Wednesday, October 31, 2012

Barriers to Tax Reform

The New York Times ran an article yesterday titled “The Real Barrier to Tax Reform” written by Bruce Bartlett. I have no issue with Mr. Bartlett, although I rarely read The New York Times. Nonetheless, what caught my eye is the following table of “tax expenditures”:

These “expenditures” make it difficult to raise enough “revenues” to cover whatever the government’s spending binge of the moment is.
I can see how reasonable people may debate the tenth – accelerated depreciation – as an expenditure. Instead look at categories such as the 401(k), medical insurance and employer-provided pension plans.
 A couple of observations on this:
(1)   Since when are monies taken from us as taxes to be called “revenues?”
(2)   Since when are monies we keep to be called “expenditures?”
There is an odor of bad fish with the vocabulary. Apple has revenues, as they have something I want and am willing to pay for. The government - not so much. This damage to the language is itself a barrier to tax reform.
Oh, you may be wondering about “exclusion of net imputed rental income.” Here is the concept: if you rented out your home rather than lived in it, someone would pay you rent. The government would then tax you on your rent. So, by living in your home rather than renting it out, you are costing the government money.
You, dear homeowner-living-in-your-home, are an “expenditure.”
Bruce Bartlett "The Real Barrier to Tax Reform"

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