Some tax breaks and pledges make government bigger, not smaller

(Note: Earlier this week I promised to publish some thoughts about anti-tax pledges. You can see them at the end of this column from Thursday’s print edition of the AJC, which also draws on an earlier blog post.)

We’ve become accustomed to hearing tea partyers say they want their country back. One step on that road is to take back tax cuts.

I’m not talking about particular tax cuts that expired, but rather the concept. Conservatives have allowed the mantra of lower taxes to be hijacked — and used to undermine our real goal of limiting government. And we’ve done it by watching tax loopholes — tax breaks, credits and exemptions — become another way for government to favor certain people, companies and activities over others.

It has happened in Georgia. And it has happened at the federal level since the 1986 reform that eliminated many loopholes in exchange for lower rates. In too many cases, tax breaks have become another way for government to make citizens dependent.

Such talk makes some of my fellow conservatives nervous. They scoff at saying some tax breaks amount to government spending. I agree there’s a danger in, for instance, saying government “gives” people’s income back to them through tax breaks. The government doesn’t “give” your income back to you. It was yours to start with.

That said, when the government takes less of your money because you acted the way government wanted you to act, it is decreasing, not increasing, your liberty.

For liberty’s sake, government should apply a lower tax rate to all of a person’s income, regardless of how it’s earned or spent. And when it comes to encouraging economic growth, we’re best served by a tax code that is stable over the long run — rather than adopting a series of short-term cuts for this tax or that one — and doesn’t try to predict which industries will lead the recovery.

Some of those very same conservatives object that government promotes its social or economic goals through direct spending. They rightly call such appropriations “subsidies.” Well, a housing subsidy is still a housing subsidy if it comes in the form of a mortgage-interest deduction.

Put another way: The $535 million loan guarantee for solar panel maker Solyndra, and the company’s subsequent bankruptcy, are being scrutinized as a misuse of federal funds. Appropriately so. But how many Solyndras have taxpayers unwittingly funded through tax breaks, with equally poor results?

The Washington Post this month produced a report on tax breaks that sheds some light on how they work. It makes two points very clear.

First, if you think these tax breaks are mostly about “special interests” or “the rich,” think again. The vast majority of tax breaks, both in the number of loopholes and their value, apply to the middle class, not wealthy people or corporations. (Not that corporate welfare is OK.)

Second, this is a bipartisan problem. Shortly after the 1986 federal tax overhaul, the Post reports, “lawmakers — particularly Democrats — latched onto the tax code as a vehicle for new initiatives. …

“[I]t started in 1986 with the low-income housing credit for developers and investors. As Reagan’s budget cutters were slashing direct spending on housing, Rep. Charles B. Rangel (D-N.Y.) won bipartisan support for the credit, which quickly became a primary source of financing for housing construction and rehabilitation.”

Under President Clinton, congressional Republicans were “far more willing to finance his priorities in the form of tax cuts than as new spending.”

The problem has been perpetuated, if not exacerbated, by the anti-tax pledges many Republican candidates and elected officials take. In theory, the “Taxpayer Protection Pledge” from Grover Norquist’s Americans for Tax Reform — the most famous of these pledges — allows for closing loopholes. But only if rates are lowered.

Again, this is a sound idea in general that is being abused in specific cases.

To wit: Why should a conservative pledge, designed to promote limited government, enforce tax breaks that pick winners and losers in the energy industry? But there was Norquist this summer, arguing that repealing a wasteful ethanol tax credit amounted to a pledge-busting tax hike.

If we want the country to get back on track, we have to get back to getting it right on our own principles.

– By Kyle Wingfield

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44 comments Add your comment

David Green

September 29th, 2011
5:50 am

Re: If we want the country to get back on track, we have to get back to getting it right on our own principles.
__________________

This – of course – is the real problem since conservatives would much rather force their principles on the rest of the nation by force of law even though they themselves have no intention of living what they preach.

DeborahinAthens

September 29th, 2011
6:02 am

Norquist and the “representatives” that sign ridiculous pledges are ideologues that have discovered that they cannot legislate their repressive social agendas. They are now trying to starve the programs of funding in hopes that they will die. They tried for decades to get rid of Social Security, Medicare, public education, public libraries,and Medicaid. Couldn’t do it. Plan B is to stop funding the programs. Without money, which Congress controls, these programs will change radically and/or die. Too bad they don’t starve wars in the same way.

