Ten Tax Nudges and Their Unintended Consequences
The Internal Revenue Code as a Behavioral Code
The Internal Revenue Code is usually described as a mechanism for raising revenue. That description is technically correct and conceptually incomplete. Congress does not merely determine how much money citizens must surrender to government. It continuously alters the relative price of private choices. Save for retirement rather than spend today, and government offers favorable treatment. Purchase a home with a mortgage rather than rent, and interest may become deductible. Give money to an approved charity rather than to another recipient, and the tax consequences change. Receive health insurance from an employer rather than purchasing it individually with after-tax wages, and the value of the benefit generally disappears from taxable compensation. Invest for capital appreciation rather than earn additional salary, and the applicable tax rate may be lower.
These are not accidental features of taxation. They are nudges.
A prohibition says, “You may not do this.” A mandate says, “You must do this.” A tax nudge says something much more sophisticated: “You remain free to choose, but we will change the economic consequences of your alternatives so that one choice becomes more attractive than another.” The citizen retains formal autonomy while government quietly changes the price tags.
The behavioral power of the tax system is therefore enormous precisely because it seldom feels coercive. A taxpayer who increases a 401(k) contribution, purchases a larger home, accelerates a charitable contribution or keeps appreciated securities until death may believe that he is responding purely to market forces and personal preferences. Yet some of those preferences have already been altered by tax law. Government has entered the decision without appearing to enter the room.
This does not mean that tax incentives are inherently irrational or illegitimate. Some address genuine externalities, some encourage socially useful behavior, some recognize legitimate differences between economic transactions, and some may produce benefits considerably greater than their costs. The problem arises when the existence of a socially desirable objective is treated as sufficient proof that the nudge itself improves the welfare of every individual responding to it.
That is precisely where Rational Paternalism differs from conventional behavioral paternalism. Behavioral paternalism asks how the choice environment can be designed to move people toward behavior policymakers believe is desirable. Rational Paternalism asks a harder question: Does following the nudge actually advance the interests of this particular person, given that person's objectives, circumstances, opportunity costs and values?
The distinction becomes apparent when we examine ten familiar tax nudges and look not at their advertised benefits, but at their unintended consequences.
1. Retirement Tax Preferences: Save Now, Consume Later
The federal government strongly encourages retirement accumulation through tax-preferred accounts. In 2026, for example, employees can generally defer as much as $24,500 into a 401(k), 403(b), or similar qualified arrangement before taking applicable catch-up contributions into account, while traditional IRAs, Roth IRAs and other retirement structures operate under their own tax rules and limitations.
The public-policy rationale is understandable. Human beings discount the future, retirement can seem remote, and individuals who fail to accumulate sufficient assets may eventually become dependent upon family or government programs. Encouraging long-term savings can therefore serve both individual and social interests.
The difficulty is that retirement saving and tax-deferred retirement saving are not synonymous. A tax benefit can cause individuals and advisers to focus excessively upon the deduction today while insufficiently examining the tax liability tomorrow. A contribution to a traditional qualified plan generally postpones taxation; it does not necessarily eliminate it. The future value of the account, future marginal tax rates, required distributions, Social Security taxation, Medicare income-related surcharges, estate-planning objectives and liquidity requirements can radically change the economic result.
This becomes particularly important for affluent taxpayers. A person may spend decades accumulating virtually all retirement wealth inside tax-deferred accounts because the government rewarded every contribution along the way, only to discover at retirement that the government has effectively become a silent partner in the account. The larger the balance, the greater the future taxable distributions may become. What felt like wealth accumulation was partly tax-liability accumulation.
The nudge can also discourage present consumption even when present consumption would be perfectly rational. There is nothing inherently virtuous about dying with the largest possible retirement account. An individual who sacrifices travel, family experiences or personal enjoyment solely to maximize tax-deferred savings may have responded exactly as policymakers intended while becoming economically richer and experientially poorer.
Rational Paternalism would not tell the client to reject retirement accounts. It would ask whether the marginal dollar belongs in a qualified plan, a Roth arrangement, a taxable portfolio, life insurance, real estate, a business, charitable planning or present consumption. The deduction is relevant, but the deduction is not the objective.
