But taxes aren’t just about the revenue. Washington loves to use taxes to accomplish goals they can’t legislate directly. This generally takes the form of “tax expenditures” — special deductions, credits, or other rules designed to benefit specific favored activities or taxpayers.
The mortgage interest deduction may be the most famous of these carrots. For most people, homeownership is a cornerstone of the American Dream. But Congress would be hard-pressed to pass legislation requiring it, or even directly rewarding it. (Buy a home! Get a free $5,000 Target gift card!) So instead, they use taxes to subsidize it. For 2018, homeowners saved $68.1 billion by deducting mortgage interest on their taxes.
But every so often, the government uses taxes as a stick . . . or at least they try to. Last week, the Wall Street Journal published an editorial blowing the whistle on one such effort that may violate the First Amendment. Specifically, it accuses the IRS of punishing nonprofit organizationsContinue reading →