Tax Law and the Culture War

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U.S. Representative Chris Smith (R-N.J.) recently introduced a bill in Congress titled the “No Taxpayer Funding for Abortion Act.” It is bill number 3 in the House of Representatives. As Representative Smith explains to NPR:

“The fact that it is designated as HR 3 speaks volumes the prioritization by Speaker (John) Boehner and Majority Leader (Eric) Cantor,” said Rep. Chris Smith, R-N.J. Smith is the key sponsor of the bill to write the Hyde language into permanent law. (House leaders give the first handful of bill numbers to measures they want to highlight as legislative priorities.)

So far, the bill has mainly received attention for its exception for women who were the victims of an “act of forcible rape.” But attention has now begun to turn to the tax provisions in the bill (see, e.g., the NPR story mentioned above as well as this editorial in the New York Times and Bridget’s post earlier today–Bridget, you beat me to the punch! I started drafting this post before going off to class and am finishing now that my class is over).

The bill is very broadly worded to disallow a deduction for “amounts paid or incurred for an abortion or for a health benefits plan that includes coverage of abortion.” This language not only prevents a taxpayer from deducting the cost of an abortion paid for out of pocket, but also from deducting the cost of health plans that include coverage of abortion, seemingly without regard to whether the taxpayer can or ever will take advantage of the coverage for abortions. This language is written so broadly that it would seem to deny a deduction for men who purchase a health coverage that includes coverage for abortion, even though they can never undergo the procedure. This limitation is subject to the exception for “forcible rape” as well as exceptions for cases of incest and to prevent the mother’s own death. As Bridget’s post of the NPR story indicates, this will involve the IRS in defining “rape,” “forcible rape,” “incest,” and all of the other terms of the limitation–something that is clearly outside of its ken.

The theory behind disallowing tax deductions and credits relating to abortion is that providing these tax benefits is the equivalent of federal funding of abortion. This, however, is a very selective application of tax expenditure analysis (which, in a nut shell, is the idea that any provision in the Internal Revenue Code that is not directly related to ascertaining one’s net income is really just the equivalent of a disguised direct government spending program).

Why, for example, is similar attention and a high priority not given to the fact that Congress lets businesses deduct the cost of engaging in discrimination? In Rev. Rul. 74-323, for example, the IRS concluded that advertising expenses were deductible as an ordinary and necessary business expense even though the advertising in question arguably violated the Civil Rights Act of 1964 (because punishment under the Act entailed neither criminal liability nor potential loss of license or of the privilege of doing business). Allowing such deductions on the ground that they are “ordinary and necessary business expenses,” as the IRS does in this ruling, is tantamount to the government funding–and, paradoxically, sanctioning–discrimination on the basis of gender (or race or national origin or other protected class status) that it has legally prohibited. Since when is it “ordinary and necessary” for a business to engage in illegal discrimination?

While disturbing on its own, what does this mixed message (i.e., don’t discriminate, but the expenses of discriminating can be an “ordinary and necessary” part of conducting business) say when juxtaposed against the proposed disallowance of a medical expense deduction for abortion?

-Tony Infanti

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