[spoiler]
PANEL 1
See Sue
(Illustration of small white girl in pigtails running. This is Sue.)
See Sue run.
PANEL 2
See Sue run to public school.
(Illustration of Sue running towards brick building.)
Go, Sue, go!
PANEL 3
See Sue’s Daddy tkae a child-care tax credit.
(Illustation of Sue’s Daddy in foreground filling out some forms while Sue plays with toys on the floor in the background.)
Maybe Daddy will use it to buy Sue more toys!
PANEL 4
See Sue use federal student loans to attend college.
(Illustration of Sue, now a teenager in a cap and gown, receiving a high school diploma.)
Good going, Sue!
PANEL 5
See Sue lower her taxes with the lifetime learning credit.
(Illustration of Sue putting an envelope into a mailbox. This cartoon is certainly action-packed, isn’t it?)
Clever Sue!
PANEL 6
See Sue get a job.
(Illustration of sue wearing goggles and sawing a piece of wood that’s clamped to two sawhorses.)
See the employer tax exclusion make Sue’s health care cheaper.
PANEL 7
See Sue buy a home.
(Illustration of a small house.)
Sue can afford it because of the mortgage deduction!
PANEL 8
See Sue have a baby.
(Illustration of a baby’s pacifier.)
See Sue take the child-tax credit.
PANEL 9
See Sue save for her kid’s college education with a tax-free education savings account.
(Illustration of Sue, now a bit older, filling out forms.)
Good planning Sue!
PANEL 10
See Sue retire.
(Illustration of Sue, now older with white hair, at a retirement party — there are balloons and cake and a man has his arm around her shoulders.)
Now Sue will collect Social Security!
PANEL 11
See Sue get sick.
(Illustration of Sue in a patient’s gown at a doctor’s office, being spoken to by someone holding a clipboard.)
Good thing Sue has Medicare!
PANEL 12
See Sue join the Tea Party.
(Illustration of Sue, wearing a blazer, angrily speaking.)
SUE: I’ve never taken a cent from the government!
Funny Sue!
[/spoiler]
I largely based the above cartoon on this table:
| Percentage of Program Beneficiaries Who Report They “Have Not Used a Government Social Program” | |
| Program | “No, Have Not Used a Government Social Program” |
| 529 or Coverdell | 64.3 |
| Home Mortgage Interest Deduction | 60.0 |
| Hope or Lifetime Learning Tax Credit | 59.6 |
| Student Loans | 53.3 |
| Child and Dependent Care Tax Credit | 51.7 |
| Earned Income Tax Credit | 47.1 |
| Social Security—Retirement & Survivors | 44.1 |
| Pell Grants | 43.1 |
| Unemployment Insurance | 43.0 |
| Veterans Benefits (other than G.I. Bill) | 41.7 |
| G.I. Bill | 40.3 |
| Medicare | 39.8 |
| Head Start | 37.2 |
| Social Security Disability | 28.7 |
| Supplemental Security Income | 28.2 |
| Medicaid | 27.8 |
| Welfare/Public Assistance | 27.4 |
| Government Subsidized Housing | 27.4 |
| Food Stamps | 25.4 |
| Source: Suzanne Mettler, “Reconstituting the Submerged State: The Challenge of Social Policy Reform in the Obama Era,” Perspectives on Politics (September 2010): 809. (pdf link) | |
From The Baseline Scenario:
Mettler distinguishes between visible federal programs, such as Pell Grants and Social Security, which are administered by government agencies and therefore are more recognizable as government programs, and submerged programs such as the mortgage interest deduction or 529 accounts. She found that the more visible programs a person uses, “the more likely he or she was to agree that government had helped in times of need.” Benefiting from submerged programs, however, had no impact on people’s perception that the government had helped them—even in the case of things like HOPE or Lifetime Learning tax credits, which help people pay for eduction. In fact, “the greater the number of tax breaks an individual had benefited from, the more likely he or she was to disagree that government had provided opportunities for an improved standard of living” (pp. 41–43, emphasis added). (This is after controlling for socio-economic characteristics.)
In short, the way our government currently distributes goodies makes it possible for people to think that they are paragons of individual self-reliance while still being enormous beneficiaries of other people’s tax dollars. That explains a lot about politics today.
I’m contemplating changing the wording of the final panel. Right now, it seems too much like a slam on the Tea Party, whereas what I really want to criticize is broader than just the Tea Party.
UPDATE: Alternative ending.
So Sue is wrong about what she’s gained from government assistance, and right about government assistance being massive and extruding into every area of American life?
Sounds like Sue needs to adjust her rhetoric – not “I’ve never taken a cent” but “you people have been paying me a fortune, and that’s one reason we’re broke.”
Thanks for the tip, I’ll pass it along to my fellow bathtub-drowners.
Sue should also consider the subsidy she got from socialized roads, socialized crop management, socialized water, socialized legal systems, socialized environmentalism, socialized defense, socialized internet, and socialized scientific research.
If she doesn’t want to have such an overwhelming government, I recommend the emigrate to a place with more freedom. May I recommend Somalia as a libertarian paradise?
I like the cartoon.
I agree that for some odd reason, people apply vastly different classifications to
“Get MORE money FROM the government”
versus
“Pay LESS money TO the government.”
Now, you and I know that those are–if you assume that you’re going to pay more than zero in taxes–really equivalent . Getting $100 as a check and paying $100 less in taxes, both leave you with an extra $100. But for most people–and in my consumer law practice I see this all the time–they are not the same thing in the slightest.
So unless you’re literally getting a check in the mail, it’s not tagged as “getting something.”
As i was reading the cartoon, I thought of a probably-dumb version (I’m not a cartoonist) that somehoe incorporated average numbers to illustrate the vast extent of the benefits we’re talking about.
Run a $100,000 government tuition grant at 3% against a normal loan at 6% and you get a big number. Add up the cost of public school at the average per-student cost for 12 years and you get a big number.
And so on.
I say this because not do people think Sue didn’t “get anything,” but I’m willing to bet that if they did, they ALSO would think that Sue’s lifetime value was four figures, instead of high six figures.
I was looking at the list above and thinking about what people think of when they think ‘taking a cent from the government’ means. And those are everything from Medicare down. Anything above medicare, such as the G.I. Bill, Supplemental Security Income, Pell Grants, don’t seem to have the judgement and stigma attached to them that food stamps and subsidized housing and then don’t get attacked, or are at least not as vulnerable, as Head Start seems to be perennially. Why is that?
Head Start is a bad example; it started out getting attacked for ideological reasons but now it gets attacked because it simply doesn’t do any good.
But the basic answer is easy: the more a benefit is perceived to be earned, paid for, or in the selfish interest of the rest of the taxpayers, the less it is resented. You earned your GI Bill by volunteering to get shot at for your country, you paid for your SSI disability by paying an earmarked tax during your working years, and your Pell Grant turns you into a high-tax-paying lawyer instead of a low-tax-paying fry cook.
I think this is a pretty effective cartoon throughout most of the panels, but I’d advise changing the last panel – it is undermining your point, as Robert’s post above demonstrate. Someone may be mistaken about how much they received from the government without being angry about other people getting government aid. Someone may also be aware of how much help they got, and retroactively resentful of it (even though at the time they were thankful). Ignorance about what government support actually means is a contributing factor to people’s attitudes towards the government, but it does not determine it. Your last panel shifts the discussion from being about what Sue got to being about her anger. I think having her make her claim with a more neutral expression (and probably dropping the tea party reference) would strengthen the point.
Eytan – I agree with your suggestion about how to conclude the above cartoon.
Robert – can you post some links to back up your claim that Headstart “simply doesn’t do any good”?
It seems to me when the percentage of people using the program dips below 40% is when the resentment kicks in. I don’t know how I feel about this…if 41% of the population needed food stamps at some point would it magically get taken off the table as an issue of contention? Headstart is on the edge at 37%…I might not have to ask about Headstart if only 4% more of the population used this program…
Eva, I think this is what Robert is talking about. Head Start does show significant gains for children while they are in the program, but that the gains disappear fairly quickly when there is no similar program in place for the children to graduate into.
In other words, Head Start in and of itself cannot compensate for the negative effects of poverty and its attending substandard schooling. So, when people are saying “Head Start does no good”, what they mean is “I thought we had agreed as a society that these are the throwaway children—let’s not continue to waste money on their education and development. Fuck these kids.” Y’know, as Head Start clearly does provide benefits; benefits that are lost without further investment in children after Head Start.
Amp,
I don’t like this cartoon. The art is fine, but I think the underlying thoughts are off-base. (And, thank you for not showing Sue crowning in Panel 8; I did not actually want to see Sue have a baby.)
Most of what you talk about are tax credits. To me those are not “government programs.” Those are examples of the government letting us keep the money we earned.
The home mortgage interest deduction is not a social program.
Social security, unemployment, medicare? Government mandates. I have no choice but to participate. I guess that means I have no choice then, but to STFU and not criticize the government about a program I have no choice but to participate in.
Public schools? That is a bit off-base. Those are usually state-run institutions. I am fine with my state providing public education and, at the same time, I can consistently hold the belief that the Department of Education should be scrapped.
