People Have To Like This Crap: The Tax Code Simplification Edition

France did the experiment for us (boldface mine):

Any business would be happy to have lower tax bills. But new research shows that in the real world, the self-employed are willing to pay hundreds of dollars more in exchange for simpler taxes, and that a less complicated tax code would spread the benefits around more equally.

That’s because when the tax code gets complicated, researchers found, two things happen.

First, it becomes more regressive — tax changes hit low-income, less-educated and older filers harder, because they don’t have the resources and knowledge needed to take advantage of the new system.

Second, the burden on the self-employed is increased. Those small businesses have shown that they’re willing to pay an average of as much as $830 for a user-friendly tax code.

How do we know this? France was nice enough to turn its entire economy into an experiment…

It all came about because, as you’ll recall from romantic comedy and period pieces, France has millions of tiny businesses. Think mom-and-pop patisseries, chocolatiers and butchers. But also, plumbers, carpenters and gig-economy workers…

Together, the reforms created a weird three-track system in which each business, before filing anything, had to decide whether they were “standard,” “simplified” or “super-simplified.”

It turns out that folks who run their own small business put a high value on simplicity. Repair shops and contractors opted for the simplified version even when a more complex tax filing would have saved them $405 a year. Professionals such as doctors and lawyers valued their time (and/or hated the accounting hassle) even more highly: If they had to pay up to an average of $830 a year to use the super-simplified regime instead of the complicated one, they’d happily do so.

“For small businesses, complicated stuff is really costly,” said Stantcheva, a Harvard economics professor. “Having to deal with a lot of accounting and tax systems is a burden.”

…The French government has since set out to simplify the tax code once again, this time by combining the two “simplified” tax schemes into one. They probably couldn’t ignore the data: Hundreds of thousands of self-employed French taxpayers have shown, over a decade and a half, that the smallest businesses value easier taxes over less taxes.

It’s an empirical analysis of how businesses actually behaved in the real world, not a distillation of industry-group requests and memoranda, and as such has a clear message for U.S. tax reformers: If you really want to help small businesses, especially those run by the middle class, the elderly and the less educated, then keep it simple.

While this is about business taxes, this can be applied more broadly: programs should be easy to use, period. The optimality criteria humans, as opposed to many economists and policy wonks, use is a combination of cost and ease of use. We don’t have to make the ‘adulting’ so damn complicated–and one can’t help but suspect that the complications are designed to induce users to make a sub-optimal choice. As some asshole with a blog put it, people don’t care about the API, they care about the GUI.

Keep it simple when it comes to policy.

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