Tax Complexity Marches On

The gist of this post is so obvious, it’s hardly worth writing.  But I sometimes find myself unable to remember specific examples of April income tax silliness when I’m discussing the need for fundamental tax reform at election time.  So here are some of my favorites from this year’s Maryland return.

Maryland would like to know whether I’m claiming any Maryland enterprise zone credits, and I understand that.  The use of enterprise zones to stimulate redevelopment strikes me as sort of a hoot, because it’s more or less an admission by government that the conditions prevailing outside the enterprise zone are materially less conducive to commerce.  But the contradiction has been with us a long time, and I’m no longer shocked by it.

Not so with the reforestation tax credit.  Apparently, I would be entitled to special tax treatment if I had “[i]ncurred expenses for reforestation or timber stand improvement of commercial forest lands.”  This one confuses me.  I don’t have any commercial forest lands, but if I did, I think I would be pretty much continually engaged in reforestation or timber stand improvement.  And I would think of the expenses incurred in those activities as ordinary expenses — something on which I would not need a tax break because they would be valuable if and only if they actually succeed in improving the commercial timber operation.  If there were a tax credit for reforestation of non-commercial timber stands, that I would understand.  But apparently I have it all backwards.  In Maryland, we only subsidize the planting of trees you’re going to cut down for profit.  (Does this have anything to do with the fact that our state song, “Maryland, My Maryland,” is sung to the tune of “O Tannenbaum”?)

Leaving aside my qualms about the state policy choice at work here, reforestation sounds like hard work.  I think the easier tax break to go for would be to “donate[] farm products to a gleaning cooperative” — it’s impossible to overstate the importance of promoting strong gleaning cooperatives — or perhaps even to “install handrails in an existing elevator in a healthcare facility.”  The catch with the latter option is that I imagine you have to own the healthcare facility to qualify; I can’t imagine I can get a tax break for nailing up some handrails in somebody else’s elevator.  But then again, who knows?

The tax credits for conservation tillage equipment and manure spreading equipment contain some traps for the unwary.  Note well, my fellow Marylanders, that conservation tillage and manure spreading are not sufficiently valuable to the state to merit a tax credit unless the you receive the approval of the Maryland Department of Agriculture.  I’m only guessing here, but presumably that means advance approval.  If you’re engaged in unapproved tillage, you’re on your own.  And if you’re engaged in unapproved manure spreading, it seems there’s a decent chance you work in Annapolis.

These tax provisions raise all kinds of issues, including perhaps most obviously the issue of why government should ever subsidize for-profit economic activities.  But let’s leave that low-hanging fruit alone for now.

A little higher in the tree, we find the connection between taxation and citizenship.  Surely part of the purpose of tax policy is to draw all citizens into the common enterprise of self-government.  We depart from strict egalitarianism by presuming that the well-to-do can and should pay for more of the common costs of self-government than the less wealthy.  Fine.  But whatever one’s level of income, when one’s tax burden is made to depend on one’s generosity toward gleaning cooperatives, how can we regard it as anything other than a bad joke?

Even that, however, is not the most striking thing about these tidbits from the Maryland tax regulations.  I prefer to dilate on the “public choice” angle.  Does anyone — anyone — think that these credits represent the will of the people of Maryland?  Isn’t it obvious that instead they represent the ease with which small interest groups get significant benefits from the electorate at large because the cost is not great enough for the public at large to notice?  In fact, aren’t laws like this conclusive evidence of systemic corruption in the legislature?

I’m disillusioned.  Re-illusion me if you can.


One Response to “Tax Complexity Marches On”

  1. George Peacock Says:

    The time for dilly-dally dilation is over. I say we move on to out and out expatiation. I cannot re-illusion you.

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