But think of this: Our government has racked up over $20 trillion of debts. If the need for revenue is reduced, the amount of taxes paid also could be reduced. Therefore, does it not make sense to spend wisely and prudently? To discourage cheating or fraud? To use the tax code as a means for collecting revenue rather than as a tool for directing behavior, punishing something we don’t like or rewarding something we do? The key to fairness in the tax code is that it should be neutral, in the sense that it treats everyone and everything alike. Tax breaks or favors for this or that group or function may be good for those special interests, but may be harmful to the general interest.
BY JOHN SHAFFER President Trump has released some details of his tax reform plan, and there is something in it for everyone to like – and to dislike. But let's not bog down in the minutiae of the plan, or issue hysterical warnings about how it will destroy someone’s fortune or business or pet project. Instead let’s start at what a tax system should be. Obviously, the purpose of a tax should be to raise revenue so the government can do the tasks set before it. Well, there’s our first problem – because there is a huge disagreement over what the government’s business properly should be; and beyond that, there is disagreement over how much money government should spend on any of that proper business. To the "big government" people any reduction in spending is seen as “cutting to the bone.” Furthermore, any tax cut is perceived as a “tax cut for the wealthy.” The small government people may favor cuts for the sake of cuts rather than for efficiency or fairness. The progressive left will never get behind a movement to reduce the cost of government (except for military spending), nor will they support tax cuts. But think of this: Our government has racked up over $20 trillion of debts. If the need for revenue is reduced, the amount of taxes paid also could be reduced. Therefore, does it not make sense to spend wisely and prudently? To discourage cheating or fraud? To use the tax code as a means for collecting revenue rather than as a tool for directing behavior, punishing something we don’t like or rewarding something we do? The key to fairness in the tax code is that it should be neutral, in the sense that it treats everyone and everything alike. Tax breaks or favors for this or that group or function may be good for those special interests, but may be harmful to the general interest. All this long introduction leads us to these basic points: The simpler a tax system is, the less costly it is to comply with it. The less money government spends, the less money it needs to collect. The more prudent and frugal government is, the less revenue it requires. The fewer favors, breaks and loopholes a tax system has, the fairer it is for everyone. The less favoritism government bestows on any given interest (through subsidies, tax breaks, favorable treatment or special considerations), the fairer the system will be. Rather than the mere dollars allegedly raised or saved through anyone’s tax plan, or the potential positive or negative effects a plan may have on this group or another one, let’s look instead at the plan from the perspective of the points listed above. That will tell us if it “promotes the general welfare,” as the Constitution ordains, or instead rewards someone’s friends or punishes his enemies. Let’s use the tax code for what the Constitution says it should do.
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