Towards an Understanding of Tax Complexity

Abstract

The study of tax complexity has reached consensus on two things. First, complexity pervades the U.S. tax system. And second, it is not
always clear what tax complexity means. Indeed, it is common practice for tax complexity scholarship to note the absence of a universal tax complexity definition and then conduct its inquiry without one. A universal definition of tax complexity has proven elusive because tax complexity means many different (although often related) things. This has made the tax policy analysis of complexity challenging. As an alternative to a definition, this Article proposes a framework with four elements for considering tax complexity—(1) an activity, (2) something that changes the ease with which that activity may be understood, (3) an effect on the person trying to understand that activity and (4) additional structure isolating the key tradeoffs and identifying what normative inputs are necessary to compare policy options. This Article demonstrates how much (if not all) of the tax complexity literature fits into this framework and how this framework may improve tax policy analysis. Ultimately, this framework facilitates clearer discussions of tax complexity and comparisons between tax systems in complex environments.