Duvall & Associates, Inc.
BUSINESS ADVISOR NEWSLETTER
 

 According to politicians, taxes can cure everything

- by Alan Duvall 

Published in Dayton Daily News  April 29, 2007 

“When you try your best but don’t succeed...I will try to fix you.”  –Coldplay 

American politicians have surmised they can cure most societal issues by way of the tax code.  See an illness – no problem.  Just offer a spoonful of tax breaks to ease the pain. 

Health care costs are exploding exponentially so fairy dust solutions such as HRA’s (Health Reimbursement Accounts), HSA,s (Health Savings Accounts) and flex plans are used to medicate the misery.  Education expenses are treated with a dizzying combination of credits and 529 plans. 

But like most sicknesses tackled by government, tax prescriptions may have short-term healing powers, but leave long-term recovery wanting.  Certainly subsidizing health care and education with tax breaks has not tempered the double-digit inflationary cost increases of either sector.  In fact, a compelling argument can be made tax subsidies actually making the situation worse. 

Tax gimmicks are also utilized to encourage certain behaviors.  Private pensions for companies (SIMPLE, SEP’s, 401K’s) and IRA’s for individuals are glossed with attractive sequins to entice employees to save for retirement.  Dividend and capital gains rates were reduced to encourage investment. 

Officials also dangle tax incentives for individual charitable giving, home buying and energy conservation.  Tax cuts encourage businesses to invest in new equipment, hire more employees and locate in disadvantaged regions. 

Taxes have even been used as a form of public assistance to provide welfare-type aid to the disadvantaged (earned income credits), people seeking to adopt or to aid disabled family members. 

Governments can threaten loss of tax breaks if certain privileged citizens do not abide by negotiated prescribed behaviors. 

Thus, tax-exempt charities can find themselves taxable entities if they engage in banned political activities.  

Government’s aversion to use tax breaks as a means of curing society’s sicknesses has immensely contributed to the increasing complexity of tax rules. 

As a result, all too frequently the breaks only reach those who have the financial resources to find them. 

“Don’t try to fix me – I’m not broken.”  –Evanescence  

Alan Duvall is a certified public accountant in Dayton.  Contact him at Alan@Duvallcpa.com.