Sunday, July 24, 2011

IRS Is the National Bureaucracy

Via Mankiw, this article is a very detailed discussion of  tax expenditures. Recommended if you're interested.  What strikes me is one of my pet ideas: our weak government.  Basically the IRS is the only national bureaucracy, the one and only instrument of government which is able to touch (ouch) the vast majority of people in the country.  So if we want to subsidize children we give a child tax credit, if we want to help the working poor we give the earned income tax credit, if we want to encourage home-ownership we permit deduction of mortgage interest, if we want people to have health insurance, we don't tax employer provided health insurance, and so on.

Our approach hides the size and cost of the government, as the article describes.  It also results in a less efficient IRS, because it has to do a lot more things, rather than focus on the task of collecting taxes and finding tax cheats. Of course that fits with the reasons why we Americans like a weak national government: we don't like a bureaucracy, at least not an obvious one, and we think freedom is having invisible constraints.

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