Did you know that the mortgage deduction, while beneficial for individual homeowners, makes housing less affordable and available for everyone? This is just one example of the unintended consequences of tax policies that we must educate people about to achieve any sort of meaningful tax reform.
In a recent episode of the Earmark Podcast, Scott Hodge of the Tax Foundation highlighted three key attitudes that need to change:
Taxpayers must be willing to give up credits and deductions,
Corporations should not use their tax departments as profit centers, and
Politicians must recognize that the IRS and tax code are not the best vehicles for delivering benefits.
Scott shared a fascinating anecdote about a lecture he gave to a group of philanthropists. He asked if they would prefer a higher charitable deduction or a lower tax rate. The audience's struggle to decide illustrates the quandary regarding tax policy: prioritizing specific deductions or lower rates.
As Scott argued, the best approach is to have lower rates, a simple system, and the ability to keep more of our own money without being unduly influenced by the tax code. However, achieving this goal won't be easy, given the challenges we face in educating people about the true impact of tax policies.
If we want tax reform, it's crucial that we raise awareness about the unintended consequences of our current system and advocate for a simpler, more efficient approach that benefits everyone.
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