Paul L. Caron

Tuesday, August 13, 2013

Tax Is the Second Most Complex Federal Statute

Daniel Martin Katz (Michigan State) & Michael James Bommarito II (Bommarito Consulting, LLC), Measuring the Complexity of the Law: The United States Code:

Einstein’s razor, a corollary of Ockham’s razor, is often paraphrased as follows: make everything as simple as possible, but not simpler. This rule of thumb describes the challenge that designers of a legal system face — to craft simple laws that produce desired ends, but not to pursue simplicity so far as to undermine those ends. Complexity, simplicity’s inverse, taxes cognition and increases the likelihood of suboptimal decisions. In addition, unnecessary legal complexity can drive a misallocation of human capital toward comprehending and complying with legal rules and away from other productive ends.

While many scholars have offered descriptive accounts or theoretical models of legal complexity, empirical research to date has been limited to simple measures of size, such as the number of pages in a bill. No extant research rigorously applies a meaningful model to real data. As a consequence, we have no reliable means to determine whether a new bill, regulation, order, or precedent substantially effects legal complexity.

In this paper, we address this need by developing a proposed empirical framework for measuring relative legal complexity. This framework is based on “knowledge acquisition,” an approach at the intersection of psychology and computer science, which can take into account the structure, language, and interdependence of law. We then demonstrate the descriptive value of this framework by applying it to the U.S. Code’s Titles, scoring and ranking them by their relative complexity. Our framework is flexible, intuitive, and transparent, and we offer this approach as a first step in developing a practical methodology for assessing legal complexity.


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Apologies if this is covered in the paper, but not mentioned in the blog entry.

As your Einstein quote suggests complexity is only half of the equation.

Can the legislation be less complex and meet the desired ends? Can we even define them?

Posted by: David | Aug 14, 2013 11:58:35 PM

Mike, I guess the next steps (as you mention in your paper) are to add in the complexity of the regs. and treaties. Tax law, of course, involves both. This is interesting work and I hope you get a good journal placement.

Posted by: HTA | Aug 14, 2013 2:28:48 PM

I'd also add that income tax includes multi-state and cross border issues, which require state and local codes, tax treaties and some basic knowledge of foreign tax regimes. That's probably best ignored at the beginning of this project (or maybe not, SSRN is not open to me), but I'm a little defensive over finishing second.

Posted by: Yo Gabba Gabba | Aug 14, 2013 1:47:53 PM

I don't mean to belittle the professors, and I love their project and appreciate their modesty in its first iteration, but according to my coffee cup that same Einstein said, "The hardest thing in the world to understand is income taxes."

Posted by: Yo Gabba Gabba | Aug 14, 2013 1:43:37 PM

Hi Andy,
Great point. You'll see that we do discuss this issue in the paper, and the analyses can be applied at any unit of analysis (e.g., Chapter, Act, section).

Posted by: Mike | Aug 14, 2013 8:24:41 AM

Title 42 is actually an amalgamation of a bunch of different statutes, touching on things like environment law, health law, housing law, and so on. It's somewhat strange to compare Title 42 to Title 26, which reflects a codification of a single body of law.

Posted by: andy | Aug 13, 2013 12:21:50 PM