Constantly Changing Tax Laws

Have you ever noticed that our tax laws are constantly changing? (and I do mean constantly). When was the last time a tax form had the same lines on it two years in a row? Hint: stop trying to remember.

Do you think it’s because our lawmakers have a strong desire to fine tune the system so it will be as fair and equitable as possible for everyone? Do you think it's because some things are not working quite right and need fixing? If either of these were true, our tax code would be perfect by now with all the “improvements” our governing bodies are making. Why can’t the tax system just get established once and for all and be left alone (with maybe an update now and then for inflation)? Can you imagine if a retail store changed its pricing policies the way are tax system changes? One month you’d get a discount for shopping on Tuesdays between 10 and 2, and the next month you’d get a credit for buying a solar powered flashlight – if bought on a Wednesday and only if paid in cash using bills no larger than $5. Why does it have to be so complicated?

Maybe there’s an ulterior motive in the tax system. Steady now - I’m not suggesting there is a conspiracy or that we are being taken as fools. What I am suggesting is that our tax laws are more than just tax laws. Our tax laws are a huge carrot and stick that pulls us - like a magnet - right into the socially acceptable agenda of the day. The carrot / magnet is the money we save by voluntarily maximizing our tax benefits. For example:

1. Buy a home - get a deduction for interest and taxes. (no deduction for rent)
2. Go to college - get a credit for tuition and a deduction for student loan interest
3. Buy a hybrid car or add solar panels to your house – get a large tax credit

The list could go on for pages. The point you see, is that the leadership’s view of what will help America’s future is written right into the tax code. Sure, the legislators could write other kinds of laws to shape social policy but we all know that nothing works faster than an economic incentive. Besides that, the Constitution protects us from forced actions and violations of our civil rights. So, why not make the actions voluntary by giving a little tax reward to those who are socially compliant. Brilliant!

Hmmm….maybe even more can be accomplished by adding super-incentives to the tax code. More on that next time.

By Norman LeBlanc, CPA
Tax Services Group

Labels: KLR, LeBlanc, Tax, Tax Credit