If It Weren’t Hard Anybody Could Do It

The editors of the Wall Street Journal cite an example of why tax reform is so hard. Every deduction and even the rates themselves has a constituency who depend on them for their incomes and who will fight to defend them.

One goal of the GOP framework is to simplify the tax code by eliminating preferences that distort economic behavior. Most itemized deductions other than mortgage interest and charitable contributions would be nixed. But the individual standard deduction would increase to $12,000 from $6,350 ($24,000 for married couples) to reduce taxes for most Americans.

The Realtors are upset because they say this middle-class tax cut would make fewer taxpayers use the mortgage-interest deduction. The National Association of Realtors trashed the framework in a statement, saying it “would all but nullify the incentive to purchase a home for most, amounting to a de facto tax increase” and ensure “that only the top 5 percent of Americans have the opportunity to benefit from the mortgage interest deduction.”

That reminds me of a complaint some years ago by a member of the Illinois Tollway Authority that if Illinois’s tolls were to be eliminated we couldn’t use I-PASS (automatic toll payment). The reality of toll roads in Illinois is that we can’t eliminate toll roads because we need the revenue to pay the pensions of retired Tollway Authority employees. The snake devouring itself.

2 comments… add one
  • walt moffett Link

    And lets not forget the horde of tax advisors, attorneys, lobbyists, tax prep agencies, etc that thrive on a complicated, obtuse tax system.

  • Guarneri Link

    “Most itemized deductions other than mortgage interest and charitable contributions would be nixed.”

    I haven’t had interest deductible mortgage expenditures in many years, but so many do. You can see an argument for a transition period to avoid near term disruption to household finances. The same might apply for other provisions. But I’m thinking no more than, say, 3 years.

    Given the actual incidence of income taxes on only about half of earners, I wonder if Walt isn’t closest to the truth, it’s the politicians and advisors who oppose elimination of deductions…………and their very reason to be.

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