Too Many Tax Breaks? Commission Says: Yes!

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.


Already a member? log in here.

Editor's Choice

Upcoming CPE Webinars

Nov 24This webcast presents basic principles of revenue recognition, including new ASU 2014-09 for the contract method. Also, CPAs in industries who want a refresher on revenue accounting standards will benefit.
Dec 3The materials discuss the concepts and principles in the AICPA’s new special purpose framework.
Dec 9A key component to improving your firm’s workflow efficiency while enhancing your profitability at the same time is how you leverage emerging technologies.
Dec 9Kristen Rampe will cover how to diffuse the tension in challenging situations in this one-hour webinar.