OpinionTrending Commentary

It’s Time To Switch From A Neiman Marcus Tax Code To A Walmart One

https://dailycaller.com/

Tax Day, April 15, is always a good day to reflect on the things we value. For example, what do you value more than money? Family? Faith? Country? How about time? After all, even for the fittest Americans, time on Earth is limited.

If our time is so precious, shouldn’t we do something about the federal tax code that costs Americans upwards of 6.5 billion hours to comply with and over $300 billion per year in lost productivity?

That’s time and money we will never see again.

Americans say they’ve had enough. They are telling pollsters that they think the tax code is too complicated and in need of reform. A new national survey released by the nonpartisan Tax Foundation found that 65 percent of U.S. taxpayers think the tax code is overly complex and even more of us—86 percent—think the federal tax code needs an overhaul.

I’m often asked, why is the tax code so complicated? To start with, there are roughly 220 tax deductions and credits in the code and nearly every one of those provisions was put there to incentivize us to conform to political priorities, not our own.

Simplifying the tax code would give us back our time and our ability to make our own choices about how we want to spend, save, or invest our own money.

A simpler tax code would also mean a smaller, less intrusive Internal Revenue Service. Over the decades, politicians have turned the IRS into a superagency, managing programs aimed at promoting housing, electric vehicles, health care, education, corporate welfare, and social services, just to name a few. Managing programs is not a skill set for a tax-collection agency.

Despite their desire for tax reform, many taxpayers fear giving up the credits and deductions they know for the prospects of a simpler tax code. But as I outline in my new book, Taxocracy: What You Don’t Know About Taxes and How They Rule Your Daily Life, many of the most popular credits and deductions don’t meet their stated goal or have serious unintended consequences.

In fact, tax subsidies can often make things less affordable rather than more affordable. For example, studies find the mortgage interest deduction gets capitalized into the price of homes, making homeownership less attainable. One study found the deduction “has no discernable impact on U.S. homeownership outcomes.”

The same goes for the tax credits for higher education costs. Universities often just pocket the amount of the credit by raising tuition prices or offer less financial aid, knowing the IRS is absorbing the cost. One academic study found that the American Opportunity Tax Credit, implemented during the Obama era, “generated very little change in college attendance or other college-related outcomes.”

Lawmakers’ efforts as venture capitalists have also been a failure. The dozens of tax subsidies for clean energy and electric vehicles in the Inflation Reduction Act have turned corporate tax departments into profit centers chasing tax breaks. Despite the advertising, purchasers of EVs don’t fully benefit from EV tax credits because automakers soak up the tax subsidies with higher prices in the same manner that universities soak up tuition tax credits with higher tuition costs.

See a pattern here?

Our current tax code is like shopping at Neiman Marcus during a 10-percent-off sale for select items. The discount gives us a false sense of savings, but we are really not getting a bargain. We should ditch the illusion of discounts and move toward a Walmart tax code with low taxes every day.

Scott Hodge is president emeritus of the Tax Foundation and the author of the new book, “Taxocracy: What You Don’t Know About Taxes and How They Rule Your Daily Life.”

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.

 

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