And, yes, I have student loans. Thank goodness the federal government subsidizes student loans because, without them, there is no way anyone could afford to go to college, what with tuition rates rising far faster than the rate of inflation. Thank you, Uncle Sam, for saving us from this disaster you caused.
Basically, it seems that this cartoon says: if you want ANY government, you have to accept the tyranny you have now without complaint or you are a hypocrite. The government owns you from birth and you had better not complain about it you ungrateful free thinking person!
-Jut
Because there is a distinction between things you have earned – by either providing a service or paying specific taxes and fees – and things you have not earned. There is also a distinction between getting money (or paid services) from the government that you have not earned vs. the government not taking away from you money you have earned.
Because there is a distinction between things you have earned – by either providing a service or paying specific taxes and fees – and things you have not earned.
Only people who already have money should get money from the government. Got it.
Jutgory @9 – I don’t think this cartoon says anything at all about criticizing the government. It says that people shouldn’t base their views of a government on a lie. Saying “I never accepted any government money” is not a valid position if you did. What you said: “I do not approve of this government mandated program even though it is part of my life” – is a totally different position and not one that this cartoon has anything to say about.
chingona, the only thing you have is a bias that apparently compels you to lie about what people are saying.
LaLubu:
Hm. Is substandard schooling automatically attendant to poverty? In fact, what do you mean by “substandard schooling”?
Regardless of income, a child’s education is a function of how well prepared the child is for school, both logistically (food, clothing, eyeglasses, etc.) and academically (parents ensure the kid does homework instead of watching TV, etc.). Poverty has an impact on the logistic issues. It can have an impact on the academic issues if the parents (or parent – single parent families are much more likely to be poor) work shift 2 or 3 or multiple jobs and don’t have as much time to spend on their kids. Kids whose families are not poor do better with logistical issues but will still have school problems if Mom and Dad don’t care much about their kids’ schooling (“C’s were good enough for me”). The which I have seen more than once in my years of Scouting, to what initially was my great surprise.
Money can fix logistical issues to a certain extent, presuming that the recipients don’t misappropriate the funds. It’s harder to deal with the academic issues. Financial support could give people more time to spend with their kids – but will they actually do so? Will they put a priority on academics? How many people react to their kid being tossed off of the football team because of poor grades by screaming at the teachers or the principle or school board about how football is the only thing keeping their kid in school instead of telling their kid to use that time to study? Lots of people.
The fundamental issue of public education is that the most important factors that affect it’s effectiveness are those that apply during the hours the child is NOT in school. Government can supplement but cannot replace parents.
RonF: In order to have “earned” these things, it means you were working at a job that allowed you to pay those taxes, hence the having money to get money.
No one is lying – they just didn’t carefully explain every nuance of their opinion so you could dissect it to find ways to refute it, and then have you play dumb and need explanations to every basic thing in the world unless it agrees with your rhetoric.
None of these are examples of an individual getting money from the government, that they didn’t already pay into. I pay into SS, so when they give it back, IT WAS MY MONEY TO BEGIN WITH. Tax credits and deductions are governments way of trying to control our behavior, but again they are just giving me my own money back. Medicare – similar to SS is something you pay into, just like my normal health insurance. The only difference is I pay into for my entire working life and can’t collect on it until I am of the proper age. Student loans are just that – Loans and you repay them. You are not being given anything.
This cartoon only makes sense if you accept its ridiculous premise, that these items are the government giving you something that you didn’t already pay into.
Agree with the cartoon. But 6/10 of the examples are tax credits. Can’t see how that’s anti-tea party, they’re literally assets that can be used to reduce your tax.
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Everyone, please dial it down a couple of notches.
Ron, let me ask you about Universe A versus Universe B.
In Universe A, Sally pays $10,000 a year in taxes (after deductions), and the government sends her a check every year for $1000 to help her pay her mortgage.
In Universe B, Sally pays $9000 a year in taxes (after deductions), and the government gives her a $1000 tax deduction every year to help her pay her mortgage.
In all other ways, the universes are absolutely identical. Sally works exactly as hard in both universes. In either case, Sally has an extra thousand dollars because she’s a homeowner with a mortgage.
Are you saying that in universe A, Sally doesn’t deserve that thousand dollars, but in universe B, she does deserve it?
What I said was that people draw a distinction between government funds and services that you contribute (or have contributed) money to pay for and funds and services that you have not contributed towards. I did not say anything about whether or not government should only provide the former or whether it should or should not provide the latter. Claiming that I did is the lie chingona told.
My apologies. I thought you were describing your own views, not the views of other people.
“Most of what you talk about are tax credits. To me those are not “government programs.” Those are examples of the government letting us keep the money we earned.
The home mortgage interest deduction is not a social program.”
The credits and deductions are a form of welfare. Because of them, many people get money back from the Federal government above and beyond their withholding and above and beyond the taxes they owed.
An example: a taxpayer can have $30k in income, with a house and a couple children. They can owe the government $900 in tax, pay $0 in withholding, and receive a “refund” check for over $2000.
That is not “keeping the money you earned”, because you’re receiving money you didn’t even earn, in the form of a “refund” check from the government. It’s welfare.
Tax Me is correct. One source of confusion is the fact that there are refundable vs. nonrefundable tax credits. A refundable tax credit is one that you get the money for the credit even if you didn’t pay that much in tax; get the EIC, you get the $1000 or whatever “taken off your taxes” in an absolute arithmetic sense; “I owed $399 but got $1000 for the EIC so they sent me a check for $601.”
A nonrefundable tax credit is one that reduces your tax obligation but does not pay you cash money even if it takes that obligation negative.
The home mortgage interest deduction is not a social program
It’s a government subsidy on personal debt meant to encourage a particular behavior that the government has deemed Desirable For The Nation. I’m pondering what criterion, other than “liberals don’t get all excited about giving it to poor people,” keeps it from being a social program.
Let’s also be clear that the personal debt in question is not simply the money owed on a mortgage to a primary residence. It also includes interest on a home equity loan or a second home. In other words, if I borrow against my Visa line of credit, I’m on my own for interest, but if I borrow against my putative home equity, the government will actually pick up the tab for a portion of that interest.
Long before the current housing crash, I quite clearly remember banks advertising home-equity loans as a preferred means of borrowing money for just that reason. “There’s a Hawaiian vacation in your garage!” (meaning, that is, that instead of savings or a charge card, you should pay for your vacation with a home equity loan, as the interest was deductible.)
Please tell me how that is anything but a social program for the homeowning class.
To be fair, the mortgage interest deduction affects more than home owners. By promoting (to what extent it’s not clear to me, I do wonder) home purchases it pumps up the home construction industry, thus helping to provide work for carpenters, plumbers, electricians, etc., etc.
Me – I’ve been living in the only house I ever bought since 1986. I took out a 30-year mortgage then. I refinanced my house to help pay for my daughter’s college education (being too rich to qualify for grants and too poor to pay for it out of savings or cash flow), but when I did I made the resultant loan a 15 year one. So the bottom line is that I get little benefit from this now (the % of your loan payment that’s interest goes down as the loan ages).
So, again, it’s a social program that benefits you, however little.
Hey, looks like WIC isn’t a social program either:
“To be fair, WIC checks affect more than poor women and children. By promoting (to what extent it’s not clear to me, I do wonder) healthy-food purchases they pump up the agricultural and grocery industries, thus helping to provide work for field workers, delivery drivers, grocery-store checkers, etc., etc.”
This expresses well a rather common point of view. I feel the appeal of this point of view.
I have outgrown this point of view.
Yes, the cartoon says that people who benefit from government and then deny it are ignorant or hypocrites. And the cartoon reminds most of us that, yes, we have benefited from government.
But I see nothing indicating that people cannot criticize government. True, people should be honest: “Yes, I benefit from government; nevertheless, I feel that the cost of certain programs exceed their benefit….”
Honesty: it’s not too much to ask.
Exactly. This would be a valid and well-reasoned argument, and isn’t what the cartoon is criticizing. It’s criticizing hypocrisy and/or unawareness about how you benefit from government programs.
I also think the “Well I pay taxes so anything I’ve gotten from the government I’ve paid for, and any taxes at all are taking what I’ve rightfully earned” argument is pretty specious, unless you’re going to seriously argue that you’d be better off financially if you had to maintain the road along your property (or pay tolls pretty much everywhere you drive), hire your own fire and police protection, and either homeschool your kids or send them to private school.
This cartoon prompted the weirdest dream…I dreamed that a 185 year old Sue, who lived past the previous maximum human life expectancy of 120 years thanks to NIH funded research on aging, was still bitterly complaining about the taxes she had to pay on her social security…that she’d collected for over 100 years.
mythago, why did you make this statement
“Hey, looks like WIC isn’t a social program either:”
and then mimic my comment about the mortgage interest tax deduction?
Because your argument applies just as well to WIC as it does to the mortgage interest deduction. So if the mortgage interest deduction isn’t a social program for the reasons you stated, then WIC isn’t a social program for the reasons mythago stated.
Mythago and Charles S. – There is a big difference between WIC and the mortgage deduction. WIC is actually giving people money from the government. A mortgage tax deduction is just lowering the amount of taxes you owe. People who collect benefits from WIC, more than likey don’t pay any federal taxes, and thus the money they receive was from taxes paid by another individual.
