The most compelling argument for tax simplification is that it could potentially eliminate the shameless “hogs at the trough” lobbying by special interests for special tax breaks (and there are some lulus out there!) This is also why it will never pass.
Secondly, it would force the hundreds of thousands of accountants and tax attorneys to find something actually productive to do rather than figure out new ways to manipulate the tax code.
If we want more savings and productivity, then we should stop taxing these things and tax the things we want less of. Although President Clinton got creamed for proposing it, the best idea is a whopping Carbon Tax that would make cars and other energy gluttons pay some of their true costs of operation. BTW, did you know that present subsidies for automobiles are equivalent to a gasoline tax of between $5 and $9 PER GALLON?!
“The most compelling argument for tax simplification is that it could potentially eliminate the shameless “hogs at the trough” lobbying by special interests for special tax breaks (and there are some lulus out there!) This is also why it will never pass.”
I agree it will never pass, because the “special interests” include such large, NON-“fat cat”, groups as homeowners, who get the mortgage interest deduction. Up to a point, a house or condo owner can even deduct the interest on a home equity loan, so that their new projection television or vacation to Hawaii can become a tax deduction too. Ugh!
People love the idea of stripping “the rich” of their deductions, but when they are reminded that they’re getting deductions too, the tune suddenly changes. Remember that no person considers themselves to be in a “special interest” group; it’s always someone else!
I definitely have to agree with you that cars – and trucks even more so – should have to pay their fair share of the costs they generate. Americans scream like banshees at the prospect of $2/gallon gasoline, but even $3/gallon wouldn’t come close to covering the full cost of motor vehicle usage. But there are too many Americans who think driving everywhere with dirt-cheap fuel (and, measured in inflated dollars, gas is still pretty damn cheap) is a God-given or Constitutional right, and any sort of measure to tailor the taxes on driving to the costs of driving would be political suicide for whoever proposed it. Like I was saying above, not every “special interest” is a handful of rich guys in three-piece suits!
Whether or not the mortgage interest deduction goes away isn’t related to a flat tax per se. The mortgage interest deduction is related to what is defined as “income” for the purposes of whatever rate scheme we have in effect. In the one that we have now, interest income is taxable, and interest paid out is deductible*. Some tax schemes have been proposed where interest paid out is not deductible, but in those, interest earned is not taxed as income. I don’t believe that anyone has been foolish enough to propose a system where they don’t balance, because that would create a market where tax liability completely skews investment decisions, which you generally try to avoid.
Over the years, Congress has been whittling away at the relevance of the deduction by increasing the “standard deduction,” which everyone gets. Once the standard deduction is greater than someone’s mortgage interest deduction (plus the others), then the mortgage deduction doesn’t matter to him anymore.
Exception: interest paid on personal, consumer-type debt is not deductible. This is the government trying to discourage that kind of debt, not that it’s trying to encourage home ownership.