The Complexity of Taxes

The Complexity of Taxes

Is there any similarity between taxes and stress? This question leaped in my mind as I was reading a post by Jerry FletcherΒ titled β€œConsultant Marketing Napkin Diary”. This buzz reminded me of the β€œLaffer Curve”, which was first drawn on a napkin. In economics, the Laffer curve illustrates a theoretical relationship between rates of taxation and the resulting levels of government revenue. It illustrates the concept of taxable income elasticityβ€”i.e., taxable income changes in response to changes in the rate of taxation.Β I have drawn the curve as below:

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This curve is very similar to the stress- strain curve. In both curves- the performance of the a government to collect tax revenue is divided in the red zones, yellow zones and the green zone. There is an optimal level of collecting taxes as there is a peak performance expected from employees only when exposed to a certain level of pressure and then their performance drops sharply till it becomes poor.

I am asking if a good metaphor for governments to collect taxes is the Yerkes-Dodson stress curve? If the two curves represent the performance under stress- either the stress imposed on employees or the stress imposed on tax-payers by governments? In line with this metaphor is my reading β€œHowever, the Laffer Curve actually discourages taxes that are too low or too high. However, the Laffer Curve actually discourages taxes that are too low or too high. The social effects and feedback from the increased governmental taxes and like performances, the capacity to accommodate taxes and pressure reach their optimal effect” There have been many attempts to find a suitable metaphor for the collection of taxes, which reflected different attitudes on taxes. Some of these metaphors are:

Text are thefts or thefts or charity

Beer Is Not A Metaphor for Tax Fairness - Forbes

A usefulΒ metaphorΒ for understanding the disproportionate damage to economic efficiency caused by risingΒ taxesΒ is the noise-to-signal ratio. For example, if the income tax rate is 10%, you keep 90% of your income. The noise-to-signal ratio is .111 (or .1/.9). Taxes behave like noise in a signal.

One other idea that popped up in my mind is to imagine the β€œCynefin of Taxes”. In their efforts to improve the collection of taxes governments tend to increase the huge number of tax-payers, the collection systems, the control of payment of taxes and many other procedures. This leads to turning the simple systems of tax-collection from simple to complicated to complex and then this tend to become chaotic. What applies to simple system doesn’t apply to complex systems, to give one example. This leads to fruitless efforts by governments because they fail to understand the human behavior and its loss in filling vague tax forms. The tax-complex system instead of becoming a self-organizing one tends to become self-destructive one. The result is the need for a new system to emerge or an endless chaos shall result. A very agreeing point of view that I find representing this thinking is this reference. It states that β€œβ€¦as complexity of a system increases, the costs associated with it increase exponentially to the point where the costs approach infinity, and collapse is a certainty”.

It amazes me how much governments need to understand the value of simplifying the tax systems and understand the behaviors of the tax-payers.


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Ali 🐝 Anani, Brand Ambassador @beBee

Thank you Max Collins for your sharing the post.

Ali 🐝 Anani, Brand Ambassador @beBee

#22
I believe some governments make the tax system more complex intentionally to confuse the tax payer and rob him/her of more money. It is paradoxical that a tax-payer has to pay while suffering as well. Paying taxes is painful; more painful is robbing using the given authority to do so. Thank you Timothy welch for sharing the buzz as well.

Ali 🐝 Anani, Brand Ambassador @beBee

#20
Your comment put a smile on my face dear Debasish Majumder. When the Laffer Curve was drawn on an envelope to the late president Reagan he decided not to raise the taxes. Taxes, like prices, have their elasticity. This means that the tax reach a maximum and then decline because they no more become responsive to tax increases. yes, who pays the taxes? I know of examples that the profit-makers found many ways to avoid paying their fair share. I thank you also for sharing the buzz.

Debasish Majumder

Debasish Majumder

1 year ago #18

when a kidnapper asked for ransom how will we react? d o you really think government and governance is synonymous? a government always represent the ruling class who somehow manged to reach to the helm of administration by making rhetoric to hoodwink people and reach to the corridor of power only to satiate minority's aspiration. i truly love the quote of Jerry Fletcher to expect government to reduce tax as well stress! across the world the governments have a proven track record to unleash huge stress to the ordinary mass. is n't it an irony to expect government to reduce stress? quite interesting buzz sir. enjoyed and shared. thank you for the buzz.

Ali 🐝 Anani, Brand Ambassador @beBee

#18
Jerry- indeed, the best thing to say is "and so it goes".

Jerry Fletcher

Jerry Fletcher

1 year ago #16

Dr. Ali, Fair and equitable taxes? Surely you jest. Taxes, in the eye of the taxed are seen as unjust and unrewarded. The closer a government comes to a dictatorship the more taxes represent a penalty with no redemption possible. Few governments have the knowledge or ability to take actions on taxes that would get to the sweet spot you note. Even fewer have the desire. And so it goes.

Ali 🐝 Anani, Brand Ambassador @beBee

#15
#16 -b the attitude towards taxes shapes our thinking about them. Which is worse theft or charity versus ransom?

Bill Stankiewicz, 🐝 Brand Ambassador

Ransom πŸ‘πŸ‘πŸ‘πŸ‡ΊπŸ‡Έ

Pascal Derrien

Pascal Derrien

1 year ago #13

Taxes or ransom ?