If you take the opinion that the mortgage tax deduction is the government giving you money, then you don’t believe the money an individual makes is their own. Just because the government lets me keep my money does not make it a social program. A mortgage tax deduction is my money and just a decrease in the governments revenue.
So to recap –
WIC is a debit from on the Feds books. Dollars taken from one and given to another.
Mortgage deduction is allowing me to keep my money. It is not taking money from someone else and giving it to me. The government is just giving up revenue.
Anyone who thinks the mortgage deduction is a social welfare program is a statist that believes the money you earn belongs to the government, and they decide how much you get to keep.
Chris, I’ll ask you the same question I asked Ron.
In Universe A, Sally pays $10,000 a year in taxes (after deductions), and the government sends her a check every year for $1000 to help her pay her mortgage.
In Universe B, Sally pays $9000 a year in taxes (after deductions), and the government gives her a $1000 tax deduction every year to help her pay her mortgage.
In all other ways, the universes are absolutely identical. Sally works exactly as hard in both universes. In either case, Sally has an extra thousand dollars because she’s a homeowner with a mortgage.
Are you saying that in universe A, Sally doesn’t deserve that thousand dollars, but in universe B, she does deserve it?
Is there some enormous moral difference between the extra thousand Sally has in Universe A versus Universe B?
Do you have a cite to show that people on WIC have typically never held a job? (I ask because I have been on WIC during times of unemployment, and most of the women in the WIC office either held low-paying jobs, or were receiving unemployment benefits. I think it’s amazing that people go from being perceived as “hard-working” to “deadbeat” with the pass of a pink slip. I think it’s even more amazing that people who work the crap jobs—those with no benefits and little pay—are perceived as always having the status of “deadbeat bum”, because their earnings are low.)
Ampersand – your analogy is invalid and you fall under the group that believes the money I make is the governments, and if they decide to let me keep more, it is a form of social welfare. That is crap.
It also demonstrates that if you allow the individual to keep their own money, they stimulate the economy, in this case the home industry. And THEY get to decide where to spend the money, instead of having the government make the decision. I feel I make much more intelligent decisions with my money than the government does.
You obviously didn’t read my last post or you don’t understand the difference.
La Lubu – I am not saying people who benefit from WIC are deadbeats. All I am saying is that it is truly a social welfare program. Meaning other people’s tax dollars are used to help those less fortunate. My point was to show that it is not the same as the mortgage tax deduction. Also, you only become a deadbeat if you continue to take more money from the system than you have paid into it.(ex. those who have been collecting unemployment insurance for 99 weeks and still feel they should get more.)
From Mythago – Mortgage Deduction – “It’s a government subsidy on personal debt meant to encourage a particular behavior that the government has deemed Desirable For The Nation.”
Where you are wrong Mythago is calling it a government subsidy on personal debt. The government isn’t subsidizing my mortgage, they are taking less in taxes from me. The mortgage deduction isn’t necessary for me to buy a home.
It is not a subsidy, it, like the entire tax code, is the government’s way of trying to control our behavior. Bottom line it’s my money to begin with. So in the context of this cartoon, it should not be included. IT IS NOT THE GOVERNMENT GIVING ME MONEY, THEY JUST AREN’T TAKING MORE FROM ME!
Not one of the examples in the comic is the government giving the individual money that wasn’t their’s or they hadn’t paid into the system. I really don’t know how much more simply I can state this.
Chris, it seems like there’s a word missing from your response. Did you mean to put the word “because” somewhere after “your analogy is invalid”? I just ask because without a “because” you’re not making an argument, you’re making an assertion.
That is, you’re just saying the analogy is invalid, you’re not showing how it’s invalid. And hey, anyone can ‘just say’ anything.
—Myca
You get a tax credit if you have a mortgage that you don’t get if you don’t have a mortgage. That isn’t subsidization of mortgages?
The mortgage deduction isn’t necessary for YOU to buy a home. It is necessary for a non-zero, yet positive, number of people to buy a home. The mortgage deduction was put in place to encourage people to buy homes but it obviously (for some reason I’m not grasping) isn’t a social program.
A question:
If you didn’t have a mortgage would you owe additional federal taxes? Above what you owe if you have a mortgage, I mean.
Hi, Chris.
I did read your previous post, but you’re right — I don’t understand the difference; that’s why I asked you to explain the difference. To me it seems that universe A and universe B are identical in all important ways.
This is a bizarre argument, because (as Myca pointed out) it’s missing the “because.” WHY is my argument invalid? Spell it out for me, please.
Since you asked: I believe the money I make is mine. Then I pay some of it to the bank for my mortgage, and that portion becomes the banks; and I pay some of it to the government in taxes, and that portion becomes the governments.
Nonsense. In my example, Sue gets to decide where and how to spend the thousand dollars in BOTH universes. Whether she gets the thousand dollar check from the government, or has a thousand fewer dollars withheld from her paycheck, either way she has an extra thousand and she gets to decide how to spend it. (Of course, to get the extra thousand, she first must have a home mortgage, but that’s true in either universe.)
And in either case, the thousand dollars she spends is a stimulus to the economy. This is pretty obvious; if Sue goes and spends $500 at Home Depot, that money then circulates through the economy, regardless of if Sue got it in the form of a tax cut or a check from the government.
It seems, so far, that you’re not able to logically explain a single significant difference between a thousand dollar home mortgage tax deduction and a thousand dollar home mortgage bonus check from the government. Could you try again, please?
There are two significant differences. One, you get something out of the mortgage deduction only if you earn income. If you don’t earn taxable income, then you can be (somehow) paying $1000000 a year in mortgage interest on your primary home, but the deduction won’t do you any good, whereas a bonus check in the same amount as a taxable person would receive, would do you some good.
Two, and relatedly, the value of the deduction is somewhat predicated on your income tax bracket; if you’re in the 10% bracket it’s worth less than if you’re in the 38% bracket. (Bracket numbers made up because I’m lazy.) The bonus check, presumably predicated on the amount of your mortgage interest rather than the amount of your income, would be a flat amount.
These are not huge differences in practice, but they are differences.
Hi all. I appreciate the responses.
I don’t care if it’s the mortgage deduction, or EIC and Child Tax and other credits, it’s still a form of welfare. When it’s a matter of other people paying for things you can write off — it’s no different from WELFARE.
An example: Why should taxpayers who either can’t afford to buy houses, or just plain decide NOT to buy houses, subsidise those who buy them? You want to buy a $300k house — shouldn’t you actually be willing to pay for the entire cost??? Why should you place any of the burden on buying your house upon other people??
After all, NO ONE held a GUN to your head telling to you BUY that particular HOUSE, did they??
Why should your cost for a $300k house be deducted from your taxes, while my purchase of a $30k car can’t be deducted?? After all, those purchases both supply to the nation a similar amount of economic activity.
The automotive industry probably provides as many jobs as the housing industry does in the U.S. — when you consider all the surrounding auto industries: registration and fees, production and sales of parts, repair, tires, etc..
So — why don’t we allow people to deduct the expenses of purchasing a car?
Or, why don’t we allow people to deduct their expense for commuting to work?
Why should a business be allowed to deduct the expense of driving 30 miles to pick up some supplies, when a worker isn’t allowed the same deduction? Both actions are economic activity.
And remember — when the economy was still solvent in 2006, nearly half of all businesses in the US (according to IRS statistics) had ZERO employees. And they were still taking advantage of tax deductions that do NOT create jobs here in the U.S.
These are all examples of why I believe the vast majority of deductions, exemptions, and credits are NOTHING MORE than a form of WELFARE.
Perhaps it’s necessary welfare. Or “good” welfare. But please, let’s call it for what it IS: it’s a form of WELFARE. One person paying taxes to support someone else who hasn’t paid in the same amount. You, the homeowning parent, get to receive a check for $3000 above and beyond what you owed while I, the single renter, pay 15% regularly. That is not fair, and it’s not equitable, and it’s an example of you taking advantage of welfare at my expense.
And that’s o.k. if that’s what America wants. But plese, America — let’s call it for what it really IS.
Thank you, and I look forward to paying even more this tax year!
Sincererly,
Tax Me.
The problem with this is the assumption that your default tax burden should be zero and that taxes are inherently invalid or unjust in some way.
If your tax burden is reduced, you have more money in your pocket *and* you’re still getting all the things your taxes pay for.
Plus, as Robert pointed out in #22, there are refundable tax credits where the government *is* giving you money and calling it a tax credit. Those are definitely a social program. I didn’t find whether the mortgage credit was refundable or non-refundable, but it’s *definitely* a social program if it reduces your tax burden below zero and therefore pays you a refund.
But when you say “other people’s tax dollars”, you are saying that people who receive WIC, or unemployment benefits, or Medicaid spend-down, or whatever…..have never paid into the system themselves. That they’ve never held a job. You are erasing their contributions to the social contract—usually years of paying into the system, poof! with one pink slip.
That’s bad enough, but what’s more damning is that you are erasing the contributions people are currently making—meaning, all the low-wage workers who receive WIC, or food stamps, or subsidized housing, or Medicaid—-you somehow believe that these people are not contributing. Most of the people receiving these sorts of benefits aren’t temporarily unemployed as I was when I was on WIC, but need these benefits over the long-term as the wages they earn are not enough to meet their basic needs. Can you explain to me why you feel this is a subsidy of poor people, rather than a subsidy for employers?
