Monday, December 17, 2012
Sooner or later the American tax code will be reformed. Probably sooner. Raising revenue will be the main motivation, but at a time of sharply increasing economic polarisation issues of fairness will be prominent too. There are also legitimate concerns about the complexity of current tax rules and their adverse effects on the economy.
So far, the debate has focused on scaling back provisions of the tax code that have favoured activities traditionally deemed to be valuable. For example, there is talk of reducing reliefs for charitable contributions, taxes paid to state and local governments, home mortgages, employer-provided health insurance and many less important provisions. There are reasonable arguments to be made in each case. But taking only the “limit tax incentives” approach to tax reform has several major defects. ...
It has been observed that the greatest scandals are not the illegal things that people do but the things that are fully legal. This is surely true with respect to a tax code in urgent need of reform.
(Hat Tip: Philip Hackney.)