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Comments on deductions and a flat tax

In his post Flat Tax and Deductions, Michael Williams of the Master of None blog writes in support of a flat tax system with both the home mortgage interest deduction and the charitable donations deduction remaining.

I think his post shows somewhat of a lack of courage, because these are probably the two dumbest deductions that there are.

Home buying is something that people would do anyway even if the tax code didn't give it extra encouragement. This deduction unfairly discriminates against the renter (who is more likely to be younger, poorer, and single instead of married), who usually has valid reasons for prefering to rent instead of own.

And the charitable donations deduction is probably the most lied about deduction that there is. A lot of people just make up a bogus amount of money that they gave. Any deduction that so readily encourages cheating should most surely be eliminated.

The problem I have with the tax code is not that it's not flat, but that it has too many deductions and is too complicated. The multiple rates are only a very minor part of the complexity, and they don't encourage cheating or un-economic behavior like the deductions for home mortgage interest and charitable deductions.

Also, any talk of a flat tax must also consider the effect of FICA taxes where are an effective 14.2% tax on the poorest working Americans.

posted Tuesday, November 11, 2003