2. The Mortgage-Interest Deduction: Own a Home, and Borrow to Do It
The mortgage-interest deduction is among the most culturally entrenched tax preferences in America. Current federal rules generally permit qualifying taxpayers who itemize deductions to deduct interest on qualifying acquisition indebtedness within statutory limits; for much post-2017 indebtedness, the relevant debt ceiling is $750,000, while certain older indebtedness remains subject to the previous $1 million limitation.
Homeownership can create stability, provide control over one's living environment, serve as a form of forced savings and produce substantial long-term wealth. None of that establishes, however, that purchasing a house is superior to renting in every circumstance, or that borrowing more money is superior to borrowing less.
The mortgage deduction creates a peculiar incentive because the taxpayer receives the deduction only by incurring interest expense. A person contemplating whether to pay down a mortgage can therefore hear the familiar objection: “But you will lose the tax deduction.” That reasoning reverses the economic relationship. No rational person should willingly pay a dollar of unnecessary interest merely to avoid paying some fraction of that dollar in taxes.
The deduction can also contribute to a mental accounting error in which the homeowner evaluates the monthly payment after tax rather than the actual economic cost of the property. Once the tax system reduces the perceived cost of borrowing, a larger mortgage can appear more affordable. A taxpayer may therefore purchase more house, maintain more leverage or delay debt reduction because government has subsidized part of the carrying cost.
Homeownership itself can create additional opportunity costs. Capital committed to a residence is capital unavailable for a business, securities portfolio, education, mobility or consumption. Transaction costs can make relocation expensive. A household may become geographically anchored to an asset precisely when employment opportunities require flexibility. None of these effects appears on the mortgage-interest deduction worksheet.
The rational question is therefore not, “How large a mortgage deduction can I obtain?” It is, “What housing arrangement maximizes my welfare after considering financing costs, taxes, opportunity costs, mobility, risk and personal preference?” Tax law should enter that calculation. It should not determine the answer.
3. The Charitable Deduction: Generosity With Government Participation
The charitable deduction represents one of the most intellectually interesting tax nudges because it involves not merely financial behavior but moral behavior. Federal law allows deductions for qualifying contributions to eligible organizations, subject to numerous limitations and substantiation requirements. Beginning in tax year 2026, even taxpayers who do not itemize may deduct limited amounts of qualifying cash contributions—generally up to $1,000 for an individual or $2,000 for a married couple filing jointly under the new rules.
The conventional explanation is that society wants more philanthropy, so government reduces the after-tax cost of giving. Yet that formulation conceals an important fact: a charitable deduction is partly a governmental decision about which forms of generosity deserve favorable treatment.
Give $10,000 to a qualifying university, hospital or public charity and the tax code may reward the transfer. Give the same $10,000 directly to an impoverished neighbor, an unemployed friend or a struggling relative and the charitable deduction generally disappears because gifts to individuals do not qualify. The moral act may be indistinguishable to the donor, but government has classified one form of generosity as tax-preferred and the other as private consumption.
The tax incentive can also distort the timing and structure of philanthropy. Donors may bunch contributions into particular tax years, contribute appreciated assets rather than cash, establish donor-advised funds, create charitable trusts or select one charitable vehicle over another because of tax efficiency. Sophisticated charitable planning can accomplish tremendous good, but at some point one must acknowledge that government has influenced not simply whether people give but how, when and to whom they give.
There is another subtle problem. The language of the charitable deduction can reinforce the assumption that philanthropy represents sacrifice: I surrender something for someone else's benefit, and government compensates me for part of the sacrifice. That framing is inconsistent with enlightened self-interest. People frequently give because giving expresses their values, advances institutions they care about, strengthens communities they inhabit, supports ideas they want perpetuated, creates family identity, produces emotional satisfaction or establishes a legacy. None of those motives requires altruistic self-abnegation.
Rational Paternalism therefore begins with the donor rather than with the deduction. What does the donor value? What does the donor want to accomplish? What resources can be transferred without compromising personal and family objectives? Only after those questions are answered should the tax system determine the most efficient method of accomplishing the donor's purpose.
4. Employer-Provided Health Insurance: The Job Becomes the Gateway to Health Coverage
Employer-provided health insurance receives exceptionally favorable federal tax treatment. Employer payments for qualifying accident or health insurance generally are not treated as employee wages and ordinarily are not subject to federal income-tax withholding, Social Security, Medicare or FUTA taxation.
The benefit is so familiar that it barely registers as a government intervention. Yet imagine an alternative system in which an employee received additional taxable salary and independently purchased identical insurance. The tax consequences could be very different. Government has therefore made compensation delivered as health coverage more attractive than an equivalent amount delivered as ordinary wages.
