Income tax deductions

Income tax deduction, what a hell of a function
“Bastards of Young,” The Replacements

Even though income tax season has mercifully ended, I’m still fretting about it.  I’ve blogged frequently about much I detest the income tax.  But I’m not done railing about the wretched thing this year, so I’ll launch another vain tirade.

As if confiscating a big chunk of our wages weren’t offensive enough, we are also subjected to the government’s social engineering, carried out via so-called income tax “deductions.”  

The purpose of these deductions is to incent economic behavior.  The policy makers correctly reason that Americans will do just about anything to reduce the amount of their wages that they are required to hand over to a corrupt, irresponsible bureacracy, so they created rules that allow taxpayers to lessen their “taxable” income by the amount of certain specified transactions.  So, for example, gifts made to charity (provided the charity is properly certified under Section 501(c)(3) and gives an acceptable receipt) are “deductible.”  Presumably there are American citizens who give money to charity that they would otherwise keep for themselves, in order to avoid paying it to the government.  I don’t think I need to comment further on that one.

All such “deductions” are offensive and should be abolished, but the single most outrageous of them is the deduction for mortgage interest.   This incredibly moronic provision of the Tax Code incents mortgage debt.  Why on earth our nation would want to incent mortgage debt is beyond me.  If asked, the policy makers will respond that they want to incent home ownership.  But if that were their purpose, then why not make mortgage principal payments deductible, rather than mortgage interest payments?  Why not make the down payment deductible?  In other words, why not make the amounts paid to actually buy a home deductible, rather than amounts paid as interest to a mortgage lender?  Obviously what this idiotic provision actually does is promote debt.  And not just any debt, but debt of the worst kind: debt secured by a mortgage on one’s very home.  Because no other interest payments are deductible, Americans are being encouraged by their government to pay off every other interest-bearing debt before paying off their home loans.  Americans are encouraged to use home equity lines to buy anything they would otherwise finance.  And of course Americans are given discounted debt, provided they secure it with their homes.  A huge and influential industry profited from this nonsense, and the mortgage interest deduction is one of Washington’s most sacred cows.  Meanwhile, those who have no mortgage, either because they rent or because they prudently paid off their mortgage loans or never took one, must subsidize everyone else. 

This lunacy contributed greatly to the housing bubble, and therefore to the entire economic meltdown we are now experiencing.  It is a perfect example of government economic manipulation and social engineering, creating malinvestment and asset bubbles, and the recession that inevitably follows them.

The mortgage interest deduction is the most damaging of them, but none of the deductions make any sense.  Did you provide shelter to displaced Midwesterners (I still don’t even know what that means)? If so, you get a deduction.  Buy a solar powered hot water heater?  Deduction.  Give money to a government approved charity (and get a government-approved receipt?)?  Deduction.  The list goes on and on.

Did you prudently avoid paying any mortgage interest in 2009?  Do you believe charitable giving should be confidential and anonymous, and that its none of the government’s dang business how much you gave to charity, and to what charities you gave?  Do you prefer to make your economic decisions independently of whatever push or shove the IRS is giving?  Then pony up sucker.

The income tax is an abomination and it should be abolished.  But if that sweet dream can’t come true, how about at least abolishing the deductions and lowering the marginal rates?  Yeah, I know.  That too is a pipe dream.

Govco will not be denied.

Love Wins


2 comments on “Income tax deductions

  1. Ralph says:

    A well written and well thought out howl at the moon! I wish we could move in the direction you discuss, but the political class will never surrender their tools of control with a flat tax. Keep up the rant, though. Who knows who you’re educating – perhaps when they grow up and get to Congress they’ll remember the lessons.


  2. Joeywahoo says:

    I could support a flat tax. As long as the flat rate is ZERO.

    I object to the “deductions” more than to the so-called “progressive” marginal rates. Of course more than anything else I’d like to see the whole concept of taxing income abolished.

    Good to hear from you amigo.


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