Re: the mortgage deduction. There’s a good argument that the mortgage deduction needs to be rescinded. What it does, is allow a person to buy a more expensive house than he or she otherwise would. Does it stimulate the economy? Certainly. But it is stimulus that is very selective; stimulus that flows towards geographic areas that are already thriving, and away from geographic areas that are struggling. It contributes to urban sprawl and white flight, which places more burdens upon economically struggling cities. Without the mortgage deduction (translation: government subsidy, or “welfare”), more people would make the choice to buy homes in economically struggling areas, pumping much-needed money into those tax coffers, school systems and economies.
On “subsidy”:
Many people speak about “subsidy” loosely as a kind of generic word for “unfair burden.” But to be rigorous, a subsidy arises from a relationship only if a party to that relationship would be better off without the relationship.
It’s very difficult to talk about the degree to which any individual “subsidizes” society because it’s very hard to imagine how a person would exist outside of society. But we can imagine a lower bound to a subsidy by imagining different types of societies that a person might belong to.
Consider, who earned more money in his lifetime: J.S. Bach (composer of 1100+ works, including some of the most famous in Western civilization) or Justin Bieber (contemporary 17-yr-old pop idol)? Bieber, hand’s down. Why? Maybe Bieber is more talented and hard-working than Bach. Or maybe Bieber, through no merit of his own, happened to be born into a society that enables more people to benefit from Bieber’s talent and hard work. If you measure the different between Bieber’s lifetime earnings and Bach’s, you’ll get a rough measure for how much Bieber’s society benefits Bieber more than Bach’s society benefitted Bach.
Now, if you imagine how productive Bieber would be if he were born into a wilderness, you’d get a fuller account of the extent of the benefit Bieber derives from society.
So here’s the exam question: How high would Bieber’s taxes have to be before you could say that Bieber was “subsidizing” society? That is, how high would they have to be before Bieber would be better off living alone in a wilderness?
I enjoy a discussion of public finance as much as anyone. I encourage people to consider whether government programs are worth their cost, and whether we can identify more efficiently means by which government can raise revenues. But when discussions start with, “What’s mine is MINE! I never got nuthin’ from society, so I don’t owe society NUTHIN’!” I know the discussion has a very long way to go.
Thus, I like Amp’s cartoon a lot. But it barely scratches the surface of the problems with Sue’s philosophy.
IT IS NOT THE GOVERNMENT GIVING ME MONEY, THEY JUST AREN’T TAKING MORE FROM ME!
In other words, the government is taking less from you in order to subsidize your mortgage.
Ok let me see if I can explain it more simply:
Tax Me:
Based on what you have said, every deduction or credit in the tax code is a form of welfare. This is a funny way of looking at it.
Ampersand
The end result of your two examples is the same, but I don’t look at the mortgage tax deduction as the government writing me a check. In both examples I am keeping my own money. Hence why I don’t feel any tax deduction is welfare.
The tax code is a set of rules that determines what an individual owes in Federal taxes. It is not welfare, it is a tax policy that changes my tax rate to encourage economic activity. You can call it a social/economic policy, but it is not welfare. The only time a tax deduction/credit can be called welfare, is if your tax liability is reduced to $0 with deductions and credits and they still give you money back. This can only happen with things like the EIC, which you still get to claim, even if your deductions reduced your tax liability to $0.
You and Tax me, seem to take the view that the tax code is welfare. And by that rubric, we should eliminate all deductions and credits and have a flat tax. And if we went to a flat tax, the rate would be lower.
I am in favor of a flat tax. I don’t think it is fair that more than 40% and by some studies as much as 50% of all people who file taxes pay $0 in Federal taxes. I do believe that no matter how little you make, you should pay something in Federal taxes. And I mean in addition to what you pay for SS and medicare are separate, because they are supposed pay you back someday because you paid into them. One is supposed to be like an IRA and the other is a medical insurance policy.
La Lubu:
My point is programs like WIC and food stamps are actually welfare, and the mortgage deduction is not.
I am not opposed to social welfare programs, and I realize that some people who end up using them have paid into the system at one point or another. However, you can only qualify for programs like WIC, and foodstamps, if you meet a certain income level. I cannot currently qualify for either program, but my tax dollars go to pay for people who do. It is a safety net idea that I agree with, and if I ever need it, I am glad it is there. Now if WIC or the food stamp program paid you by reducing your tax liability, it might be the same as mortgage deduction. (ex. my tax liability, after all standard deductions, is $300, and my income level met the criteria for WIC or foodstamps. If the tax code said those people could take a credit of not more than the $300, then it wouldn’t be welfare.)
Without the mortgage deduction, I might not choose to buy a home with all the expenses involved for the upkeep of a home, and I wouldn’t buy a home in an economically struggling area. Without the mortgage deduction, the only value of the house is if I can sell it for more than I pay. By definition, buying a home in an economically troubled area would not be a good investment.
KellyK:
As I said above, there are credits in the tax code that can actually end up reducing someone’s tax obligation below $0 and still refund them money. I totally disagree with this part of the code. No matter who you are, using all the deductions and credits they allow, once you reach $0 tax liability, you should not be able to receive any money back. The mortgage deduction is a deduction, and not a credit. It only reduces a person’s taxable income, whereas a credit is a direct subtraction from a person’s tax liability. #22 above shows this quite clearly.
Another thing, we pay taxes to the government so that they can provide certain services. Public schools, roads, military. When I benefit from those types of things, it is not welfare. And Sue saying she has never taken a cent from the government is a correct statement. She got the benefit of services she PAID for with her taxes.
There are many programs provided by the government that a large majority of the society will never use (ex. food stamps). These constitute true welfare programs. They are necessary for our society to function, but this cartoon try to equate them all as the same, and they are not.
Mythago –
“In other words, the government is taking less from you in order to subsidize your mortgage.”
That statement proves my point that you feel the money I make is the governments. And every penny that they allow me to keep, through the tax code, is subsidizing my life. That is an absurd view. The tax code is a set of rules, as I said above, that determines what we owe the government. It is not a set of rules that defines how much of our earnings we get to keep. If you don’t like the mortgage tax deduction, fine, advocating eliminating it. But don’t call it government a subsidy to me, because they are allowing me to keep more of my money.
You go ahead and pay as much as you want to the government, I will pay what their rules say I owe. No more, no less. And for the record SUE is mad about some people telling her she doesn’t pay enough.
Another thing, we pay taxes to the government so that they can provide certain services. Public schools, roads, military. When I benefit from those types of things, it is not welfare.
You get those services regardless of whether you pay taxes, or how much you pay. If you don’t pay a cent because you have clever accountants, or you make too little, or you rely on another person for your livelihood, you still get to send your kids to public schools, drive on public roads and enjoy the protection of the military.
This has nothing to do with a bizarre us-vs-them world in which we pretend that the IRS’s rules fall out of a clear blue sky and that we have no say in them whatsoever. (Why do you *think* we have deductions for mortgage interest?)
If you believe that it is wrong for the government to take any of your money at all in taxes, then it doesn’t matter whether or not anything is a social program or a subsidy: TAXES BAD. But if you believe that taxation can in any way be legitimate – and you probably should, unless you are interested in paying out of pocket for all the infrastructure allowing you to earn a living – then yes, the home mortgage-interest deductions is every bit as much a subsidy and a social program as EIC or Section 8.
Mythago – you are completely wrong.
A subsidy is someone providing money, that I already didn’t have, to help me afford something I couldn’t afford otherwise. They aren’t giving me money I didn’t already have.
To say a rule in the tax code is a subsidy, assumes the money was the government’s to begin with.
The tax code has been used to encourage certain behavior by changing your tax rate if you fall in certain categories. My mortgage deduction reduces my effective tax rate by about 3%. I believe I fit in the 28% tax bracket, but as we know, your effective tax rate is almost always lower than shown on the tables, because of deductions and credits. between the mortgage deduction and state income tax deduction, property tax deduction and dependent deductions, my effective tax rate ends up around 22%. If they want to remove the mortgage deductions, I would argue the tax rate table should be changed. No one needs to pay higher taxes because I take the mortgage tax deduction.
But currently, with all the new social programs that have been passed, they are telling people like me that I don’t pay enough, and everyone needs to pay their “fair” share. You want to remove the mortgage tax deduction, fine we can do that. I will change my behavior to what benefits me most financially.
The big difference you seem to miss between EIC and mortgage deduction is that the EIC can still be claimed, even if it exceeds the amount of taxes you actually owe. As stated above Person A with tax liability of $300 is eligible for $1,000 EIC credit. The government ends up writing him a check for $700 that he didn’t have to begin with. That $700 comes from tax revenue collected from someone else.
In my case, $16,000 in mortgage interest deduction lowers my taxable income, and I pay about $3,000 less in taxes, but it will never result in more than I actually owe. I go from paying 28% of my income to paying 25%, but I still pay federal income tax. On top of that, at some point they will get additional taxes from any capital gains I get from the property when I sell. Maybe not while I am alive, but eventually they will get to tax the appreciation of the home value.
