Income tax

Marco Rubio Wants To Fight Abortion and Trans Battles in the Tax Code

Tax loopholes for corporations end up making it easier for politicians like Rubio to meddle in private decision making.

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With the passage of state laws intended to restrict access to abortion, some companies like Bumble, Yelp, and Salesforce have announced programs to assist employees who have to travel to other states in order to obtain the procedure. After the apparent leak of a draft Supreme Court opinion which would overturn the right nationwide, Amazon announced that for any employees who have to travel in order to receive an abortion, it would reimburse up to $4,000 annually.

Last week, Sen. Marco Rubio (R–Fla.) responded by threatening legislation.

Employees' health care costs are typically tax deductible as business expenses for their employers. Rubio's bill, the No Tax Breaks for Radical Corporate Activism Act, would bar a company from deducting the costs of reimbursements not only for abortions but also for gender-affirming medical treatments for transgender children. In a statement accompanying the legislation, Rubio said, "Our tax code should be pro-family and promote a culture of life."

But directly disincentivizing behavior is a fundamental misuse of the tax code, and it's unlikely to work anyway.

To be sure, government policies are inherently incentivizing: For example, laws against robbery and murder are intended to keep people from robbing and murdering. Regarding taxes, people with incomes near the top of their tax brackets are disincentivized to increase their income, to avoid paying a higher rate.

But writing specific incentives into the tax code is an inherent market distortion, where politicians choose what products and activities they think people should be buying and partaking in. This can take the form of cronyism when certain types of products are favored. Even something as seemingly benign and beneficial as a tax credit for purchasing electric vehicles can just become a giveaway to favored companies. Additionally, when a benefit exists, it makes it that much easier for a politician to threaten to take it away: Even the health cost deduction Rubio is targeting is, itself, a distortion that incentivizes employer-provided health insurance plans.

Politicians use the tax code to achieve social policy goals because it is typically easier to insert a targeted tax credit than to pass a bill creating a new welfare program. But in practice, these carve-outs make everything more complicated: When the various COVID-19 relief bills apportioned money for stimulus checks, even with funding for additional staffing, the Internal Revenue Service (IRS) was slammed with calls from people awaiting their payments. When the tax code is the means by which benefits are distributed, then the tax collectors must also function as a social services agency.

Worse, it's not even apparent that these benefits have their desired effect. A 2014 study of a tax on high calorie foods showed that such a tax can lead to more purchases of high calorie foods. In 1997, Iris Lav of the Center on Budget and Policy Priorities, a progressive think tank, told The New York Times, "There's very scant evidence that the tax code has ever changed people's behavior."

Ironically for Rubio, this used to be Republican orthodoxy. In 1964, Ronald Reagan declared, "We cannot have [true tax] reform while our tax policy is engineered by people who view the tax as a means of achieving changes in our social structure." But since then, Republicans as well as Democrats have used the tax system as a shortcut to achieving their desired policy outcomes. As a result,filing one's annual taxes is an expensive, grueling process.

To the extent that taxation has any legitimate purpose, it is to fund the basic function of the federal government. Anything further, like incentivizing family or "a culture of life," is simply government coercion by another name.