Why so much of the U.S. tax code is social policy

One of the rallying cries for tax overhaul is the need to simplify, simplify, simplify. Supporters of simplification say it should be easier for taxpayers to pay their taxes, calculate their taxes and understand the logic behind the calculation.

But tax simplification is not just about clarifying obscure and overwritten language. And it’s not just about closing the loopholes. Tax simplification, at its heart, requires rethinking some of our shared values ​​and the way our government tries to push us to act. Because we demand more from our tax code than just raising money for the government.

“We’re asking our tax code to be an anti-poverty program,” said Daniel Hemel, a law professor at the University of Chicago, “we’re asking our tax code to be a housing program; we call for our tax code to be the primary means of funding health care in the country. We ask our tax code to push us to be better people: give more to charity, save more for retirement, spend more on education. “We pretty much ask our tax code for everything,” Hemel said.

No wonder our taxes are complicated. And all the tax credits, tax deductions, tax advantages?

“What they represent are expenses,” said Adam Chodorow, a professor at Arizona State University School of Law. “It’s actually disguised spending.”

Spend, because tax breaks cost the government money. The deductions for me or you or Warren Buffet or Amazon are all lost revenue for the federal government.

“In the tax area, we call them tax expenditures,” Chodorow explained. And these tax expenditures add up. There is currently about $1.5 trillion in federal spending through the tax code.

So why are politicians on both sides pushing social policy and behavior through taxes instead of just executing programs through the budget?

Well, for starters, it sounds better.

Imagine if the government wanted to encourage people to buy fuel efficient cars.

“We could send them checks. But that’s spending money,” Chodorow said. Instead, they could be promised a tax credit, and magically a spending program turned into a tax cut.

There is another reason why politicians prefer tax code spending to spending through the budget.

“He doesn’t come back every year for review,” explained Joseph Henchman, executive vice president of the Tax Foundation. “Tax credits and tax deductions, once written into the tax code, are automatic, unlike expenses, which must be reviewed periodically.”

Behind closed doors. Out of mind. Once a social program is in the tax code, it’s really hard to get it out. It is partly for this reason that meaningful tax simplification is so difficult.

“When you start talking about changing these tax expenditures, changing the provisions of the code, it becomes public again,” said Emory University law professor Dorothy Brown. If you take away that tax break that you sold before, it looks like a tax increase. “Everyone comes out of the woodwork and says this is the worst thing possible,” Brown said.

A significant simplification of the tax code, as the GOP promises, is not squeezing a deposit on a postcard. Tax breaks and the values ​​behind them will need to be discussed. And it will require a big change in the way both parties do business.


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