Michael Maye writes in The Street that the tax code should be changed to encourage good behavior such as buying gym membership or hiring a financial advisor. Currently, investment advice is only deductible if it exceeds 2 percent of adjusted gross income. See the following post from The Street for more on this.
Everyone agrees the federal tax code has become byzantine and overly complex, but you rarely hear much discussion about why the tax code does not reward and encourage good behavior. We'd be better off if it did.
Good behavior is when a taxpayer does something to improve their health, wealth or society overall. Consider these examples:
Medical and health expenses
Taxpayers are entitled to an itemized medical expense deduction to the extent their medical expenses exceeds 7.5% of their adjusted gross income, making people who neglect their health or carry no health insurance likely beneficiaries. Contrast that with healthy people who join gyms and take care of themselves.
Do they get a wellness deduction via a credit for being healthy? The answer is a resounding no. Well, they at least get an itemized deduction for their gym membership, right? The gym membership does not qualify as an itemized deduction either. New Jersey makes it even worse by imposing a sales tax on gym memberships.
Finance and investment advice
Investment advice is deductible as a miscellaneous itemized deductions when exceeding 2% of adjusted gross income, but I would think the government wants to reward citizens for taking control of their finances and planning for the future. At a minimum, these items should not be subject to a threshold but rather treated like other itemized deductions not subject to thresholds.
I would go a step further and argue that these expenditures should be taxpayer credits rather than itemized deductions. We should reward citizens for planning for their futures. Perhaps our citizens wouldn't be so woefully underprepared for retirement if they were rewarded for planning ahead.
This post by Michael Maye has been republished from The Street. You can also view this post on The Street, an investment news and analysis site.