Steve Malanga has written an excellent article summarizing the use of the Tax Code by our politicians. Some of the salient points are covered in the following excerpt...or you can read the entire article here. The Hedge Tax has a number of features. One of them is the idea that everybody (including corporations) gets one deduction. And there are no tax credits. The corruption of our tax code would end.
"Why does the U.S. continue to...make our code ever more complex? Because it is through deductions and credits that legislators manipulate the system. When you hear a politician touting a cause these days--whether it is making us more energy efficient, getting more kids to go to college, expanding educational opportunities in inner cities, or increasing home ownership--you can assume he intends to pursue his cause at least in part through changes in our tax code.
Credits and deductions are also a way for office holders to pay back the always-growing number of rent-seekers in Washington, from lobbyists to advocacy groups, by crafting adjustments in the tax code favorable to their industry or constituency. That’s one reason for the 3,125 changes in the tax code since 2001, an average of more than one a day. Imagine what a loss most politicians would be at on the campaign trail or in K Street meetings with lobbyists if we had a tax code that didn’t permit deductions and credits.
It’s only going to get worse in the near-term. The first Obama budget makes a series of adjustments to the code that the administration claims will make our system fairer, but at the price of even more complexity. Nothing is more illustrative of the problem than Obama’s proposal to reduce the value of the deduction for charitable contributions made by those in the top tax bracket, whom the administration argues benefit disproportionately from their giving. To do this the government must add yet another calculation to the process of determining a tax bill which treats charitable donations at a different rate from a filer’s other deductions. If something as benign as charitable donations get this treatment, you can be sure that many other deductions will soon be similarly indexed. The potential for slicing and dicing the system when you think this way is never ending, so that soon every deduction may have its own rate schedule.
Ironically, this approach makes the tax system more inequitable, not less. That’s because the cost of increasing complexity falls heaviest on the lowest-income filers. A 2001 study by the Tax Foundation estimated that individuals who earn under $20,000 annually spend the largest percentage of their income on preparation and compliance of any group—an average of 4% at the time of the study."
