If you are not a public finance economist and want to understand how the US tax code works, pick up the new version of Taxes in America. Written by my Tax Policy Center colleague Len Burman and University of Michigan tax economist Joel Slemrod (Joel also is a member of TPC’s advisory board), Taxes In America is a clear, concise, and sometimes even amusing explanation of the US tax code. Which, of course, is not clear, concise, or amusing.
If you want to know the difference between the flat tax, the fat tax, and the fart tax, this book is for you. If you want a careful but painless explanation of the US tax code—perhaps before agonizing over your own 2020 income tax return—pick up a copy. It is way more fun than the instructions for Form 1040.
The volume is written as a series of brief answers to questions such as: What is the personal income tax? Why tax corporations? What is the difference between Roth and traditional IRAs?
An unblinking eye
The new book is an updated version of the 2013 volume. It incorporates changes in tax law from the 2017 Tax Cuts and Jobs Act (TCJA) and adds a section on what behavioral economics teaches us about tax policy.
Len and Joel also include material on the political economy of taxes, take a broad look at how the US spends its tax revenue, and discuss tax fairness, the economic effects of taxes, and tax administration. They also cast an unblinking eye on popular tax breaks such as the home mortgage interest deduction and the tax exclusion for employer-sponsored health insurance. Americans love these tax subsidies, but they make little economic sense and help explain why the tax code is so complicated.
Taxes In America also includes a chapter on what Len and Joel call “snake oil,” a fistful of bad tax ideas that sound vastly better than they are but never go away. You know, such as abolishing the IRS or replacing the progressive income tax with a flat rate tax. It even has a few paragraphs on how the TCJA is really called Public Law 115-97, “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018.” Doesn’t exactly trip off the tongue, but partisan squabbles over the bill landed it a name almost as unwieldy as the law itself.
The gulf between economists and other humans
The book is a careful look at taxes and tax policy, but it doesn’t take itself too seriously—not a surprise given the authors. They even acknowledge the broad gulf between economists and other humans when it comes to issues such as the concept of imputed rent. The idea is that your home is an investment, and that part of your return from that investment is the rent you don’t pay to yourself. To an economist, it makes perfect sense to tax that rent. But for politicians and normal people, this is econo-babble.
By the way, if you can’t wait to learn the difference between those three “f” taxes: The flat tax is a single rate income tax, the fat tax is an excise tax a number of US cities have imposed on sugary drinks, and the fart tax is a levy that has been proposed in Europe on cattle owners to reflect the environmental costs of cow flatulence (a major source of methane--a potent greenhouse gas).
As taxpayers and voters, it is important for all of us to understand the US tax system. Reading Taxes in America is a terrific way to learn the basics.
