Letting someone keep an extra portion of their own income, but only if used for savings or healthcare, is referred to as "tax expenditure". This person - again we're only talking about them being allowed to keep a slightly larger fraction of his/her own income - is a "welfare queen".
Your premise is that it's their income to begin with which is based on the assumption that the entire value of whatever they get is 100% based on their own work.
Thats not how salaries works. There are a lot of factors involved in a salary not just your own work. For instance the protection of your property rights, the borders, against criminals and so on.
We can discuss how much we should pay in taxes, but this false premise that your income is a one to one reflection of your work is simply false.
That is not the framing of the article, it's a key argument made in the second answer:
"Budget experts and many policymakers (including Republicans such as [House Speaker] Paul Ryan) consider targeted tax breaks as being similar to actual government spending."
Unfortunately this is not expanded upon, but its eminently reasonable. If you don't like this way of talking about it, the argument becomes that they make the tax system more regressive than it appears to be.
So by claiming that there is some "framing" going on instead of engaging with the actual argument that is _explixitly stated_ you're only preventing discussion and analysis on the systemic origins of inequality.
If you start from the assumption that everything (and by extension, everyone) is owned by the government, then this reasoning makes sense. The only reason you have anything is because the government has allowed you to have it.
Of course, the flip side is that if it is all owned by the government, they can choose to take it away at any time because it's not like you earned it.
Which is an unfortunate line of reasoning when combined with Basic Income Guarantees..
Many people reading this would bristle at the idea that tax breaks can be equated to welfare. The former reduces the tax bill that you need to give the government, while the latter gives you free money/services that you never had to pay for yourself. Depending on your perception, the 2 can seem wildly different and to say they are equivalent would be a hard sell.
However, the article does touch on 2 very important ideas:
1) Redistribution of wealth is an innate part of government. The term has such a bad connotation, but so many immensely popular government programs basically come down to redistribution of wealth. An increase in welfare redistributes wealth from the rich to the poor. The 401k tax subsidy redistributes wealth from the middle-class to the rich. The mortgage-interest-deduction redistributes wealth from renters to home-owners, and especially, multiple-home-owners. People associated "redistribution of wealth" with robbing the rich, but in reality, a huge number of tax deductions have the opposite effect of redistributing money from those with less money, to those with more money.
2) Instead of boldly owning up to the above, politicians try to get around the "redistribution" stigma by sticking in tax deductions/expenditures instead. These tax expenditures seem more politically palatable, but in reality, have the effect of distorting the market and picking coincidental winners and losers. HSA plans? You just rewarded people with predictable medical expenditures over those with unpredictable medical expenditures. Mortgage interest deductions? You just rewarded people who prefer to invest in real-estate, and not those who prefer to invest in stocks. What you end up with are certain people, who undeservedly benefit greatly from these tax programs, and others who are just as deserving, but don't get the benefits.
Using tax deductions to enforce "fairness" is simply not a good idea. Issues of fairness should be managed at a macro scale, by adjusting the overall tax rates, and through the public safety net. Tax deductions should be used as a very specifically targeted tool, aimed at discouraging negative externalities, and encouraging positive externalities. For everything else, we would be better off scrapping them entirely, and adjusting the overall tax rates downward instead.
In what sense do tax breaks not distribute income? Tax breaks most certainly change the income redistributing effects of progressive tax systems. This is the main point of the article.
If you want to claim that that changing a redistributing effect to benefit the rich, is not the same as redistributing towards the rich, you are merely playing semantic games.
Because you didn't "make" it. You didn't start from what nature gave you sat down one day and created value. You drove on public roads, used your public education, enjoyed the safety of the police while doing so, breathed air that's clean due to enforced regulations, etc...
What value you create you create in the context of society. Your company keeps part of the value you create. So does the state. They have that leverage over you because you could not create it without them.
Their legitimization is based on contracts for companies, and on democracy in the latter.
Taking things from people without their consent is immoral. It's that simple. That doesn't mean that there shouldn't be some taxes, but understand that taxes are immoral.
Taxes are neither moral or immoral, thats how simple it is.
There is no philosophical or moral or ethical argument for claiming that it is either of those.
You start with the wrong premise. Namely that it's taking things from people without their consent. But even if we are to start there, the taxes are being taken before they get them so not even strictly speaking is it immoral (or moral). And the actual salary you get is different based on which country you live in, what part of the country you live in and so on.
