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Tax Cuts as Spending

By Gary Andres

We used to have “tax and spend” liberals. Today we have tax “as” spend politicians. The Tax Foundation argues Washington policymakers increasingly use tax policy instead of direct spending to channel government money to favored groups and causes. Scott A. Hodge of the Foundation writes:

Over the past two decades, lawmakers have increasingly turned to the tax system rather than direct spending programs to funnel money to targeted groups of Americans, furthering some social or political goal. As a result, millions of Americans have been effectively removed from the income tax payment system while the tax code has been made more complicated to comply with and more difficult to administer. The tax plans of both the presidential candidates would exacerbate this situation greatly.

Due to the growth in tax credits, a record number of taxpayers have zero liability. This chart demonstrates the dramatic growth in the number of those who don’t owe taxes. Looks like both Obama’s and McCain’s tax plans leave nearly half of all filers–over 60 million people–owing no taxes after claiming all their credits and deductions.


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Adam Lerrick, writing in the Wall Street Journal this morning, considers the implications of this new trend in tax policy.

Sen. Obama is promising $500 and $1,000 gift-wrapped packets of money in the form of refundable tax credits. These will shift the tax demographics to the tipping point where half of all voters will receive a cash windfall from Washington and an overwhelming majority will gain from tax hikes and more government spending.

Where this all is heading, according to Lerrick:

The plunder that the Democrats plan to extract from the “very rich”–the 5% that earn more than $250,000 and who already pay 60% of the federal income tax bill–will never stretch to cover the expansive programs Mr. Obama promises.

HT: Greg Mankiw

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