Lil' Barry Bailout

September 29th, 2011
6:42 am

David Green: conservatives would much rather force their principles on the rest of the nation by force of law
———————-

Hmm. How do you libtards do it?

Ever heard of Obamacare? Where do we go to opt out of that?

Hypocrite.

Ronnie Raygun

September 29th, 2011
6:50 am

Of course Connies would never use the tax code to “pick winners and losers”. That’s why they advocate taxing all income at the same rate. Except, of course, for constantly screeching about eliminating the taxes on unearned income like capital gains, inheritance, dividends since Connies think that working for your money is for losers.

Ayn Rant

September 29th, 2011
7:40 am

Anti-tax and “small government” is the conservatives’ road map back to the 19th century! Modern, prosperous civilizations need fair taxes to balance economic rewards with social values, and strong national governments to protect the liberty of individuals and the freedom of enterprise against repression and monopoly.

Low or no taxes, and the consequent ineffectual government, creates an economic and social vacuum which either lapses into anachy (”libertarianism”) or coalesces into dictatorship based on ethnic prejudices and sham economic philosophies.

Take a look at the Scandinavian countries, the Netherlands, and Finland, countries that have high taxes and competent, right-sized governments! Despite the world-wide economic recession, these countries have maintained social stability, economic growth, low unemployment, a satisfied citizenry, and the blessing of low-key politics.

JDW

September 29th, 2011
8:10 am

First off, there is no doubt that the tax code needs to be completely overhauled. It is too complex, inequitable in spots, and just plain complex. Tax subsidies are spending pure and simple and they should be treated as such. When you end one you have reduced spending not raised taxes. As for the ones on the books not, I agree, that with a few exceptions, they should be ended and/or limited.

However you have not hit the real issue here…Grover Norquist and “The Pledge”. Pure and simple it is a subversion of representative politics. The people that are elected to Congress are there to represent the best interests of their constituents and on a higher plant the best interests of the country. Pledging to an unrelated third party to either take or not take action is a subversion of that responsibility by the third party. Now should a candidate wish to run on a platform of not raising taxes or opposing abortion changes that is great, however they should not sign away their independent ability to make decisions based on a given issue in exchange for campaign contributions and support from a lobbying group.

By allowing this sort of pledge we have given people like Grover Norquist extraordinary power over not only a single elected official but over the entirety of congress. As we sit today the Republicans in Congress can’t make a move relative to balancing the budget, say by eliminating ethanol subsidies, without factoring in how Grover Norquist will react. That’s wrong. Even worse, now that corporations are people too, If Grover decides he does like a representative all he has to do is wait until election time in say Oklahoma and dump a few million dollars into the race.

All of this makes Grover Norquist, unelected and with no local standing in any place but Washington, the largest impediment to fixing the current deficit debacle and that’s just plain wrong.

HDB

September 29th, 2011
8:23 am

….from the NY Times:

“Instead of looking for ways to reignite growth, Europe’s leaders — and Republicans on Capitol Hill — are determined to slash public spending. Europe’s fixation on austerity is also compounding its debt crisis, bringing the Continent even closer to the brink. Meanwhile, China’s government, which is struggling to contain inflation without letting its currency rise, has been trying to slow domestic demand, allowing its trade surplus to balloon.

Each of these policies is wrong. In combination, they are likely to tip the world into a deep recession.

The United States government must cut its budget deficit, but the economy must recover first. According to Mr. Zandi, President Obama’s $450 billion jobs plan could add 1.9 million jobs in 2012 and cut the unemployment rate by a percentage point. With interest rates so low, the government could easily pay for a bigger program. ”

http://www.nytimes.com/2011/09/29/opinion/killing-the-recovery.html?hp

The only entity that can RAPIDLY inject capital into the economy to PREVENT economic collapse is the GOVERNMENT! The government must SPEND in economic downturns…..and COLLECT in economic upturns to maintain the economic balance since Corporate America isn’t spending!! The Grover Norquists and their ilk wish to ensure that only wealth is maintained rather than economic GROWTH…which is what the nation NEEDS to work towards!!

carlosgvv

September 29th, 2011
8:27 am

Kyle, I never thought I would see you say that tax breaks have “become another way for government to favor certain people, companies and activities over others”. I hope this signals you are breaking away from the loonies in the Tea Party and becoming a more mainstream Republican. When you write a piece endorsing Chris Christie, I will know you are back in the mainstream fold.

