President Bush’s Advisory Panel on Federal Tax Reform has concluded that Americans have too many deductions and tax credits available to them.
“It wasn’t until we really had the opportunity to listen to so many different people talk about so many different aspects of the code that it really sunk in about how much and how often the code is being used these days to either create incentives or disincentives for either investment or behavior,” the commission’s chairman, Connie Mack said in an interview with the Associated Press (AP).
The 1990’s saw the beginning of the current proliferation of tax breaks according to Eugene Steurle, co-director of the Urban-Brookings Tax Policy Center and a former Treasury Department official. They grew out of lawmakers’ desire to brand their tax breaks while also making more government appear like less government to taxpayers. The result is a tax code filled with every size of deduction and tax credit many of which overlap and are accompanied by pages of instructions. According to the AP, tax breaks amount to billions of dollars.
Some critics point out that no one tracks the effectiveness of tax breaks in encouraging or discouraging behavior among taxpayers. Others point to limitations on tax breaks making them available only to wealthy taxpayers.
Former Internal Revenue Service commissioner, Fred Goldberg Jr. told the commission: “[I]t is worth noting that the deductions are of little or no benefit to the 40 percent of taxpayers who don’t owe taxes.”
Even then it is unlikely that taxpayers will be willing to give up some tax breaks as part of an effort to simplify the system. There are even some tax breaks the President is not willing to do away with, especially those promoting home ownership and charitable giving.
“Anytime you’ve got a benefit, wherever it happens to be, whether it’s spending or taxes, people don’t want to give them up,” Connie Mack told the AP.
The panel plans to present its recommendations for simplifying and improving the fariness of the system this summer.
“We have lost sight of the fact that the fundamental purpose of our tax system is to raise revenues to fund government,” the panel stated.