The unintended consequence is the institutional marriage of employment and health insurance. A benefit originally intended to make health coverage more affordable also helps create what is commonly called “job lock”: the economic decision to change employment, retire early, start a business or work independently may become entangled with the availability and cost of health insurance.
It can also encourage excessive consumption of health benefits because compensation delivered through tax-preferred insurance can be more attractive than taxable wages. Employees may prefer richer health plans even when they would choose a different allocation between insurance and cash if both forms of compensation received identical tax treatment. Employers, meanwhile, become administrators of an enormously personal financial and medical benefit that need not logically be tied to the employment relationship at all.
The nudge therefore illustrates a general principle: when government gives favorable treatment to a particular delivery mechanism, markets gradually reorganize themselves around that mechanism. What begins as a tax exclusion becomes an institution.
5. Preferential Capital-Gains Taxation: How You Earn Matters
Federal taxation distinguishes between ordinary income and qualifying long-term capital gains. Net long-term capital gains generally receive lower maximum federal income-tax rates than ordinary income, depending upon the taxpayer's circumstances. The IRS continues to describe net capital gains as subject to preferential rates rather than the regular individual income-tax rates.
There are defensible reasons for this distinction. Investment requires capital at risk, nominal gains may partly reflect inflation, entrepreneurship should not necessarily be treated identically to wages, and excessive taxation of gains can discourage capital formation. Nevertheless, once two dollars of economic gain receive different tax treatment depending upon their legal classification, rational taxpayers will attempt to produce more of the favored dollar.
This creates an enormous industry devoted to transforming, timing, deferring and characterizing income. Compensation may be structured around equity. Assets may be retained longer because realization triggers tax. Investors may refuse to sell a deteriorating or excessively concentrated position because of the embedded gain. Entrepreneurs may structure transactions partly according to whether proceeds qualify for capital-gain treatment.
The resulting “lock-in” effect is especially important conceptually. Without taxation, an investor should sell an asset when its prospective risk-adjusted return is no longer competitive with available alternatives. With a realization-based capital-gains tax, the investor must overcome an immediate tax cost before reallocating capital. Government has therefore altered the price of changing one's mind.
The preferential rate may encourage investment, which may be desirable. It can simultaneously discourage economically rational portfolio reallocation. Both propositions can be true.
6. Step-Up in Basis at Death: Sometimes the Tax Code Rewards Dying Before Selling
Few provisions illustrate unintended incentives more dramatically than the basis rules applicable to inherited property. In general, inherited property commonly receives a basis related to its fair market value at the decedent's death, subject to statutory exceptions and specialized rules. IRS guidance specifically addresses the use of date-of-death values in determining the basis of inherited assets.
The result can be economically striking. An individual who purchased an asset for $100,000 that is now worth $1 million may face a substantial capital gain if the asset is sold during life. If the property instead remains in the estate until death, the heir's basis may be adjusted to the applicable estate-tax value, potentially eliminating much of the income-tax gain that accumulated during the decedent's lifetime.
That creates what might be called the ultimate lock-in incentive. The tax code may reward continuing to own an asset not because the asset remains the best investment but because selling it before death creates a tax liability that may disappear if ownership continues long enough.
This can distort investment management, estate planning and family decision-making. An elderly investor may retain concentrated stock, appreciated real estate or a business interest despite compelling diversification reasons because the embedded capital gain has become economically inseparable from the asset. The family may inherit an asset the decedent would otherwise have sold years earlier.
Again, the rational taxpayer is not behaving irrationally. Given the rules, waiting may be economically correct. The distortion lies in the rule changing the economically optimal behavior.
This is an important distinction throughout the entire discussion. People responding to distorted incentives are not necessarily making irrational decisions. They may be behaving entirely rationally inside an artificially altered environment.
7. Child-Related Tax Preferences: Government Enters the Family Budget
The tax code contains numerous provisions intended to reduce the financial burden of raising children, including the Child Tax Credit, the Additional Child Tax Credit, dependent-care provisions and other family-related benefits. The IRS currently describes the Child Tax Credit as providing up to $2,200 for a qualifying child, with a portion potentially available through the Additional Child Tax Credit subject to applicable requirements.
