There is a famous experiment in behavioral economics that asks the subject to imagine that he’s standing outside a football stadium just before the kickoff of a big game. The subject has both a ticket to the game and a $100 bill, which, coincidentally, is the going rate for his ticket. The subject is then asked to consider two different scenarios: In the first, he loses the $100 bill, but a nearby scalper offers to buy his ticket for $100. In the second, the subject loses his ticket and the nearby scalper offers to sell him one—for a seat in the same row of the same section—for $100. Interestingly, in the first scenario, most people choose to keep the ticket, but in the second, most people choose to keep the money.

The two different answers raise the question of why it should matter which piece of paper was lost—the $100 bill or the ticket that can easily be exchanged for $100. Economists say it should not matter in the slightest, but apparently it does.

This same dichotomy explains why we run so much social and economic policy through the tax code.

The first and primary focus of the tax code should be to raise revenue as painlessly as possible—the proverbial “pluck as many feathers as possible with the least squawking,” as the philosopher Colbert noted a few hundred years ago. Conducting policy with the tax code compromises that goal. It also obscures the true cost of various programs. A streamlined income tax that does not pull on thousands of policy levers would force Congress and the nation to have real debates over what we want the government to do and what it should refrain from doing.

For instance, without the ability to deduct mortgage interest, would the government send subsidies to homeowners for the amount of their mortgage interest? If not, then why does this tax break persist, other than through inertia?

What income should be included? | While we use the tax code to incentivize all kinds of activities, the code itself does a relatively poor job of encouraging people to save. We double-tax most investment income that is not in some sort of tax-preferred account, first by taxing the money when people earn it and then, after they invest the money, taxing its returns as well. While liberals see lower taxes on capital gains and income as giveaways to the rich, most tax economists see any tax on this income—which is a reward for forgone consumption—as a very expensive way to collect revenue in terms of reduced growth and in terms of progressivity.

Making it easier for working families to save—regardless of the motivation—should be an essential part of any tax reform. And families of all income levels respond to savings incentives. For instance, the Harlem Children’s Zone, a policy experiment that provided a subsidy to the savings of participants in the program (mainly low-income families in New York City), showed that even families that are often considered to be incapable of setting money aside manage to do so when their returns are high enough.

I admit that it seems contradictory to criticize using the tax code to conduct social policy while advocating for another incentive. But I submit that the returns from saving should not be a part of the tax base at all. If that is politically impossible (which I suspect is the case), then we should try to make it that as many people as possible can save without the government taking a portion of it.

We currently offer a welter of tax-preferred savings accounts for families that want to save, all of which direct the money toward specific uses: e.g., retirement, education, health care. But these all come with caps, annual contribution limits, and severe penalties for violating the strictures governing them. Those efforts could be improved. The mishmash of tax-preferred savings accounts at both the federal and state levels can be difficult to navigate, and states take advantage of their quasi-monopoly for their college savings accounts by allowing the vendors they choose to have management fees well above what other companies charge. For instance, the typical index fund charges a fee of less than 0.2 percent of assets; in the Washington, D.C. college fund, the only available index fund charges a fee a half a percentage point higher—a discrepancy that cannot be rationally explained other than via political largesse.

A streamlined income tax that does not pull on thousands of policy levers would force Congress and the nation to have real debates over what we want the government to do and what it should refrain from doing.

The George W. Bush administration’s 2006 budget proposal for Lifetime Savings Accounts and Retirement Savings Accounts is worth revisiting. Each would have allowed $15,000 a year to be set aside in after-tax dollars, and withdrawals (after one year for the former and at age 65 for the latter) would not be taxable events. Putting retirement benefits in one account and health, education, and others in another, taxing the money upfront and allowing interest and returns to accumulate tax-free, would be a great simplification. It could be done in the context of a fundamental tax reform that makes progressive changes to the tax code elsewhere, such as by eliminating or capping various deductions or converting deductions to a flat credit, thus preserving its political viability.

In contrast, a much bigger child tax credit—popular among many social conservatives (most notably championed by Ramesh Ponuru and Bob Stein)—is the wrong way to go. It does nothing to change savings incentives, nor does it affect anyone’s incentives to work more or do much of anything. It’s also not particularly progressive, as it would go to rich and poor alike—although if it were not made fully refundable it would go overwhelmingly to the wealthy. Again, a relevant question to ask is what would be done if such a program were administered outside the tax code: would there be any possibility of the government mailing $7,000 checks to every family for every child they have? If not, then why should we do this via the tax code?

It might be time to ask whether we want to include some sort of tax incentives to encourage higher birthrates. The average fertility for a woman in the United States is 1.85 births, which is below replacement rate. And it is falling, just as longevity for those who reach age 65 is growing at a rate faster than we’ve seen in quite some time.

Don’t incentivize college | It is undoubtedly true that the “sticker price” for attending college has increased dramatically in the last two decades. My own alma mater, Augustana College, exemplifies this trend: the price for tuition, room, and board when I began school in 1984 was under $8,000—and was under $9,000 when I graduated. Today, the price is over $40,000, an increase of roughly 5.3 percent annually over the last 30 years.

However, the actual price of college is much less than the sticker price of college, thanks to financial aid and the practice of colleges using aid to perfect the practice of price discrimination. Approximately 1 percent of Augustana’s students pay the full price. Using the Augustana tuition—or Harvard’s—as an indicator of the true cost of college presents a wildly unrealistic view.

Let me suggest another datum to use when calculating the true cost of college: In my hometown of Peoria, Ill., there is a fine junior college called Illinois Central College where I studied under a group of uniformly excellent teachers. Today, annual tuition there is just under $3,000. The tuition at the state’s four-year universities is $11,800. In other words, without any financial aid whatsoever, a resident of central Illinois can get a four-year degree for under $30,000. A family with an income under $100,000 (roughly 97 percent of all households in the area, incidentally) and students with excellent GPAs or ACT scores receive financial aid.

While it is very much true that the impending cost of college is a prime concern of most middle class families with children, using the tax code to help alleviate this has been counterproductive. It’s not necessarily the job of the federal government to make private universities affordable to the middle and upper middle classes. Besides, the inelastic supply of such services means that most of the subsidies government provides are captured by the universities.

Do no harm | As a former staffer for the Energy and Commerce Committee, I am well aware of the tendency toward jurisdictional imperialism. Nowhere did the minority and majority staffs work more closely than when the chair and ranking member perceived that another committee was encroaching on their jurisdiction. But a greatly simplified tax code that stripped out the various incentives currently in place to buy a house, an energy-efficient car, home weatherization, and a thousand other myriad and sundry things would result in a tax code less costly to administer and comply with, as well as one more amenable to economic growth. It would permit us to keep the tax rates on work lower than they currently are. I have no idea what Henry Thoreau would think of our current tax code, but his sentiment to “Simplify, simplify, simplify” is certainly an apt one today.