One of the more interesting reports I've seen lately is an item in this Sunday's Washington Posts by Lori Montgomery, analyzing where most so-called "tax expenditures" (i.e., special tax breaks) go, and who benefits.
The surprising conclusion is that giveaways to corporations are a relatively minor part of the whole picture; the data suggest that in fact it's households, the so-called "middle class," that gets the most breaks, so many in fact that the Treasury barely breaks even -- what comes in in revenue goes back out, but to different people.
The report reveals the bankruptcy of the idea of legislating -- be it social policy, economic benefits, or someone's idea of what's good for us, like "home ownership" -- by means of tax breaks. Ideally, taxation should be "pure," i.e., strictly determined by what is needed for essential government services, based on objective criteria such as income, or the use of a certain service.
As soon as we begin to try to engineer society through tax policy, we distort the balancing that would in most cases occur naturally otherwise. How many people have been lured into buying houses they couldn't really afford by propaganda that "home ownership" is in itself a desirable goal for everyone? Why should government be in the business of shaping family size by offering more deductions without limit for additional children?
Unfortunately, "tax expenditures" are an easy route for politicians -- they don't appear to increase taxes, so there is seldom a tough political fight over them, and everybody likes to think they get a benefit that others don't. It's easy! Until the bill comes due.
The other lesson here is the difficulty of the task ahead, if we're going to restructure our Rube Goldberg government fiscal system into something more sensible.
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