The Cato Institute’s Dan Mitchell raises several objections to my op-ed on Republicans and taxes.
He admits that child credits and similar narrowly-focused tax cuts will not boost growth, but he argues they will be politically effective. But since when is it the job of Republicans do adopt suboptimal (or even bad) policies for short-term political reasons?
Mitchell is assuming that a tax policy change is suboptimal if it doesn’t boost growth. I don’t see why that’s the case. I would favor getting rid of the tax penalty on individually owned health insurance even if it could be shown that it wouldn’t increase growth at all. Wouldn’t Mitchell? The tax code introduces all kinds of distortions that can usefully be combatted. Some of them reduce growth, and some of them don’t, or don’t much. I made a (brief) policy case for the change I advocate, not just a political one–and Mitchell doesn’t engage it. (That case is that our entitlements constitute an implicit tax on child-rearing that the credit is necessary to counteract.)
And does Ramesh–or anyone else–think the Republicans can out-bid Democrats in offering favors to different constituencies? And if adopting Democratic ideas is the key to Republican political success, how can he explain the political success of Ronald Reagan and the political failure of Bush 41 and Bush 43?
Again, Mitchell is assuming that an expanded tax credit for children counts as a “favor” to a “constituency.” He wouldn’t use that language (although liberals would) to describe, say, a capital-gains tax cut. Classifying the expanded credit as a favor assumes that the policy case for it is wrong–but, again, Mitchell has made no argument for that.
The child tax credit isn’t a “Democratic idea.” It was introduced into the code by the Gingrich revolutionaries, and was a central part of their Contract with America. But if Democrats want to expand it, too, that would be great in my book.