In a recent Wall Street Journal report, there are currently over a TRILLION dollars in tax breaks. At first glance, such revenue not collected by the government seems like a great potential source of funds to balance the budget (or rather a small portion of it). However, collecting such money altogether would directly hurt the poor, employers, or simply shift the burden from existing community efforts to federal programs.
Let’s face it — people (mostly those who don’t get them) have wildly false notions about what tax breaks really are. This makes it a rhetorical point for campaign propaganda and class warfare, the arguments of which are founded in evoking derision and division rather than reality.
Tax breaks are very specific things, such as a [[tax exemption]], [[tax deduction]], or [[tax credit]]. They are not subsidies or figurative “breaks” given out to certain people or groups of people, such as the rich. Exemptions occur based on LOW income, dependants, and the number of people in one’s household, but no one gets a tax break for making too much money, and only fail to pay into unemployment or social security at such time it is obvious there will never be a draw from it. And no, contrary to common urban-legend-style sloganizing, there is no tax break for outsourcing (a purposeful misunderstanding of the standard expense deductions of moving business operations and a loophole about overseas taxation rules) *.
So what are these tax breaks then? According to the article, the two greatest categories of breaks make up almost a third of the pie: employer-provided health insurance and employer-provided pensions. In other words, forms of worker compensation, one of the most basic and legitimate business expenses.
Health insurance may become mandatory soon, and apart from forcing less hiring by many businesses, takes away the burden of the taxpayer for publicly funded or assisted insurance. So basically if we took away the deduction, we would be taxing the money that would otherwise by paid by the taxpayer to begin with.
This is similar to charitable deductions. Charities, in theory and I argue in practice more often than not, serve a purpose and benefit to society that otherwise the government would be expected to cover. Much more than the tax that would be paid from any donation amount goes voluntarily toward addressing the same issues of need, medical research, the arts, and other areas where public funds are extracted and doled out by countless earmarks and laws. But these days, people seem to think that government should be handling everything, and so see charities in general as parasitic competition in an area of control that has bought many a vote since the Great Depression.
And if the government was evaluated as a charity, what would be the comparable administrative costs? That would make for a good article I may write someday.
But all other things being equal — meaning that the government funds might do as much good as that of business expenses for employees and tithes for social works in general — the question is if we want to foster independent businesses and community efforts or establish wholesale national housekeeping. Some argue economy of scale favors governmentally mandated social justice and even a command economy, and yet anyone who saw the [[Berlin Wall]] fall ought to know how that turns out. Between bureaucratic drag and oligarchic direction (even in so-called democracies), the little that gets done does not faithfully serve its intended purpose. Nearly all social programs from the Great Depression were strictly intended to be limited, short-term solutions and yet each and every promise was broken, even with regards to the scope and fund use of [[Social Security]].
Frankly, this is not about fairness, but power. Many tax breaks recognize the actions of individual and businesses so as to not unduly burden them in areas they unarguably benefit society. But tax breaks can also be forms of manipulation, encouraging by incentive such practices as “green activities” and specific hiring choices to the point the line is crossed into subsidy. The result of such things may be positive in a limited context, but the whole gestalt is flawed, contradicting the natural reasoning for deductions and replacing it with a political agenda.
We are surrounded by people who think deductions and other breaks are debts not collected and forgiven rather than a way to calculate money never rightfully owed at all. These people are likely the ones who thank the government for their tax refund, forgetting that it was their (overpaid) money to begin with!
Therefore the danger of targeting “tax breaks” as a source of revenue, instead of addressing those incentives politically motivated, is that people are too easily led to believe the debate is about “paying their fair share”. And if they get what they want, all of us will suffer not only harm to the economy, but to the freedom of it as well.
* {Addendum: For further research on this particular “tax break” misnomer as opposed to longstanding general tax code, I recommend any number of artilces by FactCheck or Politifact. All research I can find points to the conclusion that the benefits of outsourcing are no different than incentives to move between states, use automation, or simply invest overseas with ot without moving jobs. That makes any statements about the existence of tax breaks for moving jobs overseas misinformed or just plain dishonest.}