U S Male

September 29th, 2011
8:36 am

“The danger to America is not Barack Obama but a citizenry capable of entrusting an inexperienced man like him with the Presidency. It will be far easier to limit and undo the follies of an Obama presidency than to restore the necessary common sense and good judgment to a depraved electorate willing to have such a man for their president. The problem is much deeper and far more serious than Mr. Obama, who is a mere symptom of what ails America . Blaming the prince of the fools should not blind anyone to the vast confederacy of fools that made him their prince. The Republic can survive a Barack Obama. It is less likely to survive a multitude of Idiots such as those who made him their president.”

HDB

September 29th, 2011
8:49 am

U S Male

September 29th, 2011
8:36 am
“The danger to America is not George W Bush but a citizenry capable of entrusting an inexperienced man like him with the Presidency. It will be far easier to limit and undo the follies of an Bush presidency than to restore the necessary common sense and good judgment to a depraved electorate willing to have such a man for their president. The problem is much deeper and far more serious than Mr. Bush, who is a mere symptom of what ails America . Blaming the prince of the fools should not blind anyone to the vast confederacy of fools that made him their prince. The Republic can survive a George W Bush. It is less likely to survive a multitude of Idiots and self-serving zealots such as those who made him their president.”

The counterargument can also be made……..

JDW

September 29th, 2011
8:57 am

“The Republic can survive a George W Bush.”

Actually the jury is still out on that one…I hope but sometimes I wonder.

JF McNamara

September 29th, 2011
8:58 am

I agree with maybe 30% of what you say, but I agree here. We need a hard look at the entire taxing and spending methodology and we need responsible people to make decisions on what works and what doesn’t.

The problem is that even if we drastically change the tax code, we’ll just end up picking the same winners and losers because special interest groups still have lobbyist. Our legislators are cowards, and they’ve proven over and over they can’t act competitently in the budgetary process.

America’s best out is just to broadly raise the tax rates on everyone and cap spending. Since we know Congress is incompetent, its a simple thing Congress can’t mess up or find a way to hide spending, and they can’t be bribed into changing without media scrutiny.

DebbieDoRight

September 29th, 2011
8:59 am

However you have not hit the real issue here…Grover Norquist and “The Pledge”. Pure and simple it is a subversion of representative politics

Word.

Kyle if the US government is sooo big and soooo obstructive that you and people like you just can’t seem to find any of that life, liberty and freedom thingy; then may i suggest a quick one way flight to China? Let’s see how big the government is over there……

Karl Mark

September 29th, 2011
9:02 am

The problem is not so much taxes. The real problem is spending at all levels of government. Federal, State, and Local government must reduce spending. At the state and local level look at TSPLOST the simple fact is we cannot maintain what we now have yet State and Local government want a special sales tax to build more that we cannot afford to maintain? This is madness.

Freedom is just another word for nothing left to lose

September 29th, 2011
9:07 am

It is unfortunate, Kyle, that you have never lived in a country where ‘liberty’ – truly – does not exist, for if you did you would realize the extent to which you already have it. Moreover, you and every other so-called conservative/libertarian fail – completely – to appreciate that the substantial liberty you already enjoy is made possible by the very government you so despise. The ‘liberty’ you seek is a fiction, impossible to achieve in any state other than an anarchic one. And anarchy benefits no one except the most powerful. Perhaps it is time to temper your naive idealism with a dose of political realism – specifically, your per option of what is must govern your perception of how much of what ought to be actually can be. Not the other way round.

Freedom is just another word for nothing left to lose

September 29th, 2011
9:10 am

The second to last sentence in my post above should read “your PERCEPTION of what is must govern your perception of how much of what ought to be actually can be” (thank Machiavelli for that piece of brilliance, not me)

Lil' Barry Bailout (Revised Downward)

September 29th, 2011
9:34 am

Yeah, we had a heck of a time surviving our President Bush’s 4% unemployment. Thanks to Him we even survived deadbeat Democrats en masse stop paying their mortgages.

Junior Samples

September 29th, 2011
9:37 am

Wow, I think I actually agree with you on this one Kyle.
Level the playing field, no rhetoric, no games, and maybe we can make this happen.

But I’m an optimist.

Aurelius

September 29th, 2011
10:11 am

I totally agree with Kyle’s column as far as it goes. It does not go far enough.

Taxes must be set at a rate to pay for government. If government is to large taxes become to high.

The size of all government has been growing for many decades. Taxes were being raised to pay for the
growing governments.

