Congress hates itself (tax edition)

It’s so disheartening (but morbidly fun) to watch Congress complain about how poorly government works since, um, they are the government.  Part of the Republican discourse on taxes is that not enough people pay taxes, a point I agree with.  The problem, however, is that the vast majority of people pay federal income tax, but they receive more from the government and so receive a net transfer of wealth from the government.  (Caveat: everyone pays payroll taxes, so when pundits say that people pay no tax, they mean no federal income tax.  This is a very narrow definition of tax.)  In fact, around 75% of Americans pay federal income tax; more than a third of those paying an income tax, however, receive more from the government in terms of mortgage deduction, child credits, charitable deductions, etc. than they paid.

TaxVox has a lot more detail.  Their calculations suggest that 80% of income-earning Americans would pay federal income tax if all the loopholes and credits were closed.  For issues involving tax credits, the net effect could be zero if the government takes the new revenue and then spends it on child or mortgage (or other) subsidies.  Our government already pays this money as foregone income; ending these exceptions would remove inefficiencies in the tax system.

So Congress hates itself because it of course has enacted these complex tax loopholes and so shrunk the tax base.  Getting rid of these loopholes would drastically expand the tax base without having to affect policies (just spend the money instead of credit it), but the devil is that Congress actually likes this complexity because it lets it pursue social policy without looking like its pursuing social policy or spending money when of course it is doing both.

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