Tax season is here and that means a host of articles and columns about computerized tax packages, online filing, commercial tax preparers, and the like. What you won’t find is much about the way a sizeable number of taxpayers still prepare tax returns: on their own with pencil, pen, paper forms, and a printed edition of this year’s IRS instruction book. That’s right, in the digital age some folks are still doing taxes the old-fashion, pre-computer way.
What’s wrong with these people? Who are these Neanderthals? Yes, many of them cannot be described as “young.” Their ranks probably contain proportionally fewer facebookers, twitterers, and app addicts than do the ranks of electronic filers. But that does not mean they are computer illiterate. Indeed, some of them are actually pretty good on the keyboard and can click a mean mouse.
Familiarity is one explanation for staying with paper. When you’ve prepared taxes by hand for two, three, four or more decades, the task is not as formidable as it must appear to a newbie. No contesting the fact that the forms and instructions are humongous. But the humongousness didn’t suddenly appear. It’s been a creeping thing, a little more each year. If you were able to get over the hurdle ten or so years ago when the IRS made a major thing of having taxpayers do preliminary calculations on worksheets in the instruction book—for example, the Unrecaptured Section 1250 Gain Worksheet or the (and this one’s a killer) Schedule D Tax Worksheet—you’re probably hooked. You will be doing taxes by hand until the Grim Reaper calls or your children conclude you’ve become too addled for driving a car, feeding yourself, or keeping track of finances.
Another reason for the old-fashion approach is Black Box Fear. What is actually happening inside those computerized tax packages? Why do different packages come up with different, although usually close, bottom lines? Computers certainly have many beneficial aspects. But they have also given us cars that mysteriously accelerate or suddenly lose the ability to stop. And they have given us financial engineers who in turn gave the financial system a brutal knee to the groin. The financial system is still doubled over from that little gift.
So Black Box Fear keeps some taxpayers attached to those tangible forms and instructions. If a calculation produces something odd, at least an individual with a little—or maybe a lot of—patience can work his or her way back through the procedure and the numbers.
There are other reasons for doing taxes oneself. Cheapness—damned if I’m paying money to have my taxes done. Cantankerousness—think you’ve made it too tough for me, eh? Inquisitiveness—how complex has Congress and the IRS made things this year?
Whatever, the reason, a tax underground exists, an underground of cheap masochists fighting a rear-guard action against the advance of the digital age. Form 1040, prepare to meet thy master.
Thursday, March 25, 2010
Monday, March 08, 2010
TOYOTA, RUN-AMUCK FINANCE, AND THE COMPUTER
What do Toyota’s difficulties and the financial debacle of 2007-2009 have in common? Each is a negative consequence of the Information Age, more specifically of the computer. And each serves as a warning about what might lie ahead if humankind does not come to grips with the increasing complexity that the computer is foisting on the world.
The modern car has evolved into a very complicated computer system. Sensors, microprocessors, algorithms, as much as 100 million lines of computer code—this isn’t the mechanical machine of thirty or forty years ago, something maintained with just wrenches, pliers, and screwdrivers. No, the modern car is the province of computer and electrical engineers. And just as the case with other computer systems that have become fundamental to life in the 21st Century, a lot of things can go wrong, unexpected things difficult to isolate and identify.
Of course, simple physical problems are one explanation for the difficulties drivers have encountered with Toyota vehicles. Sticky pedals and interfering floor mats do not require an engineering or computer science degree to comprehend. But other explanations have been advanced. An article in The Washington Post on February 20, 2010, (“Suspicions Linger Over Acceleration in Camrys”) noted that one study found the portion of complaints to federal regulators about Toyotas and “speed control” tripled after electronic throttles were introduced in 2002. Electronic throttles are a form of computer system.
The same article highlighted a Camry owner’s manual that cautioned about two-way radio systems affecting the electronic throttle system. And it’s not just Toyota and Camrys. All modern cars are four-wheel mobile computers, some just more buggy than others.
And the connection between the computer and the run-amuck financial system? Can’t the financial difficulties that exploded on the world’s economies in 2007-2009, that in the United States produced the Great Recession, the worst economic downturn since the Great Depression of the 1930s, be explained in traditional economic boom-bust terms? Well, providing mortgages to unqualified borrowers certainly played a role. So did lax supervision, unfocused regulation, greed on Wall Street, greed on Main Street, accounting rules, maybe laissez faire government, maybe over-reaching government, probably some ideological hostility to government oversight in general, and much more.
But at a fundamental level were complex financial assets and strategies that few understood, weird financial insurance products with names like credit default swaps, and a new profession of financial engineering, all made possible by the computer.
Information is both the raw material and the product of the computer—kilobytes, megabytes, gigabytes, terabytes, petabytes and more of information. The ease with which information is now stored, manipulated, and created has been a special benefit to finance, a field that is all about information, information in the form of money. Ultimately, money is nothing more than information: information about supply and demand, information about wants and desires. So a tool—the computer—that produces an endless supply of information was married in the last quarter of the 20th Century to an industry—finance—that uses and, more importantly, creates a particular type of information, that type being money. The result was a money-producing phenomenon for which the world’s economic system, geared toward money as a scarce commodity, was not, and still is not, prepared.
