Moral advocates and special interests engineer the tax code to reward those best equipped to navigate complex rules.

To understand the American tax code, you first need to understand a theory developed while watching liquor regulations in the American South. Economist Bruce Yandle noticed that two groups supported Sunday alcohol bans: Baptist ministers, who wanted to protect communities from drinking, and bootleggers, who wanted to eliminate their competition for a day. The two groups had different motives, but pushed for the same policy. Yandle called this dynamic “bootleggers and Baptists,” and it helps explain nearly every major provision in the US tax code.

The pattern is straightforward. A well-connected industry or interest group seeks a tax carveout. On its own, that effort would likely face public resistance. So, it aligns with a broader, more publicly acceptable goal, often championed by genuine reformers. The policy passes under that moral banner, and the administrative state, Treasury officials, IRS regulators, and rulemaking bodies translate it into law that shapes generations of American wealth.

Just to be clear, the bootleggers are not the villains of this story. They’re rational actors pursuing their interests through legal means. Groups can act as bootleggers in some contexts and Baptists in others, each believing their position serves a broader good. The broader question is whether the policies they shape keep resources in private hands where they’re used more efficiently than government spending.

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