If you’ve ever played a game of blackjack at a casino, you know that winning your hand doesn’t preclude the over-served bachelor party attendee to your left from winning, nor does it the wily 19 year-old with a fake ID to your right. You also know that in this game, there are multiple players, but just one referee — the dealer — and one set of rules. There’s also a limit to the number of players who can sit at a table because a single dealer can on do so much when it comes to monitoring the game and enforcing its rules.
As you continue to risk your paycheck, the bachelor party bro gets up, and next to you now sits a card-counting statistician. The mathematician has a photographic memory and knows the probability of winning based on the number of cards dealt and which cards are showing — a pronounced advantage over amateurs like you. Although the mathematician’s approach to the game isn’t in the spirit of fair play, it doesn’t expressly break any rules, so you continue to sip your comped domestic light beer and mind your own business.
In the middle of your game, to save money on dealers, the casino consolidates your table with another and lays off your dealer, leaving a single dealer to work with twice as many players. The casino also makes significant changes to the house rules on blackjack, introducing more ambiguity about what falls within the rules and what doesn’t, with fewer dealers — referees — to manage this ambiguity.
Before these changes, there had always been a market for learning how to bend the rules at blackjack. But with the decreased supervision and heightened ambiguity that’s arisen from the layoffs and rule changes, the market for these rule-bending services swells. Before the changes, the statistician might have been teaching his trade to only five clients; after the changes, his roster of clients grew to 10. Plus, lured by the fast money, six more of the statistician’s PhD classmates decided to enter the market as well.
If only this chaos were imaginary. Instead, it’s the current state of paying taxes in the United States. Millions of players pay taxes, each of whom tries to “win,” or pay less, by taking advantage of ambiguity in the rules. This of course doesn’t preclude others from following suit.
The refs in this game are going by the wayside too. Since 2000, the IRS — the chief enforcement agency of tax laws — has undergone a 23% reduction and lost over 21,000 employees.
Likewise, the rules of the game have become more ambiguous. The U.S. tax code underwent sweeping changes when Republicans in Congress passed a major tax cut bill last December. The haste with which the bill was drafted and evaluated means that nobody’s quite sure what a good chunk of the new laws mean and what the intent is behind them.
Noticing this opportunity, in step the card sharks to help their clients profit from this ambiguity. When rules like these aren’t quite clear, the market for actuarial services geared towards helping clients interpret and subvert what was already a byzantine set of tax laws, grows to meet demand.
Not coincidentally, those who stand to profit the most from this ambiguity are those who can afford to pay the card sharks in the first place. Because of this barrier to entry, the taxpayers without the resources to hire their own tax advisor, lawyer, or accountant might not benefit or might even pay more in taxes.
Compounding the losses incurred by those who can’t afford to hire tax help are the costs and consequences that will arise from those who can game the new system. According to one report from a group of academic and private-sector tax lawyers and economists, these costs could add over $1 trillion to the deficit over the next decade.
The same report states that even those who do abide by the rules may be inadvertently penalized because of unclear language in the new tax bill. At this point, not only are fewer refs working to enforce the tax code, those remaining don’t have complete clarity on what those rules are or how to properly enforce them.
The idea of everyone agreeing on tax policy is even more imaginary than the casino scene outlined earlier. What’s even more far-fetched is a scenario in which any reasonable person believes it’s a good idea to create new rules for a game as complex as the U.S. tax code and at the same time make sure there are fewer mechanisms in place to interpret and enforce those rules.
Regardless of whether they supported the new tax bill, members of Congress want the tax code to be enforced and regulated. Regardless of cause – increased military spending or funding of Planned Parenthood – taxes are crucial. With this shared need between them, both parties must act quickly to clear up the ambiguity in our tax code and fund the sole agency responsible for enforcing it.