Few people decide whether to have a child because of a tax credit, and it would be absurd to suggest otherwise. Yet tax benefits still alter the relative cost of household choices. They influence disposable income, childcare economics, labor-force participation and the allocation of resources within families.
The paternalistic premise is evident: raising children produces social benefits, families incur substantial expenses, and government therefore chooses to subsidize part of that cost. The difficulty is deciding where support ends and social engineering begins. Tax law must define a qualifying child, establish income thresholds, determine which expenses receive favorable treatment and decide which household configurations fit statutory definitions.
The tax system consequently places government inside decisions that are intensely personal. Whether one parent remains home, whether both parents work, whether formal childcare is purchased, how income is allocated between spouses and even how unmarried parents claim children can acquire tax consequences.
The deeper philosophical question is not whether helping families is desirable. It is whether tax law should attempt to define the economically preferred family behavior and how far that preference should extend. Rational Paternalism would insist that family welfare be evaluated from the family's own hierarchy of values rather than assuming that maximizing tax credits necessarily maximizes welfare.
8. Education Tax Preferences: Subsidizing the Credential and Potentially Its Price
The federal tax code provides multiple education-related preferences, including education credits and tax-favored §529 qualified tuition programs. Earnings in a qualifying 529 arrangement generally escape federal income tax when distributions are used for qualified educational expenses.
The policy objective is almost universally attractive: encourage education and human-capital formation. Yet the statement “education is good” does not logically establish that every dollar spent on every credential produces value greater than its cost.
Tax subsidies can reduce the perceived price of education and thereby weaken price discipline. Families may focus upon accumulating money for “college” years before examining what kind of education will actually improve the student's intellectual development, professional competence or earning power. The tax-preferred account can subtly transform education from an economic decision into a presumed obligation.
This matters enormously in an economy in which traditional universities compete with professional credentials, apprenticeships, technical programs, entrepreneurial experience and rapidly evolving forms of technology-assisted education. Government inevitably lags innovation because statutes must define which institutions, expenses and programs qualify for particular benefits.
The unintended consequence is that a policy intended to support human capital can become a subsidy for whichever institutions successfully fit the statutory definition of education. The student's objective should be competence, knowledge and opportunity. The tax code's objective is necessarily defined through administrable categories. Those objectives overlap, but they are not identical.
A rational adviser should therefore never begin with, “How much should you put into the 529?” The preceding question is, “What educational outcome are you trying to finance, what might it cost, and what alternatives exist?” Only then does the tax wrapper become relevant.
9. Clean-Vehicle and Energy Credits: The Government Chooses the Technology, Then Changes Its Mind
Environmental tax incentives provide perhaps the purest example of a governmental nudge because their behavioral purpose is explicit. Congress wants consumers to purchase one technology rather than another, so it changes their relative prices through tax credits.
The recent history of clean-vehicle and residential-energy credits makes the example even more instructive. Federal credits previously made qualifying electric vehicles, energy-efficient improvements and residential clean-energy installations materially less expensive. The 2025 legislation then accelerated the termination of several of those incentives. Clean-vehicle credits generally became unavailable for vehicles acquired after September 30, 2025, while the principal residential clean-energy and energy-efficiency credits ceased for new qualifying expenditures or property after December 31, 2025.
This exposes a risk that exists whenever government uses taxation to select preferred technologies. The consumer is not responding solely to engineering, energy cost, reliability, resale value and personal preference. The consumer is also attempting to predict Congress.
A $7,500 tax incentive can change a purchase decision without changing anything about the underlying automobile. Its removal can change the decision again. The vehicle did not become less environmentally beneficial on October 1, 2025. The statutory economics changed.
The same problem applies to solar installations, batteries and energy-efficiency improvements. Once government intervenes in relative pricing, private capital flows toward the subsidized activity. Manufacturers alter production, consumers accelerate purchases, installers expand capacity and financing companies structure transactions around the incentive. When policy changes, the economic landscape changes with it.
This is one of the great weaknesses of paternalistic tax policy: it introduces political risk into private economic calculation. A technology that succeeds because consumers voluntarily value it faces market risk. A technology whose economic attractiveness substantially depends upon tax incentives faces both market risk and legislative risk.
The lesson is not that government should never address environmental externalities. The lesson is that subsidizing a specific consumer behavior is not equivalent to correcting an externality in a technologically neutral manner. Once government begins selecting the preferred path, political judgment begins substituting for decentralized economic judgment.
