The tax code is so hideously complex that even the IRS is complaining about it.But President Obama says he's all for simplifying the tax code, right?
Unfortunately, Obama is pushing the code in the opposite direction. Not only has he managed to get rates increased as part of his "fiscal cliff" deal, his health reform law will add vast new layers of tax complexity.
For example, ObamaCare adds a new refundable tax credit to offset the cost of insurance that will not only be a nightmare to administer, but will also narrow the tax base still further by kicking 8 million off the tax rolls.The problem with making the tax code simpler and easier to understand is that it reduces the power of the elected officials and bureaucrats (and the President isn't alone in opposing simplification for this very reason - the disease infects politicians from every ideology and party - he's just one of the more committed adherents). Every one of those deductions, credits, etc. that complicate the tax code was deliberately put in there to exempt some interest group or constituency from taxes that affect everyone else. Removing the ability of politicians to manipulate the tax code in this way reduces their ability to reward their friends and punish their enemies.
A tax deduction or tax credit is a legal means of reducing the tax burden of someone you like; a loophole is the same legal means of reducing the tax burden when used by someone you don't like.