A Little Palate Cleanser: An Expert Veers Out of Her Lane to Say Ridiculous Things About Taxes and Deficits
Because the frightening situation in the US and the world became even more harrowing over the last week, one part of which I discussed with some emotion two days ago, I want to end the week by talking about something else entirely. My comfort zones are economics and tax policy, so today will involve a short foray into those welcoming spaces.
As part of my self-healing, I will steer clear of the current US situation completely -- so completely that I will not even discuss current US tax or economic policies. Instead, in this very short post I want to comment on yet another instance in which a very smart person who possesses genuine expertise about one subject took it upon themselves to opine about US tax and budgetary policy. And why wouldn't they? They are generally well informed, or so they think. It all seems kind of easy, right?
But just as things can go very wrong when (as I put it back in 2013) economists "commit politics," or when economists believe that "philosophy is easy" (2019), other scholars should be careful about mouthing the conventional wisdom without seeming to have taken even a moment to think about what they are saying.
The guilty party in this case is a military historian and genuine expert on the strategies and tactics of war, Sarah Paine. Paine is a former Professor of History and Grand Strategy at the U.S. Naval War College. About a year ago, my YouTube feed started pushing a series of clips from public lectures and interviews in which Paine discussed the Russo-Japanese War, World War I, Putin's huge errors in starting and waging Russia's war on Ukraine, and many other topics about which I previously knew nothing. Even though I am a naif on those matters, I found Paine convincing because she offered evidence and logic to back up her conclusions, rather than simply saying, "I'm the expert, believe me."
Even so, the lure of spouting off can overtake even the best people, and Paine turns out to be no exception. A very short (less than three minute-long) clip from an interview posted earlier this month was titled: "Why is the tax code untouchable? — Sarah Paine." Hmmm, maybe she has an interesting take on how the tax code affected strategy in, say, the Spanish-American War? If only.
Here are her mostly uninformed, half-baked statements, which take up the first minute and three seconds of the clip:
We have one of the most crazy tax codes on the planet, and neither party can touch it, because [if] you touch any part of it, someone negotiated that wording exactly. And yet, think about how much of our economy is taken up by the overhead of all the tax accountants, all the misdirected cash in order to take advantage of something that's simply an [makes air quotes] invention of the tax system.
There was years ago, when there was talk of doing a flat tax, and wouldn't that be much more efficient? And you can imagine what accountants thought about that one [smirks]. And that idea has totally died. Talk about inefficiency.
We realize we have budgetary problems in this country, and this would seem to be something that ought to be on people's radar is clean up [the] tax code. But isn't it precisely that many people don't want the radar on the tax code, and that's why we're wondering who can get in and out of girls' or boys' bathrooms, instead of looking at the tax code, which would be the real thing.
After some mildly amusing banter, the interviewer then steered the remaining two minutes of the conversation into a discussoin of North Korea, through what I think was intended to be a "you can't even begin to fix a corrupt system" analogy to the tax code. I am not interested in that oddity, although the attempted US-tax-policy-is-like-North Korea comparison is simply ridiculous (if indeed that was what he was attempting to do). Instead, Paine's comments above are a perfect example of the self-important silliness on which I want to focus here.
It seems that nny and all comments from non-experts on these topics must be presented with an air of world-weariness, which Paine embodies perfectly. It is all about corrupt insiders rigging the system. It is evidently impossible to imagine that "someone negotiated that wording exactly" on any tax provision because the wording of the tax code needs to be as exact and clear as possible. No one would say that every tax provision is defensible, but this notion that "it would be easy to fix if the accountants stopped being leaches" is simply insane.
Yes, tax compliance costs are important, as everyone has known for millennia, but they cannot be zero. And because one persons cost is another person's income, that means that every tax system must necessarily end up allowing some people to make money by becoming experts in navigating the system. Could we reduce tax compliance costs? Of course, but not to zero, and only by "negotiat[ing] the wording exactly," because otherwise we would simply throw open the system to even greater abuse.
Putting all of that aside, however, it is amusing that Paine seems to think that there was this great idea called the Flat Tax that could have solved all of our problems. That is nonsense, both because every proposed flat tax system included all kinds of complicated line-drawing exercises. That is not unique to flat taxes, of course, but to all tax systems.
More to the point -- and this is a very old point -- the complexity of the US tax system has nothing to do with whether tax rates are flat, progressive, or regressive. Even if Paine had not completely missed the point by complaining about greedy accountants, one could create a simplified tax system that does not have flat rates. All of the complexity is in determining taxable income. At that point, the tax owed can be computed under any rate system within a nano-second.
I will stop myself from ranting about Paine's blase use of the word "inefficiency," because I am trying to calm down here. I will instead note that she indicts herself by bringing up "budgetary problems" for the government. She seems to be saying that simplifying the tax code would automatically solve those unexplained problems in the budget, but that is a complete non sequitur. One could easily make the tax code simpler while collecting much fewer dollars than the system currently collects. We could, for example, get rid of income taxes entirely and rely instead on existing federal excise taxes (which are plenty complicated, by the way) and see what happens to the budgetary situation.
OK, that is enough for now. I simply had to share with our readers my frustration in watching someone act as if very difficult questions of taxation, spending, and borrowing are simple and easy to fix. I have no idea why Japan became a military power in the late 19th century, and I know enough not to pretend to know. But understanding the tax system is easy, right? Anyone can solve all of our problems in less than sixty seconds. Cool.
- Neil H. Buchanan