August 20, 2007

A Tax Break for Driving to Work? The Fair Tax Will Fix This

There is a little-known deduction in the tax code that 400,000 people know about, and by which they avoid $150 million dollars in taxes each year. The issue is not that most of us do not know about this little sneak-a-tax, or even the amount that the rest of us are picking up through a higher federal deficit.

The issue is that this is another example of how the tax code is used to encourage a desired behavior. The deduction encourages people to drive to work by subsidizing their parking costs. If you do not have to pay for parking at work you get zero deduction. At the same time, the Department of Transportation is planning to spend $354 million to encourage people to not drive to work by subsidizing their mass transit costs.

That’s right! Our tax dollars are working against each other.

This little inconsistent truth was reported in William Neuman’s article on the front page of The New York Times last Thursday, August 16, 2007, titled “Mixed Signals: Driving to work as a Tax Break.”

This is also an example of how sneak-a-taxes and special deductions for a few people at the expense of most of us get in the tax code. This deduction for parking was passed back in the 1980’s when most of us were not paying attention. Since it was so small relative to other changes being made to the tax code, it was not covered by the evening network news programs.

One such other change by Congress in the 1980s was legislation to gradually increase the retirement age for full Social Security benefits. Like most people in their 40s, I was not paying attention to a law that would affect me 20 years later, and would cause my retirement benefits to start at age 66 instead of 65. And for those born after 1960, your retirement age for full benefits is now 67, and it does not stop there as more and more baby boomers file for benefits.

The federal government was never intended to be in the business of encouraging one behavior over another, or favoring one group of people over another. This goes beyond providing assistance to the needy. And government was never intended to be in the business of taking people’s money for a retirement system, and then increasing the retirement age as the money starts to run out.

This is what’s wrong with the tax code along with its unfairness, its complexity and a long list of other anti-free-market and politics-of-envy provisions. The only solution is to replace it, and the Fair Tax is by far the best solution. The Fair Tax – a national consumption tax replacing all existing federal taxes – eliminates all inconsistencies, stimulates economic growth and liberates the poor and the needy. (See fairtax.org for more information.)

But the bureaucrats and career politicians want to keep the current system. The tax code gives them a means by which to encourage certain behaviors, and a means by which they can award tax favors to one group over another. The current system hides a plethora of sneak-a-taxes that may never be exposed.

Individually, these sneak-a-taxes may not add up to much relative to the $3 trillion dollars government spends each year. But collectively, they add up to mortgaging our national future to people who want to destroy us, and literally taxing ourselves into economic oblivion.

These competing tax dollars may seem small to big-hearted liberals, and waiting one or two more years before people can receive full Social Security benefits should be no big deal. It may not be a big deal if government can legislate two more years to a person’s life expectancy.

The insanity and inconsistencies in the tax code are not new revelations, but some of us have got to continue to sound the alarm. That is, until we have leaders who will embrace the will of the people over the will of politics.

That would be a break for all of us.