Also, just because a majority of people vote to take things from you does not make it moral. That means that you can justify slavery with a majority vote.
This has nothing t do with voting. You don't need democracy to tax people.
You starting point, like that of the libertarians and anarcho-capitalists is based on an idea that you own what you produce but since you don't own what nature produces this line of reasoning quickly breaks down. You don't own the nature and so whatever you use from it isn't your moral right to keep.
I am presuming as a baseline the given system. Then a tax break is redistributional, because tax is progressive. If you want, it is redistributional because it undoes existing redistributions.
> Tax breaks do not distribute income. Not up, not down, not at all. Thus tax breaks to not redistribute income either.
Okay so I am now dictator of the USA. I set the tax rate to 100%. But boys get a 100% tax break. Girls pay the as listed 100% tax rate.
I am not redistributing wealth from girls to boys? Someone has to pay for the government which helps everyone. In my case, girls pay 100% of it. Boys have money to spend on food and toys at the end of the day, girls have nothing.
It's the interplay of tax and expenditure which redistributes income. So, to use your example: If the government spent 100% of tax revenue on the girls, then there is no redistribution.
And as we all know, in the real world US, virtually all Federal expenditure is on social welfare, defense, and interest on the debt. Thus you could cut ~75% of tax revenue before the effect you discuss comes into being.
while I flagged the article; it is after all more election year drivel; the primary reason people take offense at equating tax breaks with welfare is that welfare requires no effort on the receiver to contribute to the system whereas a tax break is relief from the taking by government of your work.
Or worded another way, welfare is assumed to be given to those who are not productive members of society while a tax break is considered to be a reduction in taking from a productive member.
The idea with the welfare system is that if people for a number of reasons suddenly is without a job there is a system to support them and hopefully help them back on track again.
So paying taxes is in many ways a collective insurance system. Some people never needs it, good for them. Some have lived on it their whole life, bad for them. But some might have paid taxes their whole life and is now cashing in on that.
The same thing could in some way be said about Denmark a country who have free healthcare, free education (including university), free roads, free almost everything (but high taxes)
Denmark have more people hired in the public sector than China relatively to their size and many of these people have long education and function as managers and is part of the problematic New Public Management philosophy which has spread throughout the western countries as their legislation and society in general apparently becomes harder and harder to understand.
Now how can a country with free healthcare, free education etc. be a wellfare state for the wealthy?
It can because those who are highly educated knows how the system works, can speak the "language" and are able to be treated better than the rest. Heck you don't even have to be wealthy to be treated better you just need to be higher educated.
Of course the US is more extreme but still the underlying patterns are still there. That the welfare system is built by those who need it the least. But how to fix it, now thats a discussion in itself.
> In 2015, the federal government spent over $1 trillion via tax breaks and the majority of that money went to social welfare programs.
> Q: So because I have an employer-sponsored 401K and health care plan, take the home mortgage interest deduction on my tax return, and save money for my kids’ college education in 529 accounts... Yes, you are a welfare queen
Just wow. I would expect this sort of stuff from Marxist professor, not from Washington Post.
It's a question and answer with Syracuse University political scientist Chris Faricy, so I guess it isn't just from the Washington Post. Or rather, their publishing the QA probably is not a political statement on their part. Who knows, he could actually be a Marxist.
For those making Google and Facebook software developer salaries what are you legally doing to keep more money in your pocket and away from the government?
When you make a middle class salary taxes taken feel like a fair share yet when jump up into other tax brackets the view of fairness gets weaker.
This takes such a short-sighted, illogical view of the underlying mechanics that tax expenditures and tax breaks rely on.
In the case of SNAP, you are eligible for those benefits if you are below a certain % of the federal poverty limit (FPL) based on your household size. If you earn more than a certain amount, you no longer qualify because presumably you should be able to pay for food on your own. This very directly says, "We will give you something of monetary value, if you remain poor."
In the case of a tax break, like contributing to your HSA or IRA, you don't have to pay taxes on that income (or at least not now). You can contribute up to a certain amount each year but beyond that you no longer receive that benefit. This very directly says, "We will give something of monetary value, if you save money."
