If they’re only raising the taxes on cigarettes and not on all items then I’m not sure their motivation particularly matters. I’d still call that social policy.
Or how about if we just bring back the exemptions? Maybe raise them.
I’m not sure it’s useful to argue about the words.
Generally, looking at the federal income tax system, I wouldn’t put anything in there which is primarily intended to change behavior. I’d move that to the spending side of the ledger (with the exception of a couple potential Pigouvian taxes, which aren’t part of the income tax system).
The complexities I’d keep are not primarily intended to change behavior, but simply to make the system progressive, socially neutral, or “fair”.
Po-tay-to, Po-tah-to
If you make something cheaper, people will do more of it. This is Day 1 Econ 101 stuff.
I argued in another thread that we shouldn’t make it so that the cost of having a kid is negative. (And many were horrified.) But on the other hand, tax programs do make it cheaper. And I’m largely ok with that. Our birth rates are down and we need future generations. I think it’s ok to ask taxpayers to help out with the cost. It’s something that ultimately benefits everyone, including the childless among us.
Okay. If we got rid of all itemized deductions, would there be any difference between exemptions and higher standard deductions?
Again, I don’t think the motivations of the Congress Critters matter. I think the behaviors of society are what matters.
But to that end, I suspect the motives of the Congress Critters who put in the various programs for childcare expenses was probably to encourage more parents to work rather than stay home.
Is that a good thing? Reasonable people can disagree.
Well the QBID is the most obvious one.
I was referencing the fact that long term capital gains are taxed at a lower rate.
For two decades, if you combine AO & GoA, I’ve been advocating that businesses should be able to deduct dividends paid from their income and then the shareholders should be taxed on the dividends & capital gains as ordinary income. That way there’s no double taxation, but you’re not giving the wealthy a tax break by taxing their dividends & gains at a lower rate.
Sure. But if the question is “is this good public policy”, sometimes this change in behavior is desirable, sometimes not. Sometimes policy which is a net positive incents some negative behaviors. I think that when we are weighing a change in policy, it’s good to understand that sometimes the incentives are pros and sometimes they are cons. We should not assume that Congress considered every behavior change a positive when they passed the law.
Step-up in basis
Are you quoting my comment on inheritance? I don’t see the connection.
I was referencing all of the education deductions and credits. At the federal level there’s the American Opportunity Tax Credit, the Tuition & Fees Deduction and the Lifetime Learning Credit.
Agree about just lowering the cost of college directly.
We make subsidized student loans crazy easy to get and then give people a tax deduction for student loan interest.
I agree that I can list both pros and cons for encouraging parents to work. But, if that’s the goal, then the program should be on the spending side of the ledger, not the tax side.
And I just want to point out that my list was by no means intended to be exhaustive (it’s not). Just a smattering of the reasons that you pay more or less taxes than your neighbor who makes exactly the same income as you.
I suppose not, but I’m not sure I favor getting rid of all itemized deductions.
No, on small businesses.
I edited to make it clearer.
I agree with your comment on capital gains. My post was guessing that’s what you meant.
I didn’t infer the second part from your earlier post. I’m okay with dividends paid to US taxpayers being deductible on the corporations taxes. For other dividends, I’d want the corp withholding taxes at the max US rate before I’d allow them to deduct. Also, I’d want cap gains rate at the ordinary income rate.
I’d do this because I think it’s “fair” and “clear”, not for any incentives. But, I think it would incent paying profits out in the same year as earned, and that’s an okay result as well.
okay. That’s what I called the “TCJA pass-through deduction” in my response.
I’d get rid of it.
Ok, I wasn’t really looking to debate the merits of each listed tax incentive on its merits, even though you and I probably agree about more than we disagree. My point is that politicians use the tax code to reward or penalize various choices that we all make and/or attributes about ourselves and it’s not clear the extent to which they should be doing that.
Most of us are probably fine with some level of deduction / exemption / credit for children.
If they added a $20,000 tax for all credentialed actuaries, most of us would probably think that was unfair.
Somewhere in between exists a happy medium. In general I’d rather not reward or penalize a lot of behavior via the tax code.