Then at the federal level we decided to reduce taxes but neglected to reduce the growth of government.
So we have given ourselves a $14+ trillion National Debt. Brought to us equally by our Democratic and Republican administrations and congresses.

We need to reduce the size of government at all levels. That requires a national debate and a consensus to do so.

We are not having that national debate. We are having the usual presidential election with all candidates terrified to take a stand on reducing the size of government. And the sad part is that one of the gutless wonders will be elected President of the United States.

Lil' Barry Bailout (Revised Downward)

September 29th, 2011
10:30 am

Democrats don’t mind taxes going up, since most don’t pay them in the first place.

Pay your fair share, Democrats. 15% minimum, with no deductions.

stands for decibels

September 29th, 2011
10:49 am

Good, thought provoking column, Kyle.

stands for decibels

September 29th, 2011
10:50 am

surviving our President Bush’s 4% unemployment.

when he left office it was a lot higher than that…

most don’t pay them in the first place.

pulled that one out of your rear end.

So LBB, that’s two straight lies in a row, you going for the hat trick?

Akbar

September 29th, 2011
11:11 am

For those that think the US Government is so repressive, and that “Big Guvmint” is so truly evil, then I have a solution:

Move to tribal regions of Afghanistan or Pakistan where “guvmint” won’t bother you. Delta is ready when you are (though you may have a few connections.)

Typical

September 29th, 2011
11:16 am

Lil’ Barry Bailout (Revised Downward)
September 29th, 2011
9:34 am
Yeah, we had a heck of a time surviving our President Bush’s 4% unemployment. Thanks to Him we even survived deadbeat Democrats en masse stop paying their mortgages.

Bush drives unemployment from 4.2% to 7.8% Bush drives our annual GDP from 4.2% to -2.6%. You’re right Lil Blowhard, Obama could never match those numbers.

getalife

September 29th, 2011
11:22 am

Class warfare cons.

getalife

September 29th, 2011
11:26 am

Economy grew 1.3 %

Get the gop out of the way and we are back in business.

JDW

September 29th, 2011
11:29 am

@Barry…”Yeah, we had a heck of a time surviving our President Bush’s 4% unemployment. Thanks to Him we even survived deadbeat Democrats en masse stop paying their mortgages.”

Guess you missed that ball he started down the hill…the one that LOST 750,000 jobs in his last month. He tossed us a $hi+ sandwich on the way out the door and you know it.

Typical

September 29th, 2011
11:37 am

Real gross domestic product — the output of goods and services produced by labor and property
located in the United States — increased at an annual rate of 1.3 percent in the second quarter of 2011, (that is, from the first quarter to the second quarter), according to the “third” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 0.4 percent. The GDP estimate released today is based on more complete source data than were available forthe “second” estimate issued last month. In the second estimate, the increase in real GDP was 1.0 percent (see “Revisions” on page 3).

So does this mean Barry is changing his name to REVISED UPWARDS?

Lil' Barry Bailout (Revised Downward)

September 29th, 2011
11:44 am

Obozo inherited a recovery–the recession (which only happened when Obozo’s base stopped paying their bills) ended in June ‘09.

He blew it.

Obozo: Fail. The November 2010 elections proved it.

Typical

September 29th, 2011
12:36 pm

No, I guess Lil’ Barry Blowhard needs to change his name to REVISED HISTORY.

Typical

September 29th, 2011
12:37 pm

as in now he’s just making this !@#% up!

Michael H. Smith

September 29th, 2011
12:39 pm

Lil’ Barry Bailout

September 29th, 2011
6:42 am

Let’s try that – fascist forcing others to live under their prerogatives – one more time shall we:

How about every socialist program, regulation and all but one war during the past century from the beginning of the REGRESSIVE peee-gressive socialist era error starting with Woodrow Wilson, FDR, LBJ through present today with obumercare, ALL UNDER THE SOCIALIST LIBERAL BANNER?

You disappoint me lil’ barry

Now on tax cuts Kyle, those are not of the greater importance to me as is cutting the physical size government, the scope of government power and restricting the ability of government to spend money. If these three core components are brought under control, say as limited under the enumerated powers found in the articles, then I believe taxation will be great deal easier to reform.

RAMZAD

September 29th, 2011
12:56 pm

There is a God!

Kyle Wingfield finally wrote something that has some intellectual honesty and that which is characterized by some intellectual beef. Yes, the US tax code is a maze of hills and gullies, sticks and carrots, pride and prejudices, hugs and whippings, kisses and “birds.”