Both are using government funds to encourage behavior "We will give you something of monetary value, if you [perform some behavior]." I would suggest that the intended behavior is fundamentally different and is where the real difference in these two lie.
Perhaps I'm jumping to conclusions based on the tone of the article, but the author seems to indicate that both scenarios are equally problematic, when I think there is a very logical difference. Both achieve a similar short-term net output - $X in potential taxes not remaining in the government. The difference is about whether the $X creates long-term value that exceeds that value and she seems to gloss over that to drum up a controversial article.
Edit: I'm not suggesting that either breaks of expenses are inherently better than the other. For example, an earned income credit, to me, seems to encourage a behavior that would be in line with the motives behind a tax break. I just think this is a very short-sighted analysis of both ideas and serves only to create controversy.
"In 2015, the average household in the top 1 percent received pensions subsidies worth over $13,000 while the average benefit for a middle-class family was only $1,000."
The reason is that the top 1% made and contributed probably 10 or 20 or 30 times more than any middle-class family.
In addition to this, they all pay employees, which contribute even more tax money to the system (which is never discussed in articles like this).
This article paints the false narrative that the 1% aren't paying their 'fair share'. In fact, they pay the majority of federal taxes every year and corporate taxes are some of the highest in the world...and you want them to pay more?!
The majority of stories I see about companies paying $0 in taxes, etc are nearly all reporters purposely preying on the ignorance of the average person that has no idea how corporate taxes work.
For instance, I got back thousands of dollars last year and if you took it out of context, you might think that I paid no taxes that year. However, it's only because corporations have to pay estimated quarterly taxes, and if your sales are down and you don't make as much, you get the extra money back (that you over-estimated based on current sales).
So we could change the system, where the government takes way more, in an effort to be 'fair'. But the problem is it won't be the same. The government doesn't create anything.
The 1% will leave the country well before this happened, and the middle class will be be the next one in line.
> In addition to this, they all pay employees, which contribute even more tax money to the system (which is never discussed in articles like this).
Generally, the taxes other people pay on your expenditures doesn't count towards your taxes. I can't claim the taxes Walmart pays on the money I spent on groceries. Similarly, business owners can't claim the taxes their employees pay on their salaries.
If you are suggesting that we tax rich people less so they can spend more money, this is supply side economics (https://en.wikipedia.org/wiki/Supply-side_economics). The US been experimenting with this for the last 30+ years and it largely doesn't result in more taxes paid or better GDP growth.
The guy is totally off. I happen to know this bit and therefore find everything else rather specious.
All countries allow one to contribute tax-free to their pension OR contribute with after-tax income but withdraw without paying tax. US happens to use the former system. You are basically allowed to contribute a certain amount of your income before paying tax - but will pay tax when you receive the pension.
The idea is that people have lower income during retirement and allowing them to shift tax burden to retirement will induce them to save more.
I don't see anything favoring the rich about this system (only inasmuch as people who make more money benefit more from paying less tax - which I have no problem with).
I think the framing is not productive, but the underlying point, that tax breaks should be on the table when discussing the tax system, is a reasonable one.
The broadest discussions of tax policy usually talk about the highest tax bracket a person pays taxes in, they don't often move on to talking about effective tax rates.
36 comments
[ 3.4 ms ] story [ 54.1 ms ] threadLetting someone keep an extra portion of their own income, but only if used for savings or healthcare, is referred to as "tax expenditure". This person - again we're only talking about them being allowed to keep a slightly larger fraction of his/her own income - is a "welfare queen".
Audacious!
Thats not how salaries works. There are a lot of factors involved in a salary not just your own work. For instance the protection of your property rights, the borders, against criminals and so on.
We can discuss how much we should pay in taxes, but this false premise that your income is a one to one reflection of your work is simply false.
"Budget experts and many policymakers (including Republicans such as [House Speaker] Paul Ryan) consider targeted tax breaks as being similar to actual government spending."
Unfortunately this is not expanded upon, but its eminently reasonable. If you don't like this way of talking about it, the argument becomes that they make the tax system more regressive than it appears to be.
So by claiming that there is some "framing" going on instead of engaging with the actual argument that is _explixitly stated_ you're only preventing discussion and analysis on the systemic origins of inequality.
Of course, the flip side is that if it is all owned by the government, they can choose to take it away at any time because it's not like you earned it.
