Why Are Our Taxes So Messed Up? My Guess Is Spelled C-O-N-G-R-E-S-S

My previous post was about the amount of taxes rich people pay.  Based on leaks of confidential tax info (so much for secrecy of tax returns), the ProPublica website disclosed the absolutely shocking information (shocking to people who don’t pay attention) that rich people don’t pay any more taxes than the law requires.  And if the law lets them take deductions, claim credits, etc., they do it and, thereby, pay less taxes.  ProPublica was shocked.  I’m not.  I think it says more about the tax code – and the people who pass it – than it does about the amount of taxes people pay.

Which brings me to an example of the simplicity and ease¹ of our tax code: the deductions and credits for families and child care.  Before 2021, there were two basic credits: (i) a refundable tax credit of $2,000 for each child, which began to phase out when modified adjusted gross income exceeded $400,000 for a married couple; and (ii) a refundable child care credit of $3,000 per child, up to a maximum of $6,000 for two or more children, with a phaseout beginning at $125,000 for a married couple.

The Biden Covid relief package increased the credits but did it in a way that made make things more complicated.  For 2021 (but only 2021; in 2022, the increases go away²), the refundable tax credit is increased to $3,000 per child, unless they are under six, in which case it is increased to $3,600.  But the phaseout for the increased amount is different than the phaseout for the original credit.  The phaseout for the extra $1,000 (or $1,600 if the child is under six) starts at $150,000 for couples; the old phaseout, which starts at $400,000 for a couple, still applies to the first $2,000.

The refundable child care credit has also been increased, though once again just for 2021.  It goes up from $3,000 to $8,000 for one child and from $6,000 to $16,000 for two or more children.  The phaseout still kicks in at $125,000, which is a different level than the phaseout for either part of the child credit.

So, at least for 2021, there are three different tax credits for children: (i) the regular $2,000 child tax credit, (ii) the $1,000, or $1,600, depending on the child’s age, extra child tax credit, and (iii) the child care expenses tax credit; all of which have different phaseout provisions.  Plus, the tax credits are available for every child, while the child care expense credit is effectively capped at two children.

Do you understand the reason(s) all of this?  I don’t.  Why are there three separate phaseout schedules?  Why are two of the credits calculated for each child, while the other is capped at just two kids?  Actually, I do understand.  Congress is incompetent.  They can’t, as an institution, think logically about issues, about how programs work, about what they provide, and about how they fit together.  Simplicity and ease of understanding are irrelevant.  It’s just tacking one program or benefit on top of another with no consideration as to how it all fits together or makes sense.

Aristotle supposedly said, "the whole is greater than the sum of its parts.”  Sometimes, when people are working together, what they can do together is more than the sum of what they could do individually.  Congress is the opposite.  Most of the members are smart, but what they do together, as Congress, is way less than the sum of what they could be individually.
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¹ Sarcasm alert.
² Why would you want a program that lasts more than one year?