Tax Crafting

Every time I consider an alternative to the tax code, such
as a flat tax or value-added (VAT) tax, I’m confronted by evidence of social
engineering that would be impossible without the present complicated law. The
government’s interest in promoting private home ownership comes immediately to mind. The incentive of tax credit for mortgage
interest made us first among all nations in owning homes.

Good deal! Worthy deal and I can think of few other ways to successfully
promote it.

These past few days the newspapers are full stories
about various non-profit groups that benefit from the tax break (dare we say
loophole?) of “historic easement donations.” A Washington Post article by Joe Stephens looks at
some of the less-than-straightforward issues attending the promotion of
easements, but the fact is that virtually no one was aware of or
taking advantage of
such deductions before the profit seekers stuck their
oar in the water. Currently things are rolling along quite well across the
nation, depending upon how one defines ‘quite well.’ But private profit and
public preservation are loose in the land, the former having set in motion the

And I say well done. It’s very ‘American’ even today to tear down whatever is old and
build whatever is new. Chicago, my home turf is famous for this and much has
been lost to that great city as famous buildings by famous architects fell under the wrecking ball. Living now in Europe, I’ve come to realize that
an attitude like that seems barbaric to Europeans. They work around
their history and it makes them seem quaint to us, what with not-always-hot
water and not-always-easy traffic patterns as part of the price they pay. But I suspect they’re on to
something, Europe is very beautiful and amazingly civilized.

But back to the game at hand. In order to reap this quite
substantial tax benefit one must own a building of historic value, a
distinction applied for to the National Park Service. Don’t ask me why the Park
Service, but those are the guys in charge. Once certified, the owner (and all
future owners) agree not to change the building façades without proper
permissions. The present owner can then write off from his taxes an amount
equal to approximately 10% of the value of the building and sticks all future
owners with his decision. This amounts to, in some cases, quite big
bucks—hardly a ‘cottage’ industry, but then we’ve become accustomed to tax
breaks going to the wealthy and those of us who live in cottages must find
solace elsewhere.

But, like home ownership, historic preservation is something
to be desired in the grand scale of things. In a uniquely American way we use
the federal tax code as a facilitator of those desires.

When friends rant and rave about ‘special interests’ and the
‘graft’ that accompanies most federal programs, I tell them my favorite story.
In the 1930’s, huge areas in and around Chicago were purchased by Cook County
as ‘forest preserves.’ The land in question had been, for the most part, bought
up on the sly by various politicians using insider knowledge to financially
feather their nests. Nothing new there. Hundreds of millions were thus squandered in overpriced
acquisition, a great deal of press attention was given at the time and a few old pols even
went to jail—not many and not for long, but a few. Today, these vast county and inner city forests
are priceless and irreplaceable cushions to the rigors of urban life. Chicago without them is like trying to
picture New York without Central Park. The money is long gone, the pols long
dead and yet the brilliance of the decision remains, brilliance helped a
little on its way by private gain and unequal access

This façade preservation business is yet another opportunity
made possible by private gain and unequal access. I don’t have (at least on my
house) a historic façade worth preserving and I’ll bet you don’t either. But
this is good tax law and the country will be better and more beautiful for it.

It’s ironic, yet so very American, that this provision in the law is being
‘sold’ for profit by an entrepreneurial group that only formed in
reponse to that opportunity.

I love it!

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