01 December 2014

Tax Credits are Subsidies in Principle and Practice

If you're opposed to subsidies for the poor, then you cannot maintain any integrity and claim a tax credit. Credits are little more than subsidies.

Qualifying for a subsidy suggests that you've met certain conditions which grant an exception. You don't have to 'do' the same thing everyone else under normal circumstances is required to do.

This is the same as money in your pocket and in many cases can mean quite literally a check from the government. Taking the credit means you're claiming that you shouldn't be obligated in the same way everyone else is.
You may argue that I'm getting money 'back' from taxes I've already paid in.

If so, that's your own math, not the logic utilized by the government. You're not getting 'back' your social security or unemployment tax. Those payments go into a different fund.

That said, you can use that logic but it's not technically accurate.

I'm not arguing against tax credits at all. In principle I'm neither for nor against them. What I'm against is the way some frame the issue and morally denounce the poor who receive subsidies.

Even if you're only getting 'back' the income tax you already paid, you're getting a benefit others are not receiving. The state has said your conditions, number of kids, mortgage interest or whatever means you don't have to pay that tax. You're exempt from the responsibility that others have.

It's money in your pocket. It's as if the government wrote you a check and handed you that money. Without the credit, you would have had to pay it. You would have had to write that check so to speak.

But I worked and the poor people getting assistance didn't!

That may be true in the case of some who absolutely don't work. There are very few of those by the way. The minute their kids are old enough for school, they go to work. It was called Welfare Reform. Yes, I know some of them keep having kids for that reason. That's a loophole for some of them and truly shameful. Normally if their kids are old enough for school they have to be pursuing work or job training, or they lose their subsidies.

It could be said that the working poor are being declared by the government to be over-taxed. They've paid too much in the way of Social Security, Sales Tax or whatever and the government is saying that under their conditions they qualify for an exception... a credit... subsidy.

The logic is the same whether you're poor or middle class.
The answer, cries the Libertarian is a Flat Tax and the elimination of all credits and subsidies.

Some wish they had never been utilized to begin with, but the credits and subsidies have resulted from problems reforming the tax code and the fact that in some ways it is progressive and in other aspects it is regressive. Rather than take on the core problems, the credits and subsidies have functioned as temporary solutions, plasters or band-aids.

A Flat Tax would be fair in terms of the math, though many would argue it would be anything but in terms of ethics.
Introducing a Flat Income Tax at this point would be a gross inequity. It would mean a tax hike for the poor and a cut for the middle class and wealthy. Until the government eliminates the Social Security Tax cap which at present eliminates the tax on all income a little over $115,000 a year, and unless it restructures the whole Capital Gains tax structure, then all discussion of a Flat Tax is disingenuous. It would simply be a gift to the wealthiest of Americans.

We live in Babylon and our expectations shouldn't extend beyond social stability so that we can worship and evangelize freely. The tax code is not a Christian issue. Even if it's grossly unfair, we're told in Romans 13 to pay them. If Babylon is corrupt and mismanages everything, should we be surprised? The Christians who cry 'theft' and revolt are in error both in terms of Scripture and often in terms of their basic economic principles and ethics. Their avarice and lust for power have corrupted their minds and hearts.