Which is an unfortunate line of reasoning when combined with Basic Income Guarantees..
However, the article does touch on 2 very important ideas:
1) Redistribution of wealth is an innate part of government. The term has such a bad connotation, but so many immensely popular government programs basically come down to redistribution of wealth. An increase in welfare redistributes wealth from the rich to the poor. The 401k tax subsidy redistributes wealth from the middle-class to the rich. The mortgage-interest-deduction redistributes wealth from renters to home-owners, and especially, multiple-home-owners. People associated "redistribution of wealth" with robbing the rich, but in reality, a huge number of tax deductions have the opposite effect of redistributing money from those with less money, to those with more money.
2) Instead of boldly owning up to the above, politicians try to get around the "redistribution" stigma by sticking in tax deductions/expenditures instead. These tax expenditures seem more politically palatable, but in reality, have the effect of distorting the market and picking coincidental winners and losers. HSA plans? You just rewarded people with predictable medical expenditures over those with unpredictable medical expenditures. Mortgage interest deductions? You just rewarded people who prefer to invest in real-estate, and not those who prefer to invest in stocks. What you end up with are certain people, who undeservedly benefit greatly from these tax programs, and others who are just as deserving, but don't get the benefits.
Using tax deductions to enforce "fairness" is simply not a good idea. Issues of fairness should be managed at a macro scale, by adjusting the overall tax rates, and through the public safety net. Tax deductions should be used as a very specifically targeted tool, aimed at discouraging negative externalities, and encouraging positive externalities. For everything else, we would be better off scrapping them entirely, and adjusting the overall tax rates downward instead.
2) Agreed.
3) The line between fairness and positive/negative externalities is fuzzy.
If you want to claim that that changing a redistributing effect to benefit the rich, is not the same as redistributing towards the rich, you are merely playing semantic games.
Both are of course wrong which is why you don't pay 100% or 0% in taxes.
What value you create you create in the context of society. Your company keeps part of the value you create. So does the state. They have that leverage over you because you could not create it without them.
Their legitimization is based on contracts for companies, and on democracy in the latter.
This should really all go without saying.
There is no philosophical or moral or ethical argument for claiming that it is either of those.
You start with the wrong premise. Namely that it's taking things from people without their consent. But even if we are to start there, the taxes are being taken before they get them so not even strictly speaking is it immoral (or moral). And the actual salary you get is different based on which country you live in, what part of the country you live in and so on.
So your argument is non existing really.
You starting point, like that of the libertarians and anarcho-capitalists is based on an idea that you own what you produce but since you don't own what nature produces this line of reasoning quickly breaks down. You don't own the nature and so whatever you use from it isn't your moral right to keep.
I am presuming as a baseline the given system. Then a tax break is redistributional, because tax is progressive. If you want, it is redistributional because it undoes existing redistributions.
Okay so I am now dictator of the USA. I set the tax rate to 100%. But boys get a 100% tax break. Girls pay the as listed 100% tax rate.
I am not redistributing wealth from girls to boys? Someone has to pay for the government which helps everyone. In my case, girls pay 100% of it. Boys have money to spend on food and toys at the end of the day, girls have nothing.
It's the interplay of tax and expenditure which redistributes income. So, to use your example: If the government spent 100% of tax revenue on the girls, then there is no redistribution.
And as we all know, in the real world US, virtually all Federal expenditure is on social welfare, defense, and interest on the debt. Thus you could cut ~75% of tax revenue before the effect you discuss comes into being.
Or worded another way, welfare is assumed to be given to those who are not productive members of society while a tax break is considered to be a reduction in taking from a productive member.
The idea with the welfare system is that if people for a number of reasons suddenly is without a job there is a system to support them and hopefully help them back on track again.
So paying taxes is in many ways a collective insurance system. Some people never needs it, good for them. Some have lived on it their whole life, bad for them. But some might have paid taxes their whole life and is now cashing in on that.
Denmark have more people hired in the public sector than China relatively to their size and many of these people have long education and function as managers and is part of the problematic New Public Management philosophy which has spread throughout the western countries as their legislation and society in general apparently becomes harder and harder to understand.
Now how can a country with free healthcare, free education etc. be a wellfare state for the wealthy?
It can because those who are highly educated knows how the system works, can speak the "language" and are able to be treated better than the rest. Heck you don't even have to be wealthy to be treated better you just need to be higher educated.
