Spending Through the Tax Code

October 2nd, 2011 at 11:37 am

This is an old point that’s been made many times over, so I won’t belabor it, but reading this AMs paper and reflecting on our fiscal debate, I was reminded of one particularly irrational aspect of the thing.

Those who pledge not to raise taxes yet are comfortable with spending cuts make an artificial distinction between spending and tax cuts which look and smell no different from spending.

Here’s a good e.g. from my CBPP colleague Bob Greenstein:

A parent with low or moderate income may be able to obtain a subsidy to help her defray child care costs, with the subsidy being provided through a government spending program. A parent higher on the income scale also can receive a government subsidy that reduces her child care costs, but this parent’s subsidy is delivered through the tax code, via a tax credit.

It does not make much sense to make the tax-code subsidies sacrosanct and the program subsidies a target for deficit reduction merely because one type of subsidy is delivered through a “spending” program and the other is delivered through the tax code.

This also relates to a point Milton Friedman used to make, as Tyler Cowan reminded me in this AMs NYT: to spend is to tax.  (It’s also another reminded of how yesterday’s conservative saints, like Friedman and Reagan, the latter of whom presided over many tax increases, would be kicked out of today’s party.)

I’m as dovish as they come on the deficit, but over the long run, you have to live within your means.  So if you’re unwilling to raise the revenue we need to cover our spending, you either cut that spending to the point where government is disabled, or you postpone the payments to be made by later generations.

At the end of the day, the spending/taxing dichotomy is a false one.

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4 comments in reply to "Spending Through the Tax Code"

  1. D. C. Sessions says:

    At the end of the day, the spending/taxing dichotomy is a false one.

    Which at best does not diminish its popularity, and more likely enhances it.

    I’d retire wealthy if I had a buck for every time someone used the “letting me keep my own money isn’t spending” line.

  2. Comma1 says:

    Not to state the obvious, but a subsidy through the tax code, by its nature, only applies to those of a certain income. As such, all subsidies have an element of class warfare, and by definition, are an attack on those of less income.

    So there is a difference, you’re giving Repubos too much credit.

  3. Foster Boondoggle says:

    You’re arguing a point that’s “downstream” from where the GOP claims about taxes and spending are made. The GOP view is that “I should get to keep everything I earn” and proceeds from there. A tax expenditure is just letting me keep more of what I earn, so that doesn’t require justification. But spending “my” tax money on someone else does require justification.

    That’s a pretty simple point of view to understand (as well as being a pretty simple-minded point of view). Your argument, which has as its underlying presumption that we all share in the cost of society and therefore the starting point for a calculation of gov’t expenditures should be a “no deductions or credits” baseline, assumes away the “it’s my money” viewpoint.
    (Also, it requires an attention span that covers a paragraph so it’s incomprehensible to the yahoos.)

  4. josie says:

    My daughter was at work with me until she started walking. Not in HOME either. At my WORK. i would lay a playmat down for her to roll around on. I got her a bit jeep as she got older to cruise around the office in. And also a jumperoo and swing. It figured out fine. I’d say if your at a desk… it would be NO problem having himthere with you. you can surprisingly do alot while feeding… on a computer. And then during naptimes… save your more challenging stuff for then.
    It can compute. but as she started walking it was harder to monitor what all she was getting into… therefore, she now goes to daycare.