For example, too many small businesses- mechanic shops, restaurants, construction companies pay no taxes by draining off all the cash and then match all the expenses against the verifiable income, like checks and debit transactions for a deductible loss.

No wonder these tax cheats ran screaming into the streets when the new health care law proposed putting some teeth into the 1099 reporting system. The current tax system is the Rolls Royce in the showroom of crony capitalism.

Yes, the tax system needs to become a simplified, rigid, stable and unforgiving constant that sends people to prison for a minimum ten years when they evade, cheat, swindle and F…with the IRS.

commoncents

September 29th, 2011
1:35 pm

Ronnie Raygun 6:50 am

“Of course Connies would never use the tax code to “pick winners and losers”. That’s why they advocate taxing all income at the same rate. Except, of course, for constantly screeching about eliminating the taxes on unearned income like capital gains, inheritance, dividends since Connies think that working for your money is for losers.”

Yes! Let’s double/triple/quadruple tax all income that was originally taxed, but either invested wisely, or passed down to a future generation! Heaven forbid your parents work hard their whole life, then expect that their hard-earned income would go to their own children without the gov’t reaching in to take “their fair share”.

Maybe next time I go to Vegas the casino can charge me an extra 40% on everything I win. After all, I shouldn’t expect to keep 100% of any profit off an investment or gamble. I should, however, be expected to accept 100% of all losses if business goes south.

Road Scholar

September 29th, 2011
2:18 pm

LBB has the hat trick…if only he had a brain to put the hat on!

seabeau

September 29th, 2011
3:24 pm

Ann Rant Those countries you promoted have no large class of people on the Dole, soaking up taxes year after year!!

seabeau

September 29th, 2011
3:26 pm

Balance economic rewards?? What drivel!! Socialist BS!

Dusty

September 29th, 2011
4:14 pm

In the process of “cutting taxes” we should be very careful with what/whom we let escape playing their part. Call them “subsidiies” or loopholes or whatever, they keep money away from the government in a greater degree that the usual. While wishing for lower taxes, we should not discriminate for “better things”. Let individuals decide what they want to subsidize, not the government.

As to Ann Rant who comments on the wonderful state of some small European countries, healthcare, no worries, etc. The indiviual tax rates of some of those countries have you working about 50% of each year for the government. Denmark’s individual tax rate runs 36.7-67%. Netherlands 0-52%. Germany 0-45%. UK 0-50%.

Those 2006 numbers come from Wiki.

Let us work for ourselves with a fair amount for the government. To do that will take good management which we do not have now. If money management is missing, then no debt will decrease no matter how much money the government receives. Here’s to better control of expenses and lower taxes for personal freedom.

seabeau

September 29th, 2011
4:51 pm

What we need is for the states to call for a Constitutional Convention. Break the power of the Federal Government for once and for all and return to country to its democratic beginnings. Only persons who pay federal taxes should be able to take part in or vote in federal elections. Those on the DOLE will allways vote for the DOLE!

Rafe Hollister

September 29th, 2011
8:43 pm

Kyle, good post. Conservatives do get caught up in the librul game of trying for “Fairness” and do try to impose their version of “what would be good for the country”. Anytime someone says either of these phrases, the electorate should run from that candidate. No one person or party should ever advocate that THEY are the one, who should decide what is FAIR or What is good for the Country. This is a decision the PEOPLE should make. We do still have the Freedom to do so, although the ruling class limits that freedom more each day, just yesterday, one said there was too much democracy in America.

Rafe Hollister

September 29th, 2011
8:48 pm

Ramzad, you are right, tax fraud is rampant in this country. The only ones who actually pay what they owe are the ones who receive a W-2, and even some of those cheat when they can.

That is why we need the Fair Tax.

Steve - USA

September 29th, 2011
10:02 pm

Of course tax breaks favor certain activities, that is what the government wants. You can get a tax credit for installing solar at your home. The government would love for you to do it. So now your a bad person if you take advantage of a program that the Government wants you use?

Steve - USA

September 29th, 2011
10:10 pm

HBD – I have known Mark Zandi for 35 years. Great guy and very smart, although he can’t predict the future. Watch him on CNBC when he gives his unemployment predictions. It is painful.

Sorry Mark

David Green

September 30th, 2011
5:32 am

Lil’ Barry Bailout I have yet to meet a conservative republican who isn’t a LIAR and a HYPOCRITE.