Swamped: An Unstable Tax Code is Worse Than High Taxes

MauledAgain has a great article on how just one set of tax rules for small business — section 179 — has changed during the last few decades. He points out that the level of expenses small businesses can easily write off has fluctuated from $5000 (1983) to $125,000 (2007-11) except for when it’s $250,000 (2008), and may be kept at the same $250,000 level in the future.

There are good and sensible reasons to think that an easy deduction like this would do some good. The paperwork (and plain vanilla work) on depreciating $25,000 worth of expenses is a nightmare compared to that of figuring out $25,000 more on a $500,000 budget, so this does reduce the bureaucratic load on a small business.

There’s even something to be said for tweaking the amount — a number too small, and you don’t get the desired effect; a number too big, and you run into the same problem (a business spending $250,000 per year getting the same kind of tax break as another business one twentieth the size).

But what can’t be justified is the practice of constantly fiddling with the deduction. Someone planning their future expenditures in 1983 could assume a pretty predictable tax policy; someone doing the same thing in the late 90’s would at least know which way the deduction was going (according to MauledAgain, a reform of the period called for pre-planned annual increases in the deduction).

Someone trying to make the same plans now would just give up: nobody knows whether the deduction is going to once again have a temporary increase, or a temporary decrease, or if its tenfold increase in seven years will lead Congress to cut it or even abolish it.

People can plan for paying their taxes, whether those taxes consume 10% of their income or 90%. But they can’t plan for a world in which taxes will consume either 10% or 90%, with no way to tell in advance and no reason to bother guessing.