Jeffrey Miron and Taxation

In his article Why Warren Buffett is wrong, Jeffrey Miron writes about tax policy. While he thankfully comes out against higher tax rates for super incomes, sadly he also says:

Most importantly, singling out the super-rich distracts from the real problem: the myriad policies that make no sense in the first place because they inhibit economic growth and that simultaneously redistribute from low-income households to the middle and upper classes.

The deductibility of home mortgage interest encourages excess investment in housing. High-income taxpayers get the benefits, since low-income taxpayers own little or no housing and do not itemize deductions in any case.

The favorable tax treatment of employer-paid health insurance generates overconsumption of health care and contributes to rising health care costs. The benefits go mainly to middle- and upper-income households, since those without jobs get no employer-provided benefits.

Numerous loopholes for favored industries in the corporate tax code distort the market’s investment decisions and reward the well-funded and politically connected.

I think Miron is wrong here. The real problem and distortion is the state itself and in this instance the power of taxation. Tax breaks make it easier for some people to escape from having more of their property confiscated and blown by the state. I think this is cause for some celebration.

The only way tax breaks should end is with the elimination of the tax. Until the tax is eliminated, there needs to be more tax breaks, such as for non-employer health insurance, renters, vehicle payments, childcare, gasoline, and beyond. Admittedly, all tax cuts aren’t equal and perhaps tax rate cuts are superior.

This reminded me of an anonymous comment I once came across over at EconomicPolicyJournal: Tax law with loopholes is like the Berlin wall with doors and windows.


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