I've often written here before about the excess burden of taxation the added deadweight effect of the time and effort involved in paying and avoiding it, along with the unintended consequences it pretty much always creates.
But here's an unusually graphic illustration of the concept: in the US, there are 6% more fatal crashes on tax filing day than there are on an average day. That's a figure based on 30 years of accident data. It's also one that tells us just how stressful the tax system in the US is for ordinary people.
More stats on this? Sure.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
In the last decade there have been 4,428 changes to the US federal tax code. That's more than one a day, something that means that Americans spent a total of 7.64 billion hours in 2010 negotiating their tax related paperwork (reason.com). That is more than twice the working time of all the primary school teachers in the US. Odds are it is also one of the reasons why a rising number of people are trying to give up their American citizenship.
But we have no reason to feel remotely superior about this in the UK. Here, while I can't give you any numbers on traffic accidents on the last day for self-assessment returns to be filed, I can tell you with absolute certainty that our tax system produces a massive excess burden.
In 1997, our tax rules already filled a ludicrous 5,000 pages. By 2007, despite the use of smaller type to try and contain matters, that had risen to 11,500 pages. It kept rising under Labour and it is still rising now.
This might as, Tullett Prebon's Dr Tim Morgan points out, make the UK a happy hunting ground for tax specialists and those determined to avoid paying tax. But it is a nightmare for the rest of us, for HMRC and for all chancellors. "Can anyone actually read, let alone fully comprehend a set of tax rules covering 12,000 pages of closely spaced type?"
So what would an ideal tax system look like? It would raise enough money to cover our costs. It would be cheap to administer and it would have a "minimal adverse distorting effect on the economy." By these measures, says Morgan, our system is quite clearly nigh on useless.
It doesn't raise enough money (though like Morgan I think the answer to that is probably to cut spending). It isn't cheap. It isn't equitable. And it is an utterly "abject failure" when it comes to the distortion test.
All this is partly down to the way that bureaucracy automatically plagues public services of all kinds, but our 12,000 pages are also symptomatic of the fact that the road to hell is paved with good intentions.
Each change and each addition comes from a chancellor trying to make things better: trying to give a deserving cause a break, to encourage one part of the economy over another, or to discourage some behaviours (smoking and drinking) while encouraging others (charity giving, early stage VC investing and so on). But in formalising each new change, chancellors create new vested interests: once in the book, no tax or tax break ever leaves it.
The question, then, is how we create a tax system that actually works, one that is efficient, simple transparent and fair (the conditions Adam Smith laid down). The key seems to be to make it cheap and to remove excess burden as far as it is possible by making it very, very simple.
One way to do this is the land tax, which I have written about here before. This is a very good and very old idea whose time has never come proving yet again that good ideas never die, they just get ignored.
Then there is the flat tax, something that has seen some success elsewhere and that George Osborne was once very keen on. He hasn't mentioned it recently, but it is well argued for here (by Osborne), has some record of success, and is now much discussed in the US.
Finally, there could be a flat consumption tax applied across the board consumption taxes and land taxes are the least distorting of all taxes, according to the OECD.
None of these things are going to happen our politicians just aren't strong enough to bring in major or controversial change. However, you can see Osborne trying his attempts to clamp down on tax reliefs and to set a minimum tax rate for the rich are baby steps towards tax simplification and ones that should be applauded.
With that in mind, I am deeply disappointed to see that David Cameron is not applauding them: according to the Mail he is "signalling retreat" on the clampdown on tax hypothecation via charity relief.
One step forwards. One step back. Bother.
-
Christmas at Chatsworth: review of The Cavendish Hotel at BaslowMoneyWeek Travel Matthew Partridge gets into the festive spirit at The Cavendish Hotel at Baslow and the Christmas market at Chatsworth
-
Tycoon Truong My Lan on death row over world’s biggest bank fraudProperty tycoon Truong My Lan has been found guilty of a corruption scandal that dwarfs Malaysia’s 1MDB fraud and Sam Bankman-Fried’s crypto scam
-
Beating inflation takes more luck than skill – but are we about to get lucky?Opinion The US Federal Reserve managed to beat inflation in the 1980s. But much of that was down to pure luck. Thankfully, says Merryn Somerset Webb, the Bank of England may be about to get lucky.
-
Rishi Sunak can’t fix all our problems – so why try?Opinion Rishi Sunak’s Spring Statement is an attempt to plaster over problems the chancellor can’t fix. So should he even bother trying, asks Merryn Somerset Webb?
-
Young people are becoming a scarce resource – we should value them more highlyOpinion In the last two years adults have been bizarrely unkind to children and young people. That doesn’t bode well for the future, says Merryn Somerset Webb.
-
Ask for a pay rise – everyone else isOpinion As inflation bites and the labour market remains tight, many of the nation's employees are asking for a pay rise. Merryn Somerset Webb explains why you should do that too.
-
Why central banks should stick to controlling inflationOpinion The world’s central bankers are stepping out of their traditional roles and becoming much more political. That’s a mistake, says Merryn Somerset Webb.
-
How St Ives became St Tropez as the recovery drives prices sky highOpinion Merryn Somerset Webb finds herself at the epicentre of Britain’s V-shaped recovery as pent-up demand flows straight into Cornwall’s restaurants and beaches.
-
The real problem of Universal Basic Income (UBI)Merryn's Blog April employment numbers showed 75 per cent fewer people in the US returned to employment compared to expectations. Merryn Somerset-Webb explains how excessive government support is causing a shortage of labour.
-
Why an ageing population is not necessarily the disaster many people think it isOpinion We’ve got used to the idea that an ageing population is a bad thing. But that’s not necessarily true, says Merryn Somerset Webb.
