Tuesday, July 5, 2011

Eternal Tax Code Arguments - Abolish the IRS!

Today I received the following E-mail from a friend:

Democrats have criticized Republicans for defending tax breaks that benefit corporate jets, yachts, races horses and other luxury items. Those breaks have a minimal impact on the budget but have high symbolic value.

Republicans said that closing those tax breaks would hurt businesses and the economic recovery.


Those yachts, corporate jets and race horses are really the engine of a lot of job growth, right?  

It is clear that the tax code chooses winners and losers.  It puts incentives for oil drilling, for solar panels, for people to buy houses, for students to get college degrees.  All of this was intended with something good in mind (I will ignore any cynical views).  Oil drilling because energy is vital to the country, solar panels because energy independence is a good goal, houses are good for people to own as investments and stakeholders, degrees create a smarter workforce.

We have seen what the tax code created: distortion.  Oil tax incentives have perhaps made oil slightly cheaper than it should be with some detrimental effect to competing energy sources.  Huge tax breaks for installing solar panels create the illusion of solving energy problems based on future economic hopes.  Housing policy including the tax code allowing interest deduction contributed the Great Recession.  Government subsidized and guaranteed student loans are still driving up the college cost bubble (and yes this bubble will burst as well so be prepared!).

What is then a fair tax?  A national sales tax which does not choose winners and losers.  Check out www.fairtax.org (I have NO affiliation with this site).

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