Washington Post: “U.S. Tax System Tilted Towards the Haves,” 10/11/10

The Washington Post (10/11/10) called for review of tax expenditures.  What is the difference between a “loophole” and a “tax expenditure”?  None, they are interchangeable.  The Washington Post calls for re-examination of the “tax expenditures” in the code, and they also cite that upper income earners benefit disproportionately from these loopholes.

But you cannot leave it to the politicians to decide on what remains a legitimate deduction.  As long as Congress has the power to make such decisions, there will be the usual trading going on.  That’s how pork is built into budgets.  And that is why we have had a faster growth rate in lobbyists than any other sector of the economy.  To end the jockeying for loophole favoritism in the code, you have to eliminate tax preferences altogether.

The only exceptions that should be made would be for needed incentives for an industrial policy, e.g., if the government wisely gets behind developing a home-grown solar industry to create economic growth and reduce dependency on oil imports.

The ideal implementation of a value added tax  would be a revenue-neutral substitution for the Corporate Income Tax.  No tax preferences with a broad base would result in a low percentage VAT and the elimination of all opportunity to lobby for loopholes.

What would happen to K-Street?  Who would take Congressmen to lunch?