Question

Why is anything tax deductible?

Herman Cain has got me thinking about taxes. Although I don't think his 9-9-9 plan will work, nor is it fair, I think the idea of blowing up the tax code and making it uber simple isn't a fundamentally bad idea. Seriously, why not simply have 5-10-20 as the tax rate for three different brackets? Or fine, 5-10-20-30, even for the above $1 million earners. No deductions. No credits. No nothing. I understand this would make people unhappy because they love trying to game the system with deductions, etc, but let's not fool ourselves: this is unproductive activity and only serves to mask the cost of government.

I guess the argument in favor of deductions is to promote certain private activities that are good for society like buying homes and having children. But do we really think people buy homes and have children because of the tax deductions? Come on. These are bribes to middle class voters who live "normal" lifestyles. Food and water aren't tax deductible. I'd say those are more important - especially to poor families - than child income tax credits and mortgage interest deductions to people buying a ski house.

Plus, the mortgage tax deduction doesn't even end up helping anyone in the long run. It just props housing prices higher because it's get factored into the cost of the house.

Just make it simple, predictable, and easy. You can still have deductions for business expenses, obviously, but the cost of starting a business should be small and easy as well.