“ The obvious loss is to government revenue, but the more subtle and still very real loss is the diversion of high-powered talent from what could have been gains in efficiency and productivity to focus instead on corporate reorganizations and tax evasion games.”
I’d expect very little overlap between those talent pools.
Tangential, but a pet project I've been working on has been doing exactly that! Looking at US federal tax laws and using constraints solves to find optimal paths to the lowest taxes.
I don't really do anything besides play with it, my taxes are very simple and boring, but it's been a fun project to play around with.
Those two concepts are very much the same thing. There is no literally distinction between legally minimising the taxes you have to pay, and legally avoiding a tax that you would otherwise have to pay. You just want to have a different word to use to criticise people/groups/companies you don’t like doing something you seem to otherwise approve of, so you don’t look like a hypocrite.
My accountant defined it this way… minimization is legal, avoidance is not.
Minimization is just taking advantage of the tax loopholes and strategies that are within bounds. Avoidance is lying or ignoring.
Yes it’s possible to minimize your taxes down to zero legally in many cases, but you’ll pay a good percentage of that savings to accounts and lawyers for managing that structure.
I’m struggling to believe that a qualified accountant said that. Tax avoidance is completely legal, if it becomes illegal, then that’s called tax evasion.
Avoidance and “minimisation” are the same thing, evasion is a crime.
I think of minimization as doing things like taking deductions, and avoidance as creating confusing structures of new entities in order to take advantage of gray areas and deciding that the cost of getting caught is not material.
Yeah, that's fair enough; outside of keeping as much money as I can in ETFs and index funds, my tax strategies are pretty much non-existent since I don't have enough money for it make a huge difference.
If there are any novel or situation-specific conclusions drawn, that sounds like an easy sell to CPAs and independent tax preparers. Maybe even individual tax optimizers.
My naive assumption is that sophisticated analysis will return the same few well-known recommendations almost all the time -- the taxation variant of eating properly, sleeping regularly, and getting appropriate exercise.
Certainly for anything I actually do, I've not found anything that is better than something like TurboTax gives me.
The scope of what I'm working on is trying to build strategies for holding and selling stock as well in order to minimize taxes. I've only ever used it on paper trades.
How many people pursue business or accounting degrees instead of mechanical engineering or biotechnology degrees? The talent flows to what policy incentivizes, over the long run.
Your point, that people can't just switch careers willy nilly, actually reinforces the point of the article -- that incentivizing accounting games actually reduces time spent on impactful pursuits in the long run.
More like how many people with degrees in Business go into Management Consulting, would like to join a startup as a Product Manager, or accountants that want to be Associates at a VC firm rather than work a big 4.
But even for programmers, plenty of people make the decision to go into programming or medicine or law because they are well paid and respected careers. And interests in secondary school and university are influenced by parents, teachers and the culture promoting certain directions. Kids these days are bombarded by STEM everything.
Interesting enough I read an article that there is going to be and there is to some degree, a large shortage of accountants over the next 10-20 years as people entering the profession are at record lows and retirements are at all time highs
Tons of people who get degrees in technical fields work outside that field. There are many people who have have spent at least part of their studies or career in hard science, SWE, IT, management consulting, law or finance before switching to something else in that list to improve their work/life balance, to make more money, to find employment more easily, or simply because learning the field and cracking its puzzles is engaging work for them no matter the exact technical field it's in.
High finance and crypto are two places where a high concentration of technical skills intersect with using those same skills to game our financial and legal systems.
If there were no need for tax avoidance accountants, they very well might have chosen to study to become software engineers instead. It's not like they were born a tax avoidance accountant and would be sitting in the field rotting if they couldn't find work avoiding taxes. Many would at least be regular accountants (efficiently allocating money is still more useful to all of us than efficiently avoiding taxes), or maybe some other sort of lawyer (your city's prosecutors AND your city's public defenders are both sorely overworked).
Yes and those few software devs who work in the accounting sector on facilitating tax evasion aren't exactly changing the world for the better. Not exactly the best use of their skills.
Tax avoidance is a legal problem instead of a tech problem, but it has many parallels wherever there are bad incentives. These are fundamentally not pro-social activities, but trying to get an unfair advantage through loopholes.
More computer programmers might moonlight as SEO gurus, if search engines didn't put up at least a token amount of resistance against scummy low-effort SEO tactics.
Fewer tax avoidance accountants would still be tax avoidance accountants, if we made a bigger effort to prevent it. (And that doesn't mean accountants would have to be programmers instead, there are many other kinds of talent)
Wow. I can't believe people believe this is still true in 2024.
I worked in crypto sector which paid really well in some cases... Though compensation had little to do with talent and more to do with focus on political bs and alignment with the needs of corrupt authorities. Some could argue there was an inverse correlation between talent and compensation as the most corrupt people are often that way because they lack talent to begin with.
I've observed similar dynamics in big tech corporations, unfortunately. People are promoted on the basis of their incompetence and capacity for self-delusion as it creates the necessary blind-spots which allow organizations to occasionally poke their toes beyond red lines to reap massive profits.
Stupidity and incompetence are useful attributes within corporations because they instill a feeling of insecurity in the minds of the affected employees and this makes them highly loyal and controllable. Sometimes I think one of the main reasons these companies hire actual intelligent people is to make the incompetent people feel insecure 'imposter syndrome' and increase their degree of loyalty/compliance. They don't actually need intelligent people to run things because they have monopolies and the big profits are to be reaped in maintaining their monopolies which is achieved via dirty politics; not achieved via innovation.
I think many intelligent people have observed this reality in companies they worked for. We've seen the HR manager who will bend over backwards to deny reality to align with the goals of management.
Interesting anecdotal response but it’s pretty obvious that top pay attracts top talent, basic market dynamics. Obviously grifters gravitate to where money is, that doesn’t mean all to talent at high pay is a grifter. Correlation != causation
Tax law is the highest paid field within law. High pay attracts smart people. Smart people could do something more beneficial to society with their time. (Source: I'm married to a tax lawyer)
I’d expect very little overlap between those talent pools.