Of course the US is more extreme but still the underlying patterns are still there. That the welfare system is built by those who need it the least. But how to fix it, now thats a discussion in itself.
> Q: So because I have an employer-sponsored 401K and health care plan, take the home mortgage interest deduction on my tax return, and save money for my kids’ college education in 529 accounts... Yes, you are a welfare queen
Just wow. I would expect this sort of stuff from Marxist professor, not from Washington Post.
When you make a middle class salary taxes taken feel like a fair share yet when jump up into other tax brackets the view of fairness gets weaker.
In the case of SNAP, you are eligible for those benefits if you are below a certain % of the federal poverty limit (FPL) based on your household size. If you earn more than a certain amount, you no longer qualify because presumably you should be able to pay for food on your own. This very directly says, "We will give you something of monetary value, if you remain poor."
In the case of a tax break, like contributing to your HSA or IRA, you don't have to pay taxes on that income (or at least not now). You can contribute up to a certain amount each year but beyond that you no longer receive that benefit. This very directly says, "We will give something of monetary value, if you save money."
Both are using government funds to encourage behavior "We will give you something of monetary value, if you [perform some behavior]." I would suggest that the intended behavior is fundamentally different and is where the real difference in these two lie.
Perhaps I'm jumping to conclusions based on the tone of the article, but the author seems to indicate that both scenarios are equally problematic, when I think there is a very logical difference. Both achieve a similar short-term net output - $X in potential taxes not remaining in the government. The difference is about whether the $X creates long-term value that exceeds that value and she seems to gloss over that to drum up a controversial article.
Edit: I'm not suggesting that either breaks of expenses are inherently better than the other. For example, an earned income credit, to me, seems to encourage a behavior that would be in line with the motives behind a tax break. I just think this is a very short-sighted analysis of both ideas and serves only to create controversy.
The reason is that the top 1% made and contributed probably 10 or 20 or 30 times more than any middle-class family.
In addition to this, they all pay employees, which contribute even more tax money to the system (which is never discussed in articles like this).
This article paints the false narrative that the 1% aren't paying their 'fair share'. In fact, they pay the majority of federal taxes every year and corporate taxes are some of the highest in the world...and you want them to pay more?!
The majority of stories I see about companies paying $0 in taxes, etc are nearly all reporters purposely preying on the ignorance of the average person that has no idea how corporate taxes work.
For instance, I got back thousands of dollars last year and if you took it out of context, you might think that I paid no taxes that year. However, it's only because corporations have to pay estimated quarterly taxes, and if your sales are down and you don't make as much, you get the extra money back (that you over-estimated based on current sales).
So we could change the system, where the government takes way more, in an effort to be 'fair'. But the problem is it won't be the same. The government doesn't create anything.
The 1% will leave the country well before this happened, and the middle class will be be the next one in line.
Generally, the taxes other people pay on your expenditures doesn't count towards your taxes. I can't claim the taxes Walmart pays on the money I spent on groceries. Similarly, business owners can't claim the taxes their employees pay on their salaries.
If you are suggesting that we tax rich people less so they can spend more money, this is supply side economics (https://en.wikipedia.org/wiki/Supply-side_economics). The US been experimenting with this for the last 30+ years and it largely doesn't result in more taxes paid or better GDP growth.
All countries allow one to contribute tax-free to their pension OR contribute with after-tax income but withdraw without paying tax. US happens to use the former system. You are basically allowed to contribute a certain amount of your income before paying tax - but will pay tax when you receive the pension.
The idea is that people have lower income during retirement and allowing them to shift tax burden to retirement will induce them to save more.
I don't see anything favoring the rich about this system (only inasmuch as people who make more money benefit more from paying less tax - which I have no problem with).
The broadest discussions of tax policy usually talk about the highest tax bracket a person pays taxes in, they don't often move on to talking about effective tax rates.
However - a lot of the 'tax breaks' are not really 'breaks'. They are tools created to avoid double-taxation.
I suspect a lot of us secretly have no idea why we get a check when we file our taxes. Can we get a few articles about how it already works, please?
Like getting change back at the store because you used a coupon.
Anyway, my own opinion on taxes is that it's all extremely complicated and perhaps a flat percentage would work better.