Wednesday, November 23, 2005

Why I Don't Itemize

I was having a discussion with a student the other evening and he asked me if I itemized deductions on my tax returns. I said I didn’t, because I “don’t believe in them”. He asked me why, and I was at a loss to really explain it very well on the spot, so I’ll try and justify it here (and he’ll never see it. Very effective.).

Basically, I see the vast majority of deductions as an example of upper class welfare. They are discriminatory, creating many instances of horizontal inequality (i.e. if you rent a home vs. if you own it). Economically, they are distortionary, contribute to a loss of privacy for citizens. Itimized deductions greatly complicate the tax code, which as it stands right now is over 55,000 pages long –excessive by any reasonable standard. The biggest “moral” problem with them is that they are essentially coercive social engineering using the tax code as a mechanism. I really don’t like carrots being held out in front of me in order to reward certain behavior. I make charitable donations because I think it’s important and I support the cause, not because I’ll get a tax break because of it. I also don’t really make a great deal of money and I’d be surprised if I could write off enough to make the costs of extra time in preparing my tax return (which is tedious enough) for the financial reward I’d get. So maybe the high-minded ideas I mentioned before are bunk, and it really comes to a cost-benefit analysis.

Now, you may ask, “But don’t you hate paying taxes and think that you should want to pay as little tax as possible in order to (hopefully) force the government to reign in spending?” Well, yeah. But I’m really lazy, too.


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