He disliked government's using the code to conduct industrial policy, picking commercial winners and losers, which is a recipe for what is called "lemon socialism" -- tax subsidies for failing businesses that the market says should fail. Regarding the second part of Reagan's statement, any tax code is going to shape society. But he opposed manipulating the tax code to stigmatize this or that consumer preference. Which is what the code's anti-hot-tub provision does.
One wonders: Why did the social improvers who used the code to put the government, in its majesty, on record against hot tubs and tanning facilities not extend their list of disapproved choices? Their list looks morally lax.
Really stern social conservatives probably favor explicitly proscribing government assistance to lots of things, most of them somehow involving sex. Government could preen about being too moral to subsidize, with tax-preferred bonds, economic projects that include bookstores that sell Judy Blume novels, or hotels that offer in-room pornography. And wouldn't it be fun to find the words "lap dance" in the nation's tax code?
As strongly as social conservatives deplore commercialized sex, liberals deplore cigarettes, Big Macs, firearms, fur coats, SUVs, pornography not printed on recycled paper, pornographic movies produced by nonunion studios, holiday trees provocatively labeled "Christmas trees" and much more.
But do we really want to march down this road paved with moral pronouncements? When government uses subsidies to moralize, as with tax preferences for bonds that can be used to finance this but not that, government is speaking. It is expressing opinions about what is and is not wholesome. And once government starts venting such opinions, how does it stop?
Government could spare itself the stress of moralizing about so many things if it decided that the choices people make with their money is their, not its, business. And government could avoid having opinions about so many things if it would quit subsidizing so many things.
When, for example, the valuation and allocation of money through bonds is left to the market, government can be reticent. And reticent government sounds wonderful.