Winners, Losers, and Taxes

by Ramesh Ponnuru

Veronique writes,

[A] key aspect of fundamental tax reform would be to move us toward a broader base to which a lower tax rate would be applied.

Based on this goal, I have to disagree slightly with Ramesh’s Bloomberg article yesterday. In that piece, he calls for scaling back certain tax expenditures while also expanding refundable tax credits or taking more people off the tax roles. He’s right that we could get rid of deductions (like the state and local taxes and mortgage-interest deduction), especially if overall  marginal rates are cut. There is some evidence that these tax deductions, on average, benefit affluent households the most. However, in the context of fundamental tax reform, that seems inconsistent with the idea of expanding the per-child tax credit. Plus, why stop picking winners and losers along one dimension only to pick more winners and losers along a different one?

It’s the existing structure of our tax code and entitlement programs that “picks winners and losers,” to the detriment of parents. An expanded child credit would offset this bias, eliminating the bias against family formation and expansion that exists in current federal policy. That’s why it’s a key part of a tax reform that moves away from “picking winners and losers.”

The Corner

The one and only.