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MEGAN'S RULES

May 07, 2008

Megan McArdle has some words to live by in making tax policy (emphasis mine):

Complexity is bad because it ups compliance costs, often makes evasion easier, and because complexity itself increases uncertainty: as tax laws proliferate, it becomes harder to know whether you are in compliance. It also makes the government's administrative overhead multiply like those bacteria that can kill you in five minutes after first contact.

Uncertainty is bad because it reduces the ability of people and corporations to plan for the future. It's hard to estimate your ROI if the tax laws that govern your investment change every year.

Change is bad in general because every time the tax law changes, your nation experiences a sudden loss of human capital: all the understanding of how the old law becomes useless, and people have to spend valuable hours learning to understand the new law. This is often time that could have been better spent doing new deals, or regrouting the bathtub. Mold doesn't take care of itself, you know.

I could quibble with the mold thing, as it seems to be taking care of itself quite nicely in the coffee cup I forgot behind my desk during tax season.

Ms. McArdle then points out how the candidates have banded together to violate all of these rules. It's short, and worth reading in full.

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