Ponder these statistics. From 1945 to the early 1980s, the relationship between total financial assets in the United States and the nation’s Gross Domestic Product (GDP) was stable. For those years, financial assets ranged between 4 and 5 times GDP. Beginning in the early 1980s, the relationship changed. As a multiple of GDP, financial assets began to increase, reaching over 10 times GDP in 2007. Similarly, between 1945 and the early 1980s, total debt in the United States was fairly stable at approximately 1.5 times GDP. Over the next twenty-five years the multiple more than doubled. In 2007, total U.S. debt was 3.5 times GDP. Stated another way, since the early 1980s the increases in both financial assets and debt have outpaced the growth in GDP.
And the significance of the early 1980s? That is when the Information Age blossomed, when the computer became ubiquitous, when humankind entered a brave new world.
The computer is a powerful tool, perhaps the most powerful tool that has ever been invented. But it is a morally neutral tool. Just because the computer provides a way to do something—accelerate a car, securitize a mortgage—does not mean the result is wholly beneficial. Humankind’s problem is twofold: realizing that this most powerful tool has a negative side, and learning to control that negative side. The words of Albert Einstein in reaction to the first nuclear weapon come to mind: “Everything has changed, save the way we think.”
The modern car has evolved into a very complicated computer system. Sensors, microprocessors, algorithms, as much as 100 million lines of computer code—this isn’t the mechanical machine of thirty or forty years ago, something maintained with just wrenches, pliers, and screwdrivers. No, the modern car is the province of computer and electrical engineers. And just as the case with other computer systems that have become fundamental to life in the 21st Century, a lot of things can go wrong, unexpected things difficult to isolate and identify.
Of course, simple physical problems are one explanation for the difficulties drivers have encountered with Toyota vehicles. Sticky pedals and interfering floor mats do not require an engineering or computer science degree to comprehend. But other explanations have been advanced. An article in The Washington Post on February 20, 2010, (“Suspicions Linger Over Acceleration in Camrys”) noted that one study found the portion of complaints to federal regulators about Toyotas and “speed control” tripled after electronic throttles were introduced in 2002. Electronic throttles are a form of computer system.
The same article highlighted a Camry owner’s manual that cautioned about two-way radio systems affecting the electronic throttle system. And it’s not just Toyota and Camrys. All modern cars are four-wheel mobile computers, some just more buggy than others.
And the connection between the computer and the run-amuck financial system? Can’t the financial difficulties that exploded on the world’s economies in 2007-2009, that in the United States produced the Great Recession, the worst economic downturn since the Great Depression of the 1930s, be explained in traditional economic boom-bust terms? Well, providing mortgages to unqualified borrowers certainly played a role. So did lax supervision, unfocused regulation, greed on Wall Street, greed on Main Street, accounting rules, maybe laissez faire government, maybe over-reaching government, probably some ideological hostility to government oversight in general, and much more.
But at a fundamental level were complex financial assets and strategies that few understood, weird financial insurance products with names like credit default swaps, and a new profession of financial engineering, all made possible by the computer.
Information is both the raw material and the product of the computer—kilobytes, megabytes, gigabytes, terabytes, petabytes and more of information. The ease with which information is now stored, manipulated, and created has been a special benefit to finance, a field that is all about information, information in the form of money. Ultimately, money is nothing more than information: information about supply and demand, information about wants and desires. So a tool—the computer—that produces an endless supply of information was married in the last quarter of the 20th Century to an industry—finance—that uses and, more importantly, creates a particular type of information, that type being money. The result was a money-producing phenomenon for which the world’s economic system, geared toward money as a scarce commodity, was not, and still is not, prepared.
Ponder these statistics. From 1945 to the early 1980s, the relationship between total financial assets in the United States and the nation’s Gross Domestic Product (GDP) was stable. For those years, financial assets ranged between 4 and 5 times GDP. Beginning in the early 1980s, the relationship changed. As a multiple of GDP, financial assets began to increase, reaching over 10 times GDP in 2007. Similarly, between 1945 and the early 1980s, total debt in the United States was fairly stable at approximately 1.5 times GDP. Over the next twenty-five years the multiple more than doubled. In 2007, total U.S. debt was 3.5 times GDP. Stated another way, since the early 1980s the increases in both financial assets and debt have outpaced the growth in GDP.
And the significance of the early 1980s? That is when the Information Age blossomed, when the computer became ubiquitous, when humankind entered a brave new world.
The computer is a powerful tool, perhaps the most powerful tool that has ever been invented. But it is a morally neutral tool. Just because the computer provides a way to do something—accelerate a car, securitize a mortgage—does not mean the result is wholly beneficial. Humankind’s problem is twofold: realizing that this most powerful tool has a negative side, and learning to control that negative side. The words of Albert Einstein in reaction to the first nuclear weapon come to mind: “Everything has changed, save the way we think.”
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