Why target “tax expenditures”?

(See September 20, 2011 post)

1. Because eliminating "tax expenditures" would make our tax system simpler, fairer, and more efficient, as explained in the comments of my original post.

2. Because there's no better way to fund health insurance vouchers.

Vouchers could be funded with a new tax, such as a national sales tax. But support for that would likely be low. Who wants to add another tax on top of the mess we have already?

The Affordable Care Act is funded by mandates and penalties and several new taxes, which are offset by tax breaks and subsidies. The complexity of the system undermines the confidence that people ought to have in it.

I think most people will feel that funding health insurance vouchers with income taxes is fair – if they feel that the income tax itself is fair. But they'll never think it's fair until we get rid of all those “tax expenditures” and the complexity and uncertainty that goes along with them.

My guess is that, individually, most people will be glad to give up the tax breaks that they are currently claiming on their own tax returns in order to have a simple income tax that is much easier to comply with, and to know that it is funding universal healthcare coverage.

Opposition to eliminating “tax expenditures” is more likely to come from people and groups who feel that their business or employment depends in some way on these provisions in the tax law. A lobbyist, for example, may not care about the tax breaks he would lose, but may be very concerned about losing his job if regular opportunities to influence tax legislation are eliminated.

We have a unique opportunity to achieve healthcare reform and tax reform at the same time. Universal healthcare coverage gives us a compelling reason to do tax reform. Both would be a great benefit to the country.