Legal Calculators and the Tax System

Legal calculators often embody a characteristic that can be termed “simplexity.” As we have theorized, simplexity occurs when the government presents clear and simple explanations of the law without highlighting its underlying complexity or reducing this complexity through formal legal changes. In earlier work, we have argued that some elements of IRS publications (plain language summaries of the law for the general public) present contested tax law as clear tax rules, add administrative gloss to the tax law, and fail to fully explain the tax law. In this Article, we show that simplexity also occurs when the government offers legal calculators to deliver guidance to taxpayers. For example, depending on the individual taxpayer’s circumstances, the Interactive Tax Assistant may deliver seemingly clear and simple answers to questions such as whether gambling losses are deductible, self-employment tax is owed, medical expenses are deductible, scholarships are taxable, education expenses are deductible, tip income is taxable and exceptions to penalties for early IRA retirement account distributions are triggered, among many others. We argue that legal calculators present the potential for even more pervasive and powerful forms of simplexity than static IRS publications. First, legal calculators are interactive: not only do they provide simplified statements of the law, but legal calculators also ask simplified questions about the underlying facts. At worst, this exacerbates simplexity’s “garbage in, garbage out” tendencies. Second, legal calculators deliver personalized, rather than general, answers to taxpayers’ specific questions. The tailored nature of these responses may further induce taxpayers’ reliance upon them. Last, legal calculators provide answers almost instantaneously, limiting taxpayers’ need to spend time absorbing and applying a written summary of the law. This may reduce the incentive for taxpayers to seek guidance from professional third-party advisors, enhancing the role of simplexity in tax compliance. The remainder of this Article proceeds as follows: Part II reviews the concept of simplexity and describes its occurrence in IRS publications. Part III explores the potential for simplexity in legal calculators provided by the IRS, focusing specifically on the Interactive Tax Assistant. Part IV describes questions for future research. Part V concludes