Facebook
Twitter

The Social Engineering Trap

From Kevin Williamson at National Review, A Conservative Tax Hike

The federal government uses the tax code for all sorts of social-engineering purposes: to encourage and subsidize investment in manufacturing or green-energy businesses, to reward charitable giving, to encourage home-ownership. The federal government is not very good at social engineering: Its efforts to help low-income Americans with bad credit borrow money to buy houses they could not afford was a significant contributor to the subprime meltdown and financial crisis of 2008–2009. Encouraging home ownership through subsidizing mortgage interest (which is what that deduction actually does) can encourage the wrong kind — the low-equity, high-interest kind — of homeownership. Likewise, offsetting state income taxes encourages states to jack up their levies: Because some costs are passed on to the federal treasury, Sacramento can get $1 in state income-tax revenue at a real cost to California taxpayers of less than $1.

The federal government really should not use the tax code to encourage or discourage any kind of behavior. It should use the tax code to raise the money necessary for the operation of the federal government in a way that minimizes economic damage and market distortion.

print

Category: Economics, Taxes

Tagged: ,

Recent Comments