4. Stop Using the Tax Code to Manipulate Behavior
Our income tax code is a complicated mesh of rules, exemptions, credits and adjustments hobbled together over the years to encourage some activities and discourage others. Home mortgage interest is tax deductible to encourage us to own expensive homes. Bonus depreciation encourages businesses to buy new equipment. You can get tax credits for opening a business in a certain location or for performing certain kinds of research and development. In some years, you could get tax credits for upgrading to energy efficient windows and appliances.
The problem with this manipulation is that it adds variables to what would otherwise be rational market decisions. Should you own an expensive home? Not necessarily, and the income tax code should not reward people simply because they do. In fact, after the housing crisis, the government was literally paying first-time home-buyers $8,000 if they purchased a home.
When the government picks winners and losers, we are less free. Our market choices should be made with our own needs in mind and without government interference or influence.
