Tax Reform Is Really Hard

A blog about business and economics.
March 26 2012 2:34 PM

Tax Reform Is Really Hard

1332786896622

I made the chart above based on data presented in Jane Gravelle's excellent Congressional Research Service report (PDF) on the idea of broadening the income tax base in order to allow for lower tax rates.

The main point I would make about this is that it should underscore exactly how hard tax reform is. This is often portrayed in DC as if it's primarily a political difficulty, like the problem is simply that politicians lack the gumption to take on the interests behind these tax breaks. But part of what we see here is that many of these really high-value tax breaks are integral elements of American social policy. Take the charitable deduction, for example. All governments in the developed world do a lot to subsidize things like universities and museums and other cultural institutions. In the United States, the availability of a tax deduction for charitable contributions is one of the main ways we do this. Rescinding the deduction and replacing it with more direct subsidy along European lines is a proposal that might make some sense (although I don't think I would favor it) but simply eliminating it in order to finance a tax cut would be an epochal change in education and cultural policy and not just a tax shift.

Advertisement

An even stronger version of this occurs with the health care tax deduction. Subsidizing employer-provided health insurance and then regulating it is not, in my view, a very smart way of providing health care insurance to people. But it is the way we've chosen to do it for the non-elderly non-poor population. To replace this way with some other way would be a great idea, to just eliminate it and replace it with nothing would be a disaster. The EITC and the Child Tax Credit are two of the main instruments of income redistribution in the United States. There's a case to be made for scrapping all of this stuff, but with the exception of the deduction for state and local income taxes I don't think you could do any of it without creating some kind of new replacement non-tax policy.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

History

The Self-Made Man

The story of America’s most pliable, pernicious, irrepressible myth.

The GOP Senate Candidate in Iowa Doesn’t Want Voters to Know Just How Conservative She Really Is

Does Your Child Have “Sluggish Cognitive Tempo”? Or Is That Just a Disorder Made Up to Scare You?

The Supreme Court, Throughout Its History, Has Been a Massive Disappointment

Why Indians in America Are Mad for India’s New Prime Minister

Damned Spot

Now Stare. Don’t Stop.

The perfect political wife’s loving gaze in campaign ads.

Building a Better Workplace

You Deserve a Pre-cation

The smartest job perk you’ve never heard of.

Rehtaeh Parsons Was the Most Famous Victim in Canada. Now, Journalists Can’t Even Say Her Name.

Parents, Get Your Teenage Daughters the IUD

The XX Factor
Sept. 30 2014 12:34 PM Parents, Get Your Teenage Daughters the IUD
Moneybox
Sept. 30 2014 12:04 PM John Hodgman on Why He Wore a Blue Dress to Impersonate Ayn Rand
  News & Politics
Jurisprudence
Sept. 30 2014 2:36 PM This Court Erred The Supreme Court has almost always sided with the wealthy, the privileged, and the powerful, a new book argues.
  Business
Building a Better Workplace
Sept. 30 2014 1:16 PM You Deserve a Pre-cation The smartest job perk you’ve never heard of.
  Life
Education
Sept. 30 2014 1:48 PM Thrashed Florida State’s new president is underqualified and mistrusted. But here’s how he can turn it around.
  Double X
The XX Factor
Sept. 30 2014 12:34 PM Parents, Get Your Teenage Daughters the IUD
  Slate Plus
Behind the Scenes
Sept. 30 2014 3:21 PM Meet Jordan Weissmann Five questions with Slate’s senior business and economics correspondent.
  Arts
Brow Beat
Sept. 30 2014 4:45 PM Steven Soderbergh Is Doing Some Next-Level Work on The Knick
  Technology
Future Tense
Sept. 30 2014 4:59 PM China’s Not the Problem With Carbon Emissions. We Are.
  Health & Science
Bad Astronomy
Sept. 30 2014 7:30 AM What Lurks Beneath the Methane Lakes of Titan?
  Sports
Sports Nut
Sept. 28 2014 8:30 PM NFL Players Die Young. Or Maybe They Live Long Lives. Why it’s so hard to pin down the effects of football on players’ lives.