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Much of the complexity of the tax code appears to be related to tax expenditures embedded in the tax code. "The Congressional Budget and Impoundment Act of 1974 (CBA) defines tax expenditures as "those revenue losses attributable to provisions of the Federal tax laws which allow a special credit, a preferential rate of tax, or a deferral of tax liability" (Surrey 1985)." Reference: Wikipedia: Tax expenditure.
Many have observed that tax expenditures do not receive the same level of review and approval as do appropriations. Consequently, many appear to be "below the radar".
The continuation of this post discusses an idea to treat tax incentives as tax credits to be applied to the tax due from baseline, or universal, taxes. The tax expenditures could then be more easily be subject to annual appropriations review, and publication of the cost of each line item in tax expenditures. Of course, the number and amount of tax expenditures should be greatly reduced.
Don Nordeen
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Continue reading Treat Tax Expenditures Differently.
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