- 1 -Tyrone Schiff Widening The GapThere is a common maxim that states in life there are two certainties, death andtaxes. Taxes have been around for a great deal of time and have contributed to almost allcivilization’s histories. In particular, the American Revolution was sparked by thecolonies grievance with the English parliament unfairly taxing them. This occurred over two hundred years ago, but the significance and role that taxes play in the commonAmerican’s life is immense and may even be more widespread than one may think. Thestandard document that all Americans fill out before April 15

is called the form 1040.The unique thing about this document is that no matter how much money you make or donot make, the form 1040 is all you need and all that is required by the government. Thereare a tremendous number of people from a drastic range of economic and sociological backgrounds that therefore fill out this exact same form. The form 1040 needs to beuniversal so that the process of taxation is fair. This paper will attempt to reveal that theform 1040 does not work fairly and furthers a rich-poor gap that is already becoming prevalent in our society. Specifically, the form 1040 uses particular wording and promotes deductions that only the rich can benefit from. It allows for deductions on itemsthat may not be easily available to individuals who are not necessarily rich. This hascreated a silent but far more substantial benefit to the rich. Thus, one can assert that thetax form 1040 that Americans of all sociological and economic backgrounds use isconstructed in such a way that it unequally represents those who use it and furthers thegap between the rich and poor.In order to better understand the meaning of this silent benefit, it is imperative todiscuss what scholars call the “hidden welfare state.” Christopher Howard explains in his

- 2 -Tyrone Schiff book,

The Hidden Welfare State: Tax Expenditures and Social Policy in the United States

,“the hidden welfare state occupies a sort of no-man’s land between the social policy andtax policy […]” (7). Although taxes ought to be separated from social realms in order for it to be a fair system, Howard suggests that the hidden welfare state that exists in our current tax system incorporates aspects that may in fact shape our society. Taxexpenditures are the fuel that propels this hidden welfare state forward. Tax expendituresare merely “tax breaks” or a means of giving money back to individuals directly rather than through government spending. This can include tax deductions or completelyexcluding some income from taxation (Krippner). These concepts are fundamental inrealizing how the hidden welfare state operates. In order to best illustrate how this hiddenwelfare state is developed and in turn furthers the gap between the rich and poor, ananalysis of the form 1040 will be necessary.The tax form uses exclusionary methods to mold our society. Under one of thefirst sections of the form 1040, income, there are some instances in which information isasked for that are typically only employed by the rich. Line 8a of the tax form asks for taxable interest. Taxable interest is the result of interest on investments an individual mayhave. These investments may be in certificate deposits, money market accounts, bonds or some other financial instrument. Being able to put money away and have it accumulateinterest is a privilege given to those who have acquired the means to do so, namely therich. This is excludes the poor from this portion of filling out the tax form. Thisexclusionary principle is a constant reminder to the poor that this is something else theydo not have. It works on keeping the poor down. Just a couple lines below that, 9a and b,are ordinary and classified dividends. Dividends are payments that companies make to

- 3 -Tyrone Schiff their shareholders. Being able to buy and invest in the stock market is another example of an activity that typically the rich only partake in. It is true that half of all Americanhouseholds own stock, but the amount owned is severely different (Krippner). Still, the poor who have to fill out this form will notice that they are not involved in this portion of taxation either. A final example of the exclusion inherent to the form 1040 occurs on line15a, where it asks for IRA distributions. The poor will not be able to partake in this either.An IRA is yet another investment that is set up for one’s retirement. The poor are veryrarely able to put money aside, let alone money for so long down the road as isretirement. Furthermore, Howard explains that these, “employer pensions stand out asone of the largest programs in the hidden welfare state […]” (27). Pensions or retirementfunds make a significant contribution to widening the gap between rich and poor and isyet another example of how the poor are left out of the tax process. The tax form is set upto exclude the poor from it, but at the same time also encourages activities that the rich partake in through tax expenditures.The tax form ostensibly supports the actions that are mainly only open to the rich by giving deductions and credits. In the section following income on the form 1040,adjusted gross income, there are instances in which deductions are given to activities thatthe government may deem valuable. Howard further elaborates on this analysis inadvocating that “tax expenditures reward behaviors that less affluent taxpayers cannotafford to engage in […]” (31). If one looks more closely at lines 26 and 27, it is clear thatthey outline deductions that are available to those who are involved in education.Education is without a doubt a public good and serves a positive purpose. The issue with providing a deduction for education and the loans involved in education is that education,