The Politics of Loopholes: The Improbable Prospects for U.S. Tax Reform

by John F. Witte

Overview

What are the implications and likelihood of reform of the income tax system in the United States—specifically, the expansion and scope of the tax "expenditure" (loophole) system embedded in the income tax codes? This book details the tax system that now provides for more than 200 tax expenditures, highlighting the potential lost tax dollars.

Income tax policy and politics is an inherently complex and potentially confusing topic. This book makes the tax loophole system understandable for those without in-depth knowledge about taxes. It explains what our tax system looks like, why it is set up as it is, and what effects it has on raising revenue (and thus deficits) and the furtherance of other policy goals. Additionally, it explains why, despite popular and political desires, a significant overhaul of the tax system is very unlikely to be enacted: because tax expenditures (otherwise known as loopholes) benefit all Americans in some way and are supported as policy by both political parties.

Written by John F. Witte, an established expert in tax policy and policy analysis, the book provides a balanced viewpoint that discusses the implications of reform of the income tax system in the United States, demonstrates the range of individuals who are affected by various provisions, and identifies what effects loopholes have on policy goals. Readers will see how both political parties are responsible for the creation and expansion of various loopholes, understand why many of these provisions make sound policy sense, and grasp how the tax code is affected by political desires and policy goals.

Product Details

ISBN-13:	9781440843419
Publisher:	Bloomsbury Academic
Publication date:	11/21/2016
Pages:	216
Product dimensions:	6.14(w) x 9.21(h) x 0.56(d)

About the Author

John F. Witte, PhD, is founding dean at the School of Humanities and Social Sciences at Nazarbayev University in Astana, Kazakhstan.

Table of Contents

List of Tables and Figures ix

Preface xi

Acknowledgments xiii

1 Introduction 1

2 Tax Reform in Theory and Practice 29

3 A Brief Thematic History of the Income Tax 53

4 Tax Expenditures (Loopholes) 77

5 Tax Expenditures and Economic Behavior 97

6 Tax Expenditures for Human Resources and Income Support 121

7 Tax Expenditures for Intergovernmental Transactions and Special Groups 147

8 Using the Tax System for Nonrevenue Public Policies 163

Bibliography 183

Index 187

What People are Saying About This

Sheldon D. Pollack

"It has been more than 30 years since the historic Tax Reform Act of 1986 and, before that, the publication of John Witte's classic study of the politics of the federal income tax. Sadly, we aren't likely to see major tax reform again anytime soon; fortunately, we have a new book from Witte that explains why. Witte's important new study focuses on the rise of tax expenditures since TRA and concludes (correctly) that we will just have to live with them. Use of the tax code to implement public policies is too ingrained in our political system. But Witte offers practical advice to distinguish between those special tax provisions that are devices to implement broad national policies and those that are nothing more than disguised tax cuts for special interests. This makes for a highly enlightening guide for tax policymakers, scholars, and the general public."

Paul W. McCracken

"The Politics of Loopholes is a thoughtful and informative look at tax expenditures in the current U.S. income tax system—multi-billion-dollar features that many view as inequitable 'loopholes' but others see as crucial tax incentives. It connects the economics arguments about tax policy with the realpolitik of tax reform, along the way providing valuable historical context and clearly laying out the arguments for and against the most important examples of these tax breaks."

Joel Slemrod

"The Politics of Loopholes is a thoughtful and informative look at tax expenditures in the current U.S. income tax system—multi-billion-dollar features that many view as inequitable 'loopholes' but others see as crucial tax incentives. It connects the economics arguments about tax policy with the realpolitik of tax reform, along the way providing valuable historical context and clearly laying out the arguments for and against the most important examples of these tax breaks."

Eugene Steuerle

"John Witte has always been among the most perceptive and knowledgeable of tax scholars. Anyone interested in taxes should read this thorough examination of the history, politics, and possibility of tax reform."

Editorial Reviews

Witte presents a definitive examination of tax loopholes (technically, 'tax expenditures') and the dim prospects for the classical base-broadening and rate-reducing reform prescription. . . . Summing Up: Recommended. Upper-division undergraduates through professionals.” —Choice

From the Publisher