[lmm]

Tax deductions shouldn't be incentives for random policy ideas, they should keep the tax system fair by taxing people on income that really is theirs to dispose of freely. The fact that people don't have any choice about whether to pay state or local taxes is precisely why they should be able to deduct them from their federal taxes.

[gruez]

>Tax deductions shouldn't be incentives for random policy ideas

Taxes are one of the main ways the government tries to influence behavior (eg. sin taxes, green energy incentives). What do you suggest should take their place? Or do you think that government shouldn't be in the business of influencing behavior entirely?

[lmm]

If the government wants to pay people money out of the general taxation fund to undertake certain behaviours, let it do so directly, where we can see it and account for it, rather than through deductions.

[cycomanic]

That's actually a very good point. Tax deductions in contrast to direct payments typically favor high income individuals over poorer people. At the same time for the government to get the greatest impact of your policy, which typically means influencing the behavior of the maximum amount of people. Again this would point to targeting the poor&middle class.

[sokoloff]

One of the largest* tax deductions comes from the paying of people’s wages for jobs. That’s a tax deduction where the economic benefit of the overall transaction goes much more to the wage recipient than to the entity taking the deduction.

It seems unreasonable for employers to not be able to deduct that amount and for the government to somehow pay them a fraction of what it costs to employ people.

* - I suspect it’s the largest overall, but didn’t have time to do the research to satisfy myself that it’s the single largest, but it’s clearly one of the largest.

[gruez]

> One of the largest* tax deductions comes from the paying of people’s wages for jobs. That’s a tax deduction where the economic benefit of the overall transaction goes much more to the wage recipient than to the entity taking the deduction.

To be fair it's not wages that are benefited specifically here, it's business expenses in general. If anything, wages are treated worse than other expenses (eg. buying a printer), because they're subject to payroll taxes. As for why expenses are deductible in the first place, that's done for a good reason as well. If you don't do that, you end up taxing x% for each step in the value chain, which would give huge tax benefits to conglomerates (which own the entire value chain) compared to small businesses.

[sokoloff]

I totally get that; I was pointing out that people often think "I arrange my finances properly and use deductions correctly/as-intended and all these other assholes are taking advantage of tax loopholes. (Things I use are proper deductions; things others use are disgusting loopholes.)"

[winstonewert]

Well, you do have a choice, you could move to a lower tax jurisdiction. Different jurisdictions provide different trade-offs in terms of the tax burdens and services rendered. You can move to a jurisdiction that provides your preferred trade-off.

Furthermore, there are lot of costs which you arguably can't avoid: food, medical, housing etc. Should you be able to deduct those off of your federal taxes as well since you can't really dispose of that income freely?

[lmm]

> Well, you do have a choice, you could move to a lower tax jurisdiction. Different jurisdictions provide different trade-offs in terms of the tax burdens and services rendered. You can move to a jurisdiction that provides your preferred trade-off.

If you take that attitude then that invalidates the original argument - in that case, surely it's just as reasonable for the federal government to incentivise local mutual support cooperatives (which is what high-tax jurisdictions ultimately are) as it is to incentivise 503cs.

> Furthermore, there are lot of costs which you arguably can't avoid: food, medical, housing etc. Should you be able to deduct those off of your federal taxes as well since you can't really dispose of that income freely?

Yes, absoutely! The fact that you can't do that unless you structure yourself as a business is one of the great injustices that leads to the rich paying a much lower real tax rate than the poor.