Phi Beta Cons

Tax Credits and Spending Roundup

I have no plans to re-enter the tax-credit debate, so I’m just going to pass along, with very little comment, the fact that a few liberal bloggers have weighed in on the use of tax credits (“tax expenditures,” “targeted tax breaks,” whatever) to create what they call a “welfare state” for the rich and/or middle class. Conservatives Bruce Bartlett and Josh Barro have also commented about how a tax policy that forgoes revenue in a targeted fashion — that is, the government stakes a claim to the money, and then offers to let the individual keep it if he spends it the way the government wants him to – has the exact same effect as one that collects the money and then spends it on the target directly. Also, here’s a suggestion that we eliminate the charity deduction.

UPDATE: Jamelle Bouie of The Atlantic has a post as well, though the conclusion — that tax credits prove the middle class and rich have a “huge stake in a functioning government” — is questionable. Yes, they’re getting a lot of government money in the form of targeted tax breaks — but the government can only spend money (whether that means writing checks or letting people out of tax obligations) if it’s funded, and that funding comes from . . . the rich and the middle class. If you eliminated these tax breaks and replaced them with across-the-board tax cuts, the rich (definitely) and the middle class (probably) would end up about the same. In other words, the government isn’t giving the rich money they wouldn’t have otherwise; it’s taking their money and then giving it back with conditions (such as that they spend it on mortgages or charitable giving).


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