The government is not subsidizing me to afford a home. They are providing me with an incentive to buy a home by lowering my tax rate. If they didn’t give me the mortgage deduction or if they took it away, I would change my behavior.
Chris, I realize that you don’t want to think of the mortgage deduction as a social welfare program, but it is. If the mortgage deduction did not exist, many homeowners would pay more in taxes than they currently do. Significantly more. The mortgage deduction reduces their tax liability, thus putting more money in their pocket. The “more money in their pocket” part is designed to get people to purchase a more expensive house than they normally would (meaning: if they had to pay for the house themselves, rather than partially by themselves, and partially by government subsidy, or, if you prefer, “rebate”, or, like I prefer, welfare). It’s a social welfare program designed to stimulate the economy, in the exact same way that WIC is a social welfare program designed to stimulate the economy—-by providing the largest benefit to large scale institutions (for mortgage deductions, the banks; for WIC, agribusiness).
And that’s fine—if you don’t think it would be worth it, then it isn’t for you. But most people don’t think that way—they think of homeownership as good in and of itself, especially if they don’t live in one of the more expensive areas of the US. (might as well mention I live in the rust belt, where mortgages are significantly cheaper than renting—no kidding)
Maybe, maybe not. But if a critical mass of folks who could afford to fix up older homes had their mortgage subsidy taken away, so they couldn’t afford the suburbs, but could afford the city? Then it wouldn’t be so risky, no? More money pumped into the city coffers, leading to better city infrastructure and better public school funding. Less economic segregation in the schools. Better infrastructure, better schools…..better climate for further investment. Rescinding the mortgage deducation would funnel money away from the suburbs and into the cities where its needed.
And that’s fine, too. But you’d still be paying more in taxes. As I explained to apprentices reluctant to get into the Local’s 401k program (only members contribute; there is no matching funds by the contractor—we have a pension for that)…..you’re money ahead, because it isn’t taxed when it is placed into your account. You get taxed later, when you withdraw it. Meanwhile, you’re drawing interest on the money you have in your account. If you don’t participate, and take all your money on your check, the IRS is going to get a cool cut off the top. A third of the money you otherwise would get to invest is going to —poof!—go towards your tax liability. Why watch that disappear into taxes when you could be making it work for you?
Chris, you might choose not to own a home if the mortgage deduction were not available. Or, you might anyway if your mortgage payment was lower than your rent payment. Or if the “homeowner” neighborhoods were more stable than the “rental” neighborhoods. Or if you wanted some outdoor space. Or more peace and quiet. But whatever your choice, you’d probably be looking for another tax shelter for your money.
TIFs are another example of social welfare (aka free money) programs that aren’t recognized as such.
Perhaps so. But, for what it’s worth, both the Internal Revenue Service and Bankrate.com labor under the delusion that the first $250,000 of capital gains on a primary residence (or $500,000 if you’re married) is free from capital gains tax.
La Lubu –
By definition it is not a subsidy because I am keeping my money. They are not giving me money that I didn’t already have. WIC is providing services at no cost to low income women and children. Given the income requirements, and I checked their website, individual who qualify (income less than $35K, basic example of a woman with one child) I did the following exercise.
So let’s assume – Single mother with 2 kids (WIC is for women)
Gross income $35K with 2 kids, files as head of household. I did a quick turbo tax entry for this situation. I used a straight calculation for the amount of SS and medicare taxes withheld, and put $0 withheld for Federal income tax. (NO FEDERAL INCOME TAX was taken out of her checks). Even with her employer withholding no money for federal income tax, this individual would still receive $1,545 back from the federal government. Her actual tax liability was shown as $1,706, but with the Child tax credit and EIC, she ends up getting a check from Uncle Sam. The only taxes paid by this individual was about $2,000 in SS and Medicare taxes. The federal refund they get is from taxes paid by someone else. This is an example of welfare. Why should this person receive any money from the federal government? Once your tax liability reaches $0, you should not be able to take anymore deductions or credits.
Reducing my tax liability is not welfare. Also, I don’t agree with your assumptions about where people would buy homes, if the mortgage deduction did not exist. Not sure what you base it on. The reason I don’t buy a home in the city has more to do with safety and crime and the desire to have a yard. It has nothing to do with the fact the government gives me a deduction on my taxable income.
I used a straight calculation for the amount of SS and medicare taxes withheld, and put $0 withheld for Federal income tax. (NO FEDERAL INCOME TAX was taken out of her checks).
But that isn’t what happens in real life. In real life, she gets the money back at the end of the year, not during the year in the form of no federal tax withheld. In any case, when your tax burden is lower than it otherwise would be without a specific targeted social welfare program (like the mortgage deduction), it is a form of welfare. It is a subsidy, or rebate, to you. Reducing your tax obligation is welfare, because you would otherwise owe that money, just as you would any other bill.
What part of “taxes are an obligation” do you not understand?
Observed reality among working class/lower middle class people in the rust belt. I don’t itemize and thus don’t get the benefit of the mortgage subsidy, as I file 1040A, head of household. I suspect most of my neighbors are in the same boat—the standard deduction gives them more benefit than itemizing. At the working class/lower middle class level, in this geographic area, one is far better off buying than renting (the safety you mention is an automatic benefit from homeownership; apartment complexes are less safe when it comes to violent crime and more prone to theft/break-ins, especially of vehicles).
So, my different perspective is based on being from a different social class than you.
La Lubu –
By your logic, the entire tax code is a list of subsidies. Meaning the arbitrary tax rate of 28% for income for income between $83K and $174K is a subsidy that allows me to keep 72% of MY income. For your definition of a subsidy, one would have to believe that all the money that you make is the governments, and the tax code just defines how much you get to keep. I don’t look at it that way. I believe we are currently over taxed, and that our government has not done a good job of spending the money we pay in taxes.
Actually a credit doesn’t become welfare, until your tax liability is reduced to $0. So the EIC actually isn’t welfare, if you still pay some taxes.
In the example I gave, if her employer had withheld taxes, she would have gotten it all back plus the $1,545 that I listed. So she actually did receive $1,545 that she did not earn from her own work. It was government welfare taken from one tax payer and given to her. The money I get to keep as a result of the mortgage deduction is MY money. The government didn’t have to take money from another tax payer and give it to me. This is a simple concept, but you must be one of the people that believe the “rich” don’t pay their “fair” share.
Taxes are an obligation, true, and my obligation, according to the current tax law works out to be about 23% of my income. The rules that make up the tax code are not subsidies, as long as you still pay something to the government.
Not sure how many ways I can say this, but it is a simple concept. Here is yet another way to say it: If, after you have followed the tax laws, your tax liability is $0, and the government still send you a Federal Tax refund, that is welfare. If, after you follow all the tax laws, your tax liability is greater than $0, even 1 penny, you have not received welfare. You have been allowed to keep your own money.
Chris, you seem to be focused on one particular meaning of “subsidy” that doesn’t make much sense in this context. If you accept that taxation is a legitimate action of the government, which apparently you do, the money you owe in taxes is not your money, it’s the government’s money to dispense with as the citizenry (indirectly, and very imperfectly, through their elected officials) sees fit. (One could argue that it doesnt’ become the government’s money until you pay your taxes, but that’s a distinction with zero meaningful difference. And it also doesn’t matter whether one thinks we’re being overtaxed – and I personally agree with you on that – or undertaxed, except maybe at the extreme ends of the argument; if there’s some legitimate role for taxation, that tax money should reasonably be considered to belong to the government.) If some people are required to pay less in taxes than they would otherwise by virtue of having bought a house, had a child, etc., then by a straightforward definition of the word subsidy those activities are being subsidized by the government through the tax code, and those individuals are receiving subsidies. That may not be consistent with some technical definition of the word subsidy used in some specific circles, but it’s certainly consistent with basic common sense in this context. Your insistence on focusing on the fact that you still pay some taxes doesn’t change that point. And while it’s not true that “the entire tax code is a list of subsidies” as you say, it’s certainly true that a lot of it is, like it or not.
You don’t need to keep restating it a zillion different ways. We’re not confused by the concept; we’re disagreeing with it.
Like I said before, you’re arguing as though your tax burden should be zero and that no reduction to it “counts” unless it drops it to zero or below. You’re treating taxes like they’re not an obligation, or they shouldn’t be, which ignores the fact that if you get enough tax credits to drop your obligation to zero, you’re still getting every benefit that other people’s taxes pay for. You’re just not receiving it as a check from the government.
But consider two next-door neighbors, one who owns, and one who rents. Assume they have similar incomes and lifestyles. They get the same benefits from the taxes they pay–they drive on the same roads, are protected by the same cops, send their kids to the same schools. For all of these things, the person with the mortgage pays less, because they’re paying less taxes. Therefore, either there’s less money in the system, or other people are paying more than they would if there were no mortgage tax credit.
If that person then complains that they never got anything from the government, their next-door neighbor has every right to laugh at them.
In practical terms, if you owe someone $500, it doesn’t matter whether they hand you $100 or forgive you $100 of your debt. You’re in exactly the same boat either way.
Chris,
It seems like you’re being either deliberately obtuse or just really hung up on semantics.