10. The SALT Deduction: Federal Tax Policy Subsidizes State Tax Policy
The deduction for state and local taxes is a particularly complicated nudge because it sits at the intersection of federalism, taxation and geography. Current law permits individuals who itemize to deduct qualifying state and local taxes subject to an overall limitation that is generally $40,000 for 2026, or $20,000 for married taxpayers filing separately, with reductions for certain higher-income taxpayers and a statutory floor on how far the limitation can be reduced.
There are legitimate arguments for allowing the deduction. A dollar already taken by state government is arguably less available to pay federal taxes, and state and local services may substitute for services that would otherwise have to be funded elsewhere. Yet the deduction also changes the effective price of state taxation.
If part of an additional state or local tax payment reduces federal taxable income, the taxpayer does not necessarily bear the entire nominal cost of that tax. The federal government effectively absorbs part of the economic burden through reduced federal revenue. This can make high-tax jurisdictions somewhat less expensive to their residents than they would be in the absence of the deduction.
Conversely, limiting the deduction makes differences among states more economically visible. A taxpayer deciding whether to live in California, Texas, Florida, New York or another jurisdiction begins confronting more directly the cost of the tax-and-service package offered by each state.
This creates an unusual form of intergovernmental paternalism. Federal tax law changes the price of state government. Congress is therefore not merely influencing whether an individual saves, buys a house or attends college. It is influencing how much of the cost of another government the taxpayer actually experiences.
The unintended consequence can run in both directions. A generous deduction can weaken taxpayer sensitivity to state taxation. A restrictive limitation can disproportionately affect taxpayers in jurisdictions with high property and income taxes and can influence migration, real-estate values and political attitudes. Either way, federal tax policy is altering the feedback mechanism between citizens and their state governments.
The Common Error: Confusing a Tax Advantage With an Economic Advantage
These ten examples differ enormously, but they share a common structure. Government identifies conduct it wishes to encourage, tolerate or protect; assigns that conduct favorable tax treatment; and thereby changes the economic relationship among competing choices.
The resulting behavior may be entirely rational. A taxpayer who maximizes a 401(k), finances a home, contributes appreciated securities to charity, receives employer-sponsored health insurance, delays realization of capital gains, retains appreciated assets until death, funds a 529 plan or responds to a tax credit is not necessarily being manipulated into foolishness. Given the law, those may be precisely the economically rational choices.
The philosophical problem occurs one level earlier. Why did those choices become economically superior?
If the answer is partly “because government changed their relative prices,” then the market outcome cannot be described as entirely independent private preference. The state has become a participant in the decision.
That observation also exposes one of the weaknesses of traditional behavioral economics. The behavioral-paternalist argument often begins by observing that human beings are imperfect decision-makers. We procrastinate, discount future benefits, misunderstand probabilities, follow defaults, react asymmetrically to gains and losses and rely upon heuristics. Policymakers then propose designing the choice architecture so people are more likely to make the “right” decision.
But who determines what the right decision is?
Saving more for retirement sounds prudent until the person has sacrificed decades of meaningful consumption and dies with an enormous retirement account. Homeownership sounds prudent until an oversized mortgage destroys financial flexibility. Charitable giving sounds virtuous until a donor compromises family security to satisfy a moral expectation of sacrifice. College sounds indispensable until a student incurs enormous costs for a credential with little economic or intellectual value. An electric vehicle sounds environmentally responsible until the consumer's actual usage, financing cost, electricity source, depreciation and alternatives are considered.
The behavioral paternalist identifies a general social objective and designs incentives around it. The rational paternalist begins with the individual.
Rational Paternalism Does Not Mean Ignoring the Nudge
Rejecting governmental paternalism does not mean behaving as though tax law does not exist. That would be financial malpractice. Once government establishes the rules, those rules become part of economic reality.
The appropriate response is therefore not ideological purity. It is rational optimization.
A professional adviser should explain the incentive, quantify its value, identify the behavior it encourages, expose the opportunity costs it conceals, and determine whether accepting the nudge advances the client's objectives. Sometimes the answer will emphatically be yes. A client should maximize the qualified plan. Another should pay off the mortgage. Another should deliberately maintain it. Another should establish a charitable remainder trust. Another should sell the appreciated asset and pay the tax rather than allow tax avoidance to perpetuate an unacceptable investment risk.
Professional judgment exists precisely because statutory incentives cannot know the individual.
