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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 governme
by whack 11y ago
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.
- iuioiuio777 11y ago1) Tax breaks do not distribute income. Not up, not down, not at all. Thus tax breaks to not redistribute income either. 2) Agreed. 3) The line between fairness and positive/negative externalities is fuzzy.
- Certhas 11y agoIn 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.
- rhino369 11y agoIs not taking your money distributing it to you? You are presuming society or government owns everything we make.
- ThomPete 11y agoAnd you are presuming that you own everything you make. Both are of course wrong which is why you don't pay 100% or 0% in taxes.
- barney54 11y agoWhy is it wrong to say that I own what I make?
- Certhas 11y agoBecause 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. This should really all go without saying.
- barney54 11y ago
- Shivetya 11y agowhile 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.
- ThomPete 11y agoIt's not that simple though. 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.