Why Congress Does Not Simplify the Tax Code

The problem is that there are two competing goals for the tax code. The first goal for the tax code is to raise revenue to operate the government. The second goal is to influence the behavior of citizens. This goes back to one of the first major taxes in the United States, a tax on whiskey Whiskey Rebellion . Alexander Hamilton felt the tax was a way to raise revenue from the unseemly behavior of drinking whiskey.

Congress is reticent to give up any power or control over the people. That is why people get a tax deduction for doing one behavior and a tax penalty for doing another. These objectives sometimes fight each other. For example, you get a deduction for installing alternative energy like solar or wind power only to find another government agency charges a “grid fee” for not using as much electricity from the utility company.

Those that see the tax code solely as a means of raising revenue want the code to be as simple as possible. This makes taxes easy to collect and makes cheating on taxes more difficult.

Those who want to accomplish various other goals with the tax code, such “redistribution of wealth,” “social justice,” “supporting clean energy,” “making home ownership affordable,” “supporting working families,” “making US companies more competitive,” or whatever goal, need a complicated tax code to accomplish those goals. Of course, there are also the more unsavory goals, such as rewarding constituents and campaign donors through tax code changes.