This is also where professional ethics separates itself from compliance. Compliance asks whether the transaction fits within the rules. Professional ethics asks whether the transaction should be recommended at all. Something can be tax-efficient, legally permissible, regulatorily compliant, and economically foolish simultaneously.
The Internal Revenue Code cannot make that distinction for the client.
The Invisible Paternalism
Direct government expenditures attract political attention because they are visible. If Congress appropriates $10 billion for a program, legislators debate the expenditure and the public can see the number. Tax preferences often operate more quietly. Government collects less revenue from one form of behavior than another, and the behavioral subsidy becomes embedded in the tax system.
That invisibility matters because citizens may not recognize how extensively public policy has altered their private decision-making environment. The homeowner sees a mortgage deduction rather than a housing subsidy. The executive sees a 401(k) contribution rather than a subsidy for deferred consumption. The employee sees employer health insurance rather than a subsidy for receiving compensation in one form instead of another. The investor sees a capital-gains rate rather than an incentive affecting the form and timing of income.
The terminology itself sanitizes the intervention. We call them deductions, exclusions, credits, deferrals, basis adjustments, and preferential rates. Economically, many operate by changing the price of behavior.
Once that is understood, an important conclusion follows: tax simplification is not merely an administrative objective. It is also a question about the proper boundaries of governmental influence over private decisions.
A theoretically neutral tax system would raise revenue while altering private choices as little as practicable. The actual tax code does something very different. It communicates thousands of judgments about which activities deserve encouragement, which investments deserve preference, which relationships deserve recognition, which expenditures deserve deduction, and which forms of income deserve different treatment.
The Internal Revenue Code is therefore not only a fiscal document. It is an enormous statement of governmental values.
Life Insurance: When the Nudge Becomes Product Architecture
Life insurance deserves separate treatment because it takes this concept one step further. Sections 101, 7702, and 7702A do not merely change the relative attractiveness of life insurance. They help determine what a tax-qualified life insurance contract must actually look like.
Section 101(a) generally excludes qualifying death proceeds from gross income. Section 7702 establishes actuarial requirements defining a life insurance contract for federal tax purposes, while §7702A determines when funding causes an otherwise qualifying contract to become a Modified Endowment Contract, with different consequences for distributions under §72.
Here, the government is no longer merely saying, “We prefer that you own life insurance.” It is effectively saying, “If you want this tax treatment, the relationship among premium, cash value and death benefit must remain within the architecture we have prescribed.”
This is why life insurance provides such an important extension of the ten nudges. Tax policy has ceased merely influencing the consumer's selection among products. It has begun influencing the construction of the product itself.
The same professional principle nevertheless applies. A client should not purchase permanent life insurance merely because its tax characteristics are attractive any more than the client should carry an unnecessary mortgage merely because the interest is deductible. The insurance, liquidity, guarantees, risk transfer, accumulation characteristics, estate-planning consequences and tax treatment must collectively advance the client's interests.
“Tax advantaged” and “economically advantageous” are not synonyms.
From Behavioral Paternalism to Rational Paternalism
There is nothing inherently sinister about a nudge. Government necessarily creates incentives whenever it taxes one activity differently from another, and some differences may be economically or morally justified. The danger lies in assuming that because a policy encourages conduct that sounds socially desirable, following the policy must be desirable for every individual.
Rational Paternalism begins with a different premise. The individual is not a statistical abstraction whose behavior must be corrected until it resembles the policymaker's preferred outcome. The individual has objectives, values, obligations, preferences and circumstances that may differ materially from population averages.
The professional's job is not to defeat government policy, nor is it to obediently implement it. The professional's job is to understand the architecture government has created and then help the client navigate it rationally.
Sometimes that means accepting the nudge. Sometimes it means exploiting it aggressively. Sometimes it means ignoring it. And occasionally it means paying more tax because the supposedly tax-efficient alternative is economically inferior.
That final possibility is particularly important. In contemporary financial planning, tax minimization is often treated as though it were an independent virtue. It is not. Taxes are one expense among many. Rational people minimize total economic cost, not necessarily the amount appearing on a tax return.
The objective is not to die having paid the least possible tax, accumulated the largest retirement account, claimed the greatest number of deductions or responded most obediently to Congress's incentives.
The objective is to live according to one's rational self-interest.
Government may design the nudge. It should not be allowed to define the destination.