Taxation and social policy

While often imagined by the lay public and uninitiated students as the height of dry, stultifying, and obtuse material tax policy is actually a rich arena for the expression, study, and understanding of social policy.

Behind the question of how to pay for the common social enterprise of government are a myriad of complications and complex social choices. For instance while most tax codes are progressive - reflecting the common social belief that taxation should be born in proportion to ones ability to pay - the extent to which the rich are taxed in comparison to the poor varies greatly country by country. This reflects countries' choices AbOUT the relative merits of taking more from the rich to support a public good for all.

The reality that social policy underpins tax policy - and the special interests which spring up to promote and defend certain social policies - helps explain why the U.S. tax code is so complex and RIFE with exceptions. One might be surprised, for example, at how often gambling or horses pop up in the U.S. tax code.

Even seemingly obvious questions - such as "what is income?" - are inherently ambiguous and arriving at a usable definition requires policy choices about whether things such as inheritance, fortuitous winnings, and capital gains should be subject to taxation.

Since the collection and use of money by government affects every citizen of any nation, even relatively subtle changes in taxing policy can have far reaching, and often unintended, social consequences. For instance, many who decry the complexity of the U.S. tax code would simplify it by making both expenses and capital expenditures fully deductible in the year in which those costs are incurred. This would eliminate many schemes to avoid taxation and make the tax code more accessible. However, it would also go against the notion that taxation should mirror earnings. If this seems too theoretical to be a concern to the average citizen, then consider that it would also eliminate the current tax advantage to companies who use human workers (salaries being a preferred tax expense) rather than robots (a less ideal capital expenditure).