Ali 🐝 Anani, Brand Ambassador @beBee

I thank you Franci\ud83d\udc1dEugenia Hoffman, beBee Brand Ambassador for sharing the buzz. This is very appreciated

Ali 🐝 Anani, Brand Ambassador @beBee

#9
Kevin Baker comment

Ali 🐝 Anani, Brand Ambassador @beBee

#8
My cousin closed shop for the same reasons that you mentioned in your comment Paul Walters. When taxes become a burden and pile up one little more tax will make the tax-player so distressed to keep the business running.

Ali 🐝 Anani, Brand Ambassador @beBee

This was my response to the previous comment: Charlotte Wittenkamp- as authors we pay taxes for what we write even though we don't get rewards in cash. We may be get criticized, blamed, misunderstood and the like. As long as we feel the taxes are a comparable to the rewards we get we feel satisfied. I find your sensible comment rewarding for it explains for me what I experience. People today seek the fulfilling of the SCARF requirement. SCARF stands for Status, Certainty, Autonomy, Relatedness and Fairness. You mentioned fairness in your comment. This is needed because we expect to get some rewards for what we pay and also in treating tax-collection with fairness among all tax=payers. Your comment shows the consistency of the SCARF Model with taxes as reflected in your comment.

Ali 🐝 Anani, Brand Ambassador @beBee

I want to share this comment that was contributed my my shared buzz on LinkedIn. It is a worthy one. Charlotte Wittenkamp 1st degree connection1st Bridge Builder Great curve, Ali Anani, PhD. Sometimes the tax rate is so low that basic functions of government can't be conducted (like underfunding the IRS which makes it not audit the most complicated tax returns.) Sometimes it is so high that people don't bother working more. The sweet spot is when people think it is sort of fair and equitable - which probably is a little higher than anybody likes because people tend to take roads, police, social security, Medicare and other government activities for granted. I grew up in one of the highest taxed countries in the world but my education was free except for the books, and my grandmother lived out her 100 year life without worrying because of retirement benefits, free medicare, and for the last couple of years a nice retirement home with her own furniture and private bathroom all paid by her social security benefits. Since that time I have not complained about paying taxes. Much is in how we tell each other the system works and we usually get i wrong: https://usdkexpats.org/20160128-does-rose-any-other-name-still-smell-foul

Paul Walters

Paul Walters

1 year ago #7

Ali \ud83d\udc1d Anani, Brand Ambassador @beBee Corporate Tax, Payroll Tax, Pay as You Go Tax, Fringe Benefits Tax, Personal Tax, Goods And Services Tax, Capital Gains Tax, Land Tax, rates, State Accounting tax.... And then someone asked me " Why did you sell your business? " Complicated or now...getting taxed to death simply wasn't any fun

Ali 🐝 Anani, Brand Ambassador @beBee

#6
Thank you dear Tausif Mundrawala for commenting and sharing the buzz. There is an agreed experience that taxes forms get more difficult to understand because of the introduction of many agencies. You are lucky to specialize in this field. What I wanted to highlight in this buzz is that taxes are widely confusing of their value. The attitudes, as reflected by metaphors for taxes, include that they are charity, theft and social due. I found it interesting that the stress curve resembles the Laffler Curve meaning that they behave similarly and are both exposed to different sources of pressures such as social pressures, attitudes pressures and misconception pressures. The climate of the taxes is as complicated as the atmospheric climate and predictability of its performance becomes hard to do. I thank you for sharing your experience and for contributing a thoughtful comment that prompted me to reply in some detail.

Ali 🐝 Anani, Brand Ambassador @beBee

#4
it amazes me how VUCA applies to taxes. Volatility, uncertainty, complexity and Ambiguity are also characteristics of taxes as they are of the world today. I hope you get your reward sooner than later.

Harvey Lloyd

Harvey Lloyd

1 year ago #4

#2
Here in the US taxes are rewards for contractors (Civilian and Military), research grants Job postings and many other dynamics that are all hidden in subterfuge. In the heat of the battle between me and the CPA firm i have a hard time shaking the thought of where was the "T" man when i needed money, resources etc.... I can't complain, this go round of tax policies i have been rewarded. Generally though the reward runs out and i lose my turn. It will be someone else's turn next time.

Ali 🐝 Anani, Brand Ambassador @beBee

Jerry Fletcher- you are mentioned in this buzz

Ali 🐝 Anani, Brand Ambassador @beBee

#1
I wish the "Tea" man would rather stand for the "Tea Man". Yes, taxes are rewards, but for whom? The tax system is getting complicated . It is a punishment to pay taxes and be punished for filling complex forms. The tax system is moving towards complexity and that is why the cynefin approach may help us in our comprehension and therefore simplifying the system. It is an interesting idea to see taxes as a reward, but at what price. This is a challenging idea my good friend, Harvey.

Harvey Lloyd

Harvey Lloyd

1 year ago #1

Some brief meetings today referenced the end of year processes and someone used the "T" word. Now your post. I am predicting a cranial volcano by November 30. Roger Dawson of the 1980's era discussed many forms of power. One of those was/is Reward Power. If the existence of a reward exists we will tend to fight our conscious mind and vote in favor of the reward. The tax code is in the US is involved within a tangled web of reward power. I would imagine if we looked at the "T" word through group dynamics, voters and branding we could see very quickly where Reward Power exists. Within the system, rewards are channeled towards More Money, Voters or popularity. Simplifying the tax code would crush, CPA's and the political ability to reward one of the dynamics by politicians. Then of course there is the legacy policies that are very difficult to get rid of while rewarding. Disabling a legacy policy hurts just as many as you have rewarded. Great thoughts, but still a reminder that the "T" man cometh.

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