Joe and Bob earn the same amount of money and pay the same amount toward housing. Joe owns and Bob rents. Joe pays less in taxes. Bob pays more. Both get the same benefit from schools/roads/police/etc.
Owner Joe is getting a subsidy that Renter Bob is not, and if you want to stamp your foot about the money being first theirs and not the government’s, well, then Renter Bob is either subsidizing Owner Joe’s housing costs or he’s subsidizing Owner Joe’s benefit from government services by paying more for the same roads and schools than Joe does.
Under your whole MY MONEY IS MINE thing, isn’t Renter Bob’s money just as much his as Owner Joe’s money is his? Why should Renter Bob pay more? Because the government has a policy of encouraging people to buy houses and the tax code is the instrument by which it encourages that behavior.
I don’t think there’s really a right/left divide here. Maybe the mortgage deduction is good and maybe it’s bad, but it’s absolutely a government social program. Calling it what it is doesn’t make anybody here a socialist.
By your logic, the entire tax code is a list of subsidies.
Not entirely, but pretty close.
KellyK
So our tax code is a list of subsidies (deductions, credits, etc.) Well then the base tax rate itself is also a subsidy. Meaning every penny you earn is actually the governments, and they have allowed you to keep a certain percentage, by not setting the tax rate at 100%. That is an absurd way to view our tax code.
I am not arguing that my tax obligation should be $0. I am saying my tax obligation is defined by the tax code.
Our tax system is not a flat tax, where everyone pays the same percentage, regardless of income level or situation. The tax code already defines different rates for different levels of income (by your definition, the government is subsidizing some income levels more than others.), and further defines those rates, in the form of deductions and credits. My tax obligation is the sum total of all those codes. Given my income level, I do not consider my tax obligation to be the 28% rate defined in the base tax rate table. In my case it works out to 23%. In your last analogy, you view my tax obligation as 28%, that is where we disagree.
Kelly in your example, if my neighbor makes the same as me and choose not to buy a home to take advantage of the lower rate it provides, that is his problem. The same goes for someone who chooses to put his savings in a bank, instead of a tax free interest bearing account, so he can pay less taxes today, and put off that tax burden until retirement, when he can possibly pay at a lower rate.
These are not subsidies, they are the rules that define your tax obligation. If you choose to pay more to the government than the tax code requires, that is your choice. Until the government actually give me money I didn’t earn myself, I will not consider the deduction or credit a subsidy.
And Sue in the comic is not saying she never received a service from the government, she is saying she never received any money from the government.
@ Chingona
Me – “By your logic, the entire tax code is a list of subsidies. ”
Chingona – “Not entirely, but pretty close.”
So you do view your earnings as the government’s and they just decide what you get to keep.
“but it’s absolutely a government social program”
There is a difference between a social program and social welfare. One allows me to keep my own money in an effort to encourage economic activity, the other gives me someone else’s money, so I can spend it.(food stamps, or any portion of EIC that is paid to an individual who’s tax obligation has been reduced to $0)
AS for renter Bob, I would call him an idiot for not taking advantage of the rules that would lower his tax rate. He is choosing to pay more to the government than he is required to pay.
So you do view your earnings as the government’s and they just decide what you get to keep.
This is a completely different issue than the issue of whether the tax code is a list of subsidies. The two are not remotely related.
My earnings are mine, AND my taxes are an obligation and the price I will gladly pay for living in a civilized society. Both/and.
That doesn’t change one bit the fact that I get a subsidy for my mortgage and another one for my child care expenses because I use a flexible spending account that reduces my taxable income and two more for each of my children (with a child tax credit on top of just listing them as dependents) and then another one for my retirement savings in my 401(k). All of those things cost me less than they otherwise would, thanks to the tax code.
This is the dictionary definition of subsidy: 1. Monetary assistance granted by a government to a person or group in support of an enterprise regarded as being in the public interest. 2. Financial assistance given by one person or government to another.
That’s what we’ve got here. Monetary assistance going from one group of people and institutions to others.
As for Renter Bob, maybe he doesn’t have relatives who will help him out with the down payment, like Owner Joe’s parents did. Maybe he just moved to town and isn’t sure how long he’ll be living here. Maybe he prefers to spend his extra money on a fabulous vacation each year instead of saving it. Hey, that stimulates the economy too! It doesn’t matter why he hasn’t bought into the American Dream. I would think that someone with your apparent ideological tendencies wouldn’t want the government interfering in Bob’s market decisions, anyway. Hell, I’ve got what I suspect are the opposite ideological tendencies, and I’m not sure the government should be interfering in Bob’s market decisions. Regardless … what matters for purposes of this discussion is that, of all the money that everyone pays into the tax pot, people who own homes get money that otherwise similarly situated people who rent do not. That’s a subsidy.
I don’ t think a subsidy has to reduce your tax burden to zero to be a subsidy. The thing you keep ignoring is that your taxes are paying for services—so when you reduce your tax burden, you’re getting the same services and paying less for them.
This argument does *not* require me to think that all my money belongs to the government, just that taxes are an obligation and that reducing an obligation, while not reducing any of the services you get for that obligation is–in all practical terms–the same as giving you money. Let’s say the electric company gives a $50 discount to someone who does something they want to encourage–putting in weather stripping, telling 5 friends to switch to electric heat, whatever. If that doesn’t reduce my bill to zero, I’m still “getting something.” Admittedly, taxes are different because you pay based on how much you make rather than by what services you use. But, you’re pretty much paying a subscription fee for civilization on a sliding scale.
I would also argue that the things you call subsidies benefit all of us as tax payers, and so it’s only reasonable that we pay for them. You can complain that someone is “giving your money to a mom on WIC” or you can acknowledge that trying to make sure children don’t starve to death is an overall good for society–fewer people stealing out of desperation, just as one example. If we didn’t have those safety nets and instead required companies to pay all their employees a living wage, you’d also pay more for food, consumer goods, pretty much everything.
Plus, we all benefit from the fact that a safety net is there for us to use it if we needed it. If there was absolutely no safety net, it would be highly rational to live as simply as you could and hoard most of your paycheck. The heck with cable or computer games or a nice car, because if you lose your job or end up with medical bills you can’t pay, you could be out on the street that week. That wouldn’t exactly be good for the economy.
If you receive a mortgage tax credit, you don’t lose access to that safety net or have an increased risk of getting your car broken into by someone who needs cash to buy infant formula. So, like with schools, police, roads, etc. etc. etc., you’re getting the same benefits, and paying less.
Chingona-
By your definitionthe first part of the tax code, where they define tax brackets, is also a subsidy just like the mortgage deduction or EIC.
The tax rates are as follows 10%, 15%, 25%, 28%, 33%, 35%. These numbers are arbitrary, and have been changed many times over the years.
Your view says that 100% of the money we earn is the government’s, and in the first part of the tax code, they decide to split us into 6 groups and each group gets paid(subsidized) a different amount by the government. At the base level that would be 90%, 85%, 75%, 72%, 67% and 65%. After that, they have additional rules that further split up those groups and the government pays(subsidizes) them more based on how they behave. The problem with your view, is you somehow believe that the tax code only defines 6 levels of taxation, but in reality there are many more levels, based on what deductions and credits you can take.
So as in my own example from a prior post, the government starts off saying since I earn money I owe 100% to them, except, if I make between 83K and 144K, it gets reduced to 28% tax bracket, and because I bought a home, have a kid, and contribute to savings, it gets reduced to 23% tax bracket. I don’t view taxes as the government defining what I get to keep, the tax code defines what I am obligated to pay. And in my case my tax rate as defined by the government is 23%, not 100% with the government providing me a subsidy of 77%.
Your definitions are correct, but the subsidy is going from the tax payer to the government, not the other way around. The tax code just defines how much of a subsidy each individual has to provide to the government in the form of taxes. The only people receiving a subsidy from the government are those that get refunds from the government, even though their tax obligation is $0.
Now if you want to discuss how unfair the current tax code is, because it splits us into so many different groups, fine. We can have that discussion. As I said before, I am in favor of a flat tax. Everyone pays the same flat rate, no matter how much they make, or how they behave. Then the government gets to use that money however they want. But it is not their money, until I send it to them! There are lots of people who send more money to the government than they owe, and they get a refund of their money. I do not send the government a dime more than I actually owe, so I don’t get refunds.
Kelly –
So how much is my obligation in taxes to the government? Where is that defined?
See your are operating on the basis that the base tax codes alone are our obligation. I do not view it that way. Every line in the tax code is subject to change. They could raise our base rate, they could take away deductions or credits. You have to view the tax code as a whole and it’s purpose is to define how much an individual pays. Your tax obligation is the sum total of all those rules.
I don’t disagree with your point about some people pay less for the same government services. I pay 23%, others pay as much as 35%, some pay 0% and yet another group actually gets paid by the government, and they still benefit from those services. The only group out of the 4 I listed, that is actually getting a subsidy from the government is the last one. The fact that we all benefit from those services is not the subsidy.
I buy a $200 cell phone and sign a two-year contract with AT&T. AT&T sends me a check for $150, effectively reducing the price of the phone to me to $50. Yes, we generally call that a rebate, but it would be just as accurate to say that AT&T subsidizes the cost of a cell phone for people who sign contracts with the company. Saying would not mean that deep down, I really think all my money belongs to AT&T and they only deign to let me use some of it. Nor is it some inevitable logical conclusion from calling it a subsidy.
