Steve Moskowitz explains that tax law does two things: raise money for government, and nudge behavior through hidden incentives. Since democracies can't command private action directly, they use tax breaks to steer people toward economically beneficial choices.
there's two purposes to our tax law. One everybody knows about— get money out of us. But the other one is it's a system of incentives. And what happens with a system of incentives is how does the government get you to do something when in a democracy they don't have the right to order us to do anything? So how do they get us to do something they want us to do? Good for the economy. Easy. They pay us. They pay us through the form of tax savings. You say, well, oh, okay, where are all these tax savings? They're hidden in the tax law.
