
He did mention simplifying the tax code in the state of the union address.
- jerf 16y ago
  Talk is cheap. I don't mean that as a criticism of Obama specifically. There is a long history of people promising tax simplification. Very little has ever happened, quickly erased by further complexification. (Broadly speaking, they're doing it wrong. The solution to a too-complicated tax code is to fix the incentives Congress has to make a complicated tax code, then let the problem address itself incrementally over several years. Simply burning straight for simplication without addressing the underlying problems is doomed to failure. Of course, trying to address the underlying problems is also mostly doomed to failure, so shrug.)
  - Natsu 16y ago
    > Broadly speaking, they're doing it wrong. The solution to a too-complicated tax code is to fix the incentives Congress has to make a complicated tax code Controlling people's purse strings is a main source of congressional power. I don't see them giving much of that up any time soon...
    - jerf 16y ago
      It would take a very-well-thought out Constitutional amendment through a State-powered Constitutional Convention (since Congress isn't going to trim its own wings) at a minimum, I fear. Any one of "very-well-thought out", "Constitutional amendment", and "Constitutional Convention" seems pretty unlikely anytime soon; the combination of all even more so. Still, these are crazy times politically, who knows?
  - bryanh 16y ago
    They should create large tax write-offs based on how complicated your tax return was. That should simplify things! I think...
- genieyclo 16y ago
  Heads of states say a lot of things they never do.

cyrus_ 16y ago

I'm not so sure this is true. For any startup founders here, some questions: 1. How much time did you spend incorporating your business? 2. How much time do you spend per year filing your income taxes, or do you hire an accountant? 3. If the latter, how many billable hours do they put into it? Was this a major expense for your business? There may be a huge step function if they somehow simplify the tax code such that small and medium business owners can do it themselves in a day rather than having to hire an accountant, but anything short of a major overhaul will leave people in roughly the same position I think.

dantheman 16y ago
Look at the entire tax infrastructure - H&R Block and all those accountants basically doing a make work job, that could be eliminated by simplifying the tax structure.
- eli 16y ago
  Err, I don't think the H&R Block lobby is conspiring with legislators to keep taxes complicated. The tax code is complicated because it's layer upon layer of incentives and disincentives and hacks and amendments and loopholes and counter-loopholes built up over decades. It evolved into its current state, it wasn't built this way.
  - brown 16y ago
    Maybe not H&R Block, but Intuit (TurboTax) sure does... Why Can’t the I.R.S. Help Fill in the Blanks? http://www.nytimes.com/2010/01/24/business/24digi.html?_r=1 http://www.nytimes.com/2010/01/24/business/24digi.html?_r=1 Intuit's end-run http://articles.latimes.com/2010/jul/21/opinion/la-oe-ventry-intuit-20100721 http://articles.latimes.com/2010/jul/21/opinion/la-oe-ventry...

hinathan 16y ago

The problem I have with government using tax incentives as a way to spur entrepreneurial growth is that by their nature these incentives reward current activity with future benefits. But the payoff horizon — next year's tax filing – isn't actually useful for a new company. That's why I'm so bullish on using simplified health insurance as an incentive for new business. It provides value and reduces friction on day 1 and continues to do so through the earliest, highest risk phases of a company's lifecycle. Tax incentives reward success but don't help business attain that success.

Benjo 16y ago
Sounds good to me. Unfortunately, politicians have more to gain by giving tax breaks to successful company compared to helping new small businesses, which is probably why there's not a lot of political will for ideas like this.