Chris, it kind of seems like you’re just so unwilling to accept the notion that you benefit from some number of government subsidies through the tax code that you’re going through some pretty impressive mental gymnastics to avoid the common sense meaning of that word. That’s obviously your decision, whatever works out for you, etc., but I don’t think you’re going to fool too many people with that line of “reasoning.”
Again, this is completely irrelevant to the question of whether you receive subsidies. If the government has a legitimate claim to some amount of money through taxation, that money belongs to them. And if some people pay less in taxes solely as a result of the fact that bought a house, had a child, etc. (i.e. people with the exact same income profile who didn’t buy a house or have a child have to pay more), those activities are being subsidized, and those people are receiving subsidies. If you don’t like the idea of being one of those people, it would probably make more sense to not claim the subsidy than to pretend it doesn’t exist.
Tangentially related:
The Congressional Budget Office reports that people in the bottom 20% of the income distribution used to receive 54% of government “subsidies” in 1979; by 2007 that figure was only 36%. (The Center for Budget and Policy Priorities says that as of 2010 the figure had dropped to 32%.)
Consequently, even after you account for the pernicious subsidy-making effects of taxes and government programs, the percentage of net income received by the bottom 20% has gone down since 1979. Heck, the percentage of income received by the bottom 80% has gone down since 1979.
Lee and chinwag,
Both your examples assume everyone starts at the same base tax rate. That would be a flat tax, which we don’t have. So answer me this question. What is the base tax rate at which you don’t consider me receiving a subsidy? In the AT&T example the base cost of the phone is $200. Give me the base tax rate?
Nice. Real nice.
Jesus. Don’t do that shit. Apologize to chingona, please.
—Myca
Chris, my position doesn’t assume that at all; I really don’t have any idea why you think it does. We have a taxation system, whether it’s flat or progressive, that has been deemed completely legitimate by legislatures, courts, and the vast majority of citizens (while there are obviously disagreements in the specific structure, the existence and general framework are broadly accepted). Given that, the relevant question is not whether there are different tax brackets but whether, for two people in the same tax bracket with the same income structure who would otherwise have the same tax burden, does one pay less in taxes because he or she buys a house? If the answer is yes, which it obviously is, that house purchase is subsidized and that person receives a subsidy.
There are three basic points to the argument:
1. We have a legitimate taxation system, and as a result some portion of our income as US citizens belongs to the federal government.
2. For someone who buys a house, the government takes less money in taxes (or returns more after it’s been paid; again, a distinction without a difference) than it would take from that same person if he/she didn’t buy a house.
3. The government, through the tax code, is subsidizing the purchasing of houses, and people who buy houses receive government subsidies for doing so.
#1 and #2 are self-evidently true, and #3 follows directly from them for any remotely coherent, common-sense definition of the word subsidy.
I don’t particularly need an insincere apology. I’m just not going to keep discussing this with someone who wants to play like that. Which is fine. Everyone else seems to have it under control.
Lee
“2. For someone who buys a house, the government takes less money in taxes (or returns more after it’s been paid; again, a distinction without a difference) than it would take from that same person if he/she didn’t buy a house.”
This is my point me and the other person who make the same income, but one of us owns a house, are not in the same tax bracket. He remains in the 28% tax bracket, and my tax bracket is 23%. In the tax code I am defined as a different class than someone who doesn’t own a home. Just as the code defines someone who makes 40K is a different class than someone who makes 85K. So by your argument, any rule in the tax code that reduces our tax liability to less than 100%, they are being subsidized. If they removed the mortgage deduction, there would still be people who own homes, and for one those homes might cost the buyer less, because there is not an incentive to buy. The tax code provides incentives, not a subsidy. By your logic the standard deduction is also a subsidy, since a single person gets a different standard deduction than a married couple, or a head of household.
The base tax rates change all the time, and they as part of the code are no different than the deductions or credits, when defining a person’s obligation. I guess by your definition, when Reagan reduced the top marginal rate from 70% down to 39%, the government was providing a subsidy to those in the highest tax bracket. For that matter any tax break the government chooses to give us would be considered a subsidy.
Not sure why Chingona is upset, the comment must have been deleted.
Holy crap, does Amp have a time machine? See today’s New York Times: Even Critics of Safety Net Increasingly Depend on It.
“Gulbranson owns a logo apparel shop, deals in jewelry on the side and referees youth soccer games. He makes about $39,000 a year and wants you to know that he does not need any help from the federal government.
He says that too many Americans lean on taxpayers rather than living within their means. He supports politicians who promise to cut government spending. In 2010, he printed T-shirts for the Tea Party….
Yet this year, as in each of the past three years, Mr. Gulbranson, 57, is counting on a payment of several thousand dollars from the federal government, a subsidy for working families called the earned-income tax credit. He has signed up his three school-age children to eat free breakfast and lunch at federal expense. And Medicare paid for his mother, 88, to have hip surgery twice….
Mr. Gulbranson and many other residents who describe themselves as self-sufficient members of the American middle class and as opponents of government largess are drawing more deeply on that government with each passing year.
Dozens of benefits programs provided an average of $6,583 for each man, woman and child in the county in 2009, a 69 percent increase from 2000 after adjusting for inflation. In Chisago [County], and across the nation, the government now provides almost $1 in benefits for every $4 in other income.
* * *
Many people say they are angry because the government is wasting money and giving money to people who do not deserve it…. They are frustrated that they need help, feel guilty for taking it and resent the government for providing it.
* * *
Medicare is often described as an insurance program, but its premiums are not nearly high enough. In simple terms, Americans are getting more than they pay for. But many older residents in Chisago say this problem belongs to younger generations. They paid what they were told; they want to collect what they were promised.”
I imagine it’s because you referred to her/him as “chinwag” instead of chingona.
Another distinction with zero meaningful difference. If the sole reason you pay less in taxes than someone with the exact same income profile (whether that’s done by allowing you to deduct from your gross income so that your amount of taxable income puts you to a lower bracket or by any other method) is that you performed some activity – in this case bought a house – and he/she didn’t, the government is subsidizing the performance of that activity through the tax code.
I have no idea where you came up with this; it certainly has nothing to do with what I said.
Again, no idea where you’re coming up with this. In the case of home buying, having a child, going to college, etc., we’re talking about subsidizing certain activities that the government deems beneficial to society. They may be right about that, and I’m not saying those subsidies shouldn’t exist; nonetheless, it’s pretty obvious that they’re subsidies.
Person A has $x wage income, $y interest income, and buys product z.
Person B has $x wage income, $y interest income, and doesn’t buy product z.
Person A pays less in taxes than Person B, despite their incomes being exactly the same.
–> The government is subsidizing the purchase of product z. I’m not sure how it could be much more straightforward than that. In any case, I am sure that there’s not much point in continuing this conversation. Have a great afternoon.
Chingona I am sorry for the typo. I type on my phone some times and really don’t go back through and proof read the typos.
As far as this subject goes, if people want to view the tax code as a subsidy, that is your choice. Instead of calling them deductions in the tax code, they could have just defined a different tax rate for home owners. In my mind it is my money I am keeping, not money that belongs to someone else. If government removes the mortgage deduction, I would lobby for them to reduce my tax rate.
Me – “So by your argument, any rule in the tax code that reduces our tax liability to less than 100%, they are being subsidized.”
Lee -“I have no idea where you came up with this; it certainly has nothing to do with what I said.”
My point is the base tax rates are just another rule in the tax code. The government could just as easily say we owe 100% of our income in taxes, but because person A makes X his rate is reduced to 28% and because person B makes Y, they get taxed at 10%. At the base level the fact that we have progressive tax rates, and everyone doesn’t pay the same %, you could say the government is subsidizing the lower tax rates, and the only people not being “subsidized” by the government are the people in the highest tax bracket.
As for public schools, I pay taxes so that the government can provide public education. Why shouldn’t I get money back if I have to send my child to private school, because the public school that my tax dollars pay for is terrible.
That’s not at all how our progressive tax system works, Chris. A person doesn’t get taxed at rate X for all of their earnings. For example, tax rates for 2011 break down as follows for an individual:
10% on taxable income from $0 to $8,500, plus
15% on taxable income over $8,500 to $34,500, plus
25% on taxable income over $34,500 to $83,600, plus
28% on taxable income over $83,600 to $174,400, plus
33% on taxable income over $174,400 to $379,150, plus
35% on taxable income over $379,150.
So, if you have taxable income of $83,599 and I have taxable income of $83,601…
You are not taxed at 25% while I am taxed at 28%.
So… everyone does pay the same rate on taxable income. We don’t all pay the same effective rate, though, due to various subsidies.
It is astonishing to me the number of right-wing oriented folks who get the structure of marginal taxation wrong. Almost as if there was a misinformation campaign about it … oh wait …
yrs–
–Ben
Chris at 77:
Um, because if you take “your” money* out of the system, it gets worse? Also because the service is still provided and available to you, whether it meets your standards or not.
*Quotes because it’s already paid as a tax, so it’s not really your money anymore.
