Books like Why Nations Fail make clear that many a third-world country stays poor not because its government is having difficulty thinking up policies that would help it get richer, but because the government's members or supporters would be inconvenienced if those policies were carried out. The Harvard Business School asks companies why they prefer not to create jobs in the USA, and finds that the complexity of the tax code is an important factor (see figure 14 on page 19). So why is the tax code so complex in the USA? Wouldn't it be convenient for everyone, not just companies, if it were radically simplified?
Well, nearly everyone. But it's hard to shake companies or people down for campaign contributions by threatening to take away their tax breaks, if they don't have any tax breaks for you to take away. So now we know who is inconvenienced.
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