April 4, 2009

Simplicity works

Think of a business model. Think of the laws of physics. Think of your favorite song (it's probably not an 18 minute jazz opus). Think of the concept of hard work pays off. Think of effective corporate slogans and logos (for example Nike, what's their slogan, and their logo?). The fact of the matter is simplicity, simply, works. It just does. It's the KISS principle - Keep It Simple Stupid (either that or Gene Simmons).

You might argue that physics has some complex underlying math, but the principles of physics are pretty simple. For example the concept of inertia can be simplified down to objects in motion unless acted upon by an outside force, will remain in motion, and objects at rest will similarly remain at rest. It can be further simplified to a statement an 8 year old can understand: Things like to do what they are already doing.

So if simplicity works, why do people including government officials (elected or otherwise) assume that the government has to be so complex? Not meaning to go all libertarian on you, could the United States government not go miles towards easing economic problems by simply easing up on the complexities they have imposed on American business? The tax code is over 67,000 pages long. Does that seem reasonable to anyone other than a bureaucrat or a lawyer? I can't begin to imagine how many pages of federal laws there are.

Why not have fewer laws? Why not get rid of burdensome impositions of Sarbanes Oxley, and mark-to-market accounting? Why not go further and clean up laws that were written decades ago and are no longer relevant?
Why not simplify existing laws so that they are easier to understand? It would require fewer lawyers of America, freeing up talent to go after engineering, medical, teaching and business degrees? It's easy to pick on lawyers, but this is a critique aimed at the profession, not the individuals.
How about dramatically simplifying the tax code? We know the tax code is where the government can use it's powers to drive specific behaviors, for example child tax credits, or charitable donations. And yes, it can be leveraged as a tool to get votes by either party. But the tax code and things like the Alternative Minimum Tax are way too complex. Why not impose a flat tax? Or scrap the income tax altogether? Could America afford to give up the government revenue? Of course not.

The GNP of the United States in 2007 (pre-recession hit) was $13.84 trillion. If you scrapped income tax and put a value added tax on all goods and services you could still come up with the $2.57 trillion in government revenue from 2007. True, the tax rate would have to be 18.5% on every transaction. But it's not as bad as it seems, according to the site Homeland Stupidity.

Between federal, state and local governments in the United States, about 40% of Americans’ income goes to taxes and various statutory fees. And that’s why you’re having so much trouble getting ahead. Federal income taxes are only a small portion of the taxes we pay. We also pay federal payroll taxes for Social Security and Medicare, state income taxes, state and local sales taxes, property taxes, death taxes and excise taxes. . . .

So the government could cut the total average tax burden by 50% and still generate the same revenue. Seems simple enough. And while we are at it why not simplify things by ridding the government of a few unnecessary departments? Strip it down to the core responsibilities. That might help make up the rest of that revenue gap to government spending.
Why should we want so much simplicity? Because simple works. Simple is beautiful. It makes things run more efficiently. It gives you more freedom as an individual. I'd say more but I don't want to complicate the argument for simplicity.

The irony is that people on the left who want freedom often only see it from their own perspective. It's fine for me but put businesses in a straight jacket. Make them make my car green. Make them pay $70 per hour for labor. But make them sell me that car super cheaply because everyone deserves transportation - it's my right as a liberal American, and it's also the right of that illegal immigrant over there. See, they've already started complicating things. Simple - let GM make the cars it wants to make, and you buy the car you want to buy. If you don't like a big SUV and that's all GM makes, buy somewhere else. They lost your business because they didn't diversify their product line to your tastes. And if no one wants to sell you a hybrid and you can't buy one because your one of only 6 people in the nation who want one, well then take the bus. Simple.

Of course, all of this may have to wait for at least 2012 - some people are currently quite busy trying to really impress us all with how smart and enlightened they are and show us how complex and Byzantine they can make things and how we will all benefit from their superior intellect. So 2012 it is.

1 comment:

  1. Current tax code: 47,000 pages. FairTax Act: 133 pages. No reduction in government revenue, thanks to embedded sales tax, but no income, payroll, or capital taxes on anyone, and a credit for the tax burden on poverty-level spending--so, if Health and Human Services determines a family of four is at the poverty line at $2000 a month, they get a prebate credit for 23% of $2000.


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