Tax Lessons

• There is no such thing as a free lunch. Except in very special circumstances, cutting tax rates does not stimulate the economy to increase revenues.
• Taxes collected do not measure the social cost of government; spending is a much better metric. If the government cuts tax collections without restraining spending, all it’s done is put off the reckoning of who will bear the cost.
• Tax policy changes create winners and losers, both within and across generations. Talking about this is not class warfare.
• Taxes entail economic cost. They replace the incentive to work, save, and invest, and encourage taxpayers to engage in unproductive tax shelters. Centuries of experience proves that taxpayers do respond to those incentives, but there is considerable disagreement about how much they respond. Nonetheless, it is apparent that the all-in economic cost of a dollar of government services is significantly more than a dollar.
• If we value services the government provides more than their cost, we should grow up and tax ourselves to pay for them. If not, they should be eliminated.*
• A large and growing number of spending programs are now run through the tax system. Policymakers should apply the same scrutiny to those “tax expenditures” as to traditional spending. If they are not worth the cost. they should be eliminated.* And if they would work better as a traditional spending program, they should be removed from the tax code.
• The tax code could be made simpler and more efficient by eliminating preferences and loopholes, consolidating tax subsidies with similar aims (such as the vast array of education credits and deductions), and eliminating the ultra-complex AMT. This is easy for tax policy experts to say and hard for politicians to do (because those preferences and loopholes all have powerful constituencies).

Source: Taxes in America. What Everyone Needs to Know (2013) by Leonard E. Burman & Joel Slemrod.

A couple of article on taxes:

• Some Thoughts, Facts, and Charts about Taxes: Bring Us Back To 1913; Or Better Yet, Bring Us Back To 1912!
• The Real History of the American Income Tax

*Like that would happen. Taxes laws have too much power in them.