The Meaning of Tax Rate Increases Instead of Deduction Caps
11th December 2012
Tom Smith understands the dialectic.
The obvious explanation I think is to consider what tax deductions actually are. They are the very catalog of political influence in this country. The real estate industry, the non-profits, the long list of other deductions you can take: The tax code is the fine print of the social contract on which the fat belly of Leviathan comfortably rests. Those of us squished by its slimy blubber may breathe only with difficulty, but for the beast itself, it’s more like a soft mattress to which it has comfortably conformed, and vice versa. Any sort of tax reform, including deduction caps, which are incremental reform, partially wipes out part of these accumulated deals among State and special interest factions. So if you want to raise revenues for the State, and leave the tissue of these deals intact, it has to be by raising rates, not imposing caps, and the more funds you want to raise, the more important this is.
Rates declare how much of your earnings will be confiscated by the state; deductions are what the state, for political reasons (and favoring politically fashionable groups), will graciously allow you to keep.
Each deduction is a privilege, in the precise meaning of that term, written into the law to favor a particular special interest, and bearing the fingerprints of a political agenda or a corrupt political deal. They are the poster children of The Tax Code As Social Engineering, rather than serving (as the Founders intended) as a just system of allocating the cost of government.