I understand how the tax code works, I just don’t believe the base tax rates are my obligation. I see deductions and credits a further clarification of what I owe, an incentive to spend MY money in certain ways. Since I make more money, I have more to spend to stimulate the economy than someone who makes less. It is a way to try and make an unfair, progressive tax rate fair, allowing me to lower my tax obligation. If a deduction allows me to lower my rate from the 28% bracket to the 25% bracket, I view my obligation as the 25%, not 28% with a subsidy of 3% from the government. As I said before, the money is mine, I am obligated to pay taxes of a certain amount, and that is defined by our tax code. If renter A makes the same as me and doesn’t take advantage of every reduction in the tax code, that is not my fault. The mortgage tax deduction doesn’t keep me from paying taxes on that income, it just delays it, and actually, it really just diverts it from the federal government to my local government.
I buy a house, I pay taxes on the purchase, and every year, I pay property tax, that a renter does not pay. In my case I pay about $6,000 in property taxes that I wouldn’t pay if I rented. That is considerably more than the $3,000 approximately that it reduces my tax obligation. So the government is not giving me any money, I am just paying it to my local government directly. My net taxes actually would go down if I rented. Homeowner ‘A’ actually pays more in taxes to local government than renter ‘B’, because he buys a home, and that is why the mortgage deduction is there.
But you keep believing the government spin that they are giving you something with a deduction. In reality the only time they give you something is if the tax code reduces your obligation to $0, but they still send you a check for something like EIC.
Our tax code is a mess, and not fair, in my opinion, so I refuse to accept the rhetoric that somehow the government subsidizes me, because they provide deductions or credits in the tax code.
What? Renters pay property taxes in the form of higher rent. The landlord pays the property taxes directly; the renter pays the property taxes indirectly, in the form of higher rent. Fixed rate mortgages stay the same. Rent increases each year (well, for residential. Where I live, landlords don’t offer leases longer than one year for residential).
Of course you refuse to accept the idea that your tax breaks are a subsidy. The idea that your tax bill being lowered (translation: an obligation that you have is being lifted) is a form of welfare….well, that carries a stigma. A stigma that middle-class people don’t want to accept. “Welfare” is something that “those people”, those lesser human beings, get. What you get is an “incentive”—even though that incentive comes in the form of forgiven debt.
What you don’t refuse to accept, of course, is the money.
If renter A makes the same as me and doesn’t take advantage of every reduction in the tax code, that is not my fault.
Nobody said it was your fault. That’s certainly an interesting choice of words.
Homeowner ‘A’ actually pays more in taxes to local government than renter ‘B’, because he buys a home, and that is why the mortgage deduction is there.
Um, no. In addition to deducting my mortgage interest, I also deduct my local property tax. La Lubu is correct that renters generally pay property tax – through their rent – but they don’t get to deduct that either.
(The one cavaet I’d put on La Lubu’s comments about rent is that in places where property values have plummeted, the rental market has gone very soft. We have a home that we couldn’t sell when we moved, and we rent it at a loss. Nonetheless, if market conditions would allow me to raise the rent, I would do it in a heartbeat, and the rent we do collect does go toward property taxes and mortgage, and … we get to write off the loss.)
I see deductions and credits a further clarification of what I owe, an incentive to spend MY money in certain ways. … It is a way to try and make an unfair, progressive tax rate fair, allowing me to lower my tax obligation.
Allow? Allow? Why, it’s almost like you think it’s not your money in the first place!
You have made it very clear that that you see targeted credits and deductions as creating some infinite number of constantly shifting tax brackets. You have failed to make a case for why anyone else using common-usage understandings of the English language, should view it that way. When a person is in a certain tax bracket, and deductions and credits that allow the person to reduce their tax obligation are targeted at certain economic activities and not at others, the government is subsidizing those economic activities.
By “allowing” you to reduce your tax obligation, by “incentivizing” you to engage in certain economic activities, the government is causing those particular activities to cost you less than they otherwise would if the deduction or credit did not exist. That’s a subsidy.
Mortgages are subsidized. European vacations are not.
Remember that your mortgage interest exists in the private market. It’s money you are paying the bank, in exchange for which the government reduces your tax obligation. Now tell me again how it’s YOUR MONEY.
I will give you one thing, the word “allow”, was a poor choice. Not consistent with my other posts, it was a mistake. But the government has done a good job in convincing people to view their money as the government’s, I slipped up.
But by your logic, when the George Bush lowered all base tax rates, across the board, that was really the government giving everyone a subsidy, because our real obligation should have been the old rate? And according to liberals, we have been given that subsidy too long, but now they are only going to take that subsidy away from the top two tax brackets.
The government tells us they are providing tax “cuts” every time they add a credit or deduction to the tax code. They could just as easily change the base rate to do that. However, they call it a credit or deduction, which allows people like you to say the government is “paying” me, instead of what it really is, a way of lowering taxes for some and not other, based on arbitrary issues.
You are also correct, a portion of rent goes to pay the property tax for that unit. And I would agree that probably isn’t fair. My point was that I pay more in property tax than I actually get back for the mortgage deduction and property tax deduction combined. Now if they gave me a straight credit for the property tax and the interest, that might actually equate to a subsidy (meaning I don’t pay the government any taxes, but they still send me money.
Again, deductions and credits can be viewed as an incentive, to encourage a certain behavior, but not a subsidy. If instead of the deduction, they just said we are lowering the tax rates, across the board, they couldn’t encourage how I spent it. I believe there is a benefit, because these incentives can help fuel certain industries, but when I engage in these behaviors, I am spending MY money, not the governments.
Every dollar I pay in taxes goes to subsidize the government, not the other way around. The entire tax code places people into groups and defines their obligation. I don’t care what you call it, the some total of the code defines my tax rate/obligation, not just the first section. Everyone doesn’t get to qualify for all the rules in the code, but whatever one you do qualify for, defines your obligation.
I would prefer we had a flat tax, with no deductions or credits. It would be so much simpler. If we need a progressive scale, fine, but the tax rate should be the tax rate. However they spend it after that is their business, but it is not the government’s money until I pay them.
Only if that credit or deduction applies to every single person who files a tax return. Also, even when that credit or deduction applies to every single tax return, it is usually easier to enter it in the code as a credit or deduction rather than reduce each bracket’s rate by some fraction of a percentage point. Especially since each tax bracket would need to be reduced by a different amount. Or, I suppose, you could just lower the rate on the lowest bracket. But that would give the poor yet another undeserved perk over the hard workers among us.
IOW, “Complexity is always bad.” So you don’t believe that there is any reason – not one possible reason – that we might want some people who earn $X to have less tax obligation than other people who earn that exact same amount? You can’t imagine any circumstance in which we, as a nation, might want to differentiate the tax obligations of two identical earners?
Jake,
I think you finally get my point. The fact that we don’t have a flat tax rate, the government already divides us into groups that pay a different percentage. Why should I pay a higher rate as my income increases? In my perfect world, everyone pays 20% (folks can argue what that percentage should be) of their income, no deductions, or credits.
One way to view our current system now is our flat tax rate is 35%, except
you are subsidized 2% on every dollar between 178,651 – 388,350
you are subsidized 7% on every dollar between 85,651 – 178,650
you are subsidized 10% on every dollar between 35,351 – 85,650
you are subsidized 20% on every dollar between 8,701 – 35,350
you are subsidized 25% on every dollar between 0 – 8,700
and you get to reduce your taxable income by
$5,800 if you are single,
$11,600 for married couples,
$8,500 if you are “head of household” (why do we need a different deduction for a head of household and a single person? See child deduction)
you get to reduce your taxable income if you have a kid
and on and on, the tax code by your view is just a flat tax with a list of subsidies.
I look at it as the tax code and all its language determines my ultimate tax liability. Whatever group you fit into, based on all the rules, sets your rate.
So back to the renter vs. home owner example
We may make the same amount of money, but according to the tax code we are different groups, so we pay a different rate. The semantics of calling them deductions or credits, does not make them a subsidy. They are just rules that lower the rate for some people over others.
What does a head of household do to deserve an extra $2,700 reduction in their taxable income?
Ultimately, separating us into groups and deciding some get to pay a lower percentage than others is what is not fair. But because it isn’t fair, don’t call it a subsidy to me as a home owner, because you have to pay more because you don’t buy a home, so you can feel better about paying more and try and attach a stigma on me.
In the example of two people who buy something from a store and one person has a coupon. The person with the coupon is not receiving a subsidy from the store that the other person did not have access to.
If the renter has the same amount of income as me, and all other expenses are similar, he is just as able to buy the house and not pay the lower tax rate provided for that group of people.
Chingona,
Let me say again, I am sorry for mistyping your name.
Tax deductions and credits are an elected officials tool to buy votes for his re-election. They get to target their voting block and show them they care, because they are giving them a tax break. So yes our tax code is a constantly changing set of tax brackets. It divides us into groups and allows for the class warfare arguments that say one person or another doesn’t pay their “fair” share. This applies to people at both ends of the tax brackets. One group says the rich don’t pay enough, and the other says it is wrong for 40% to pay $0 in federal income tax.
This is just another reason I support a flat tax. There are plenty of studies to show a flat tax could bring in substantially more revenue. Then the government can run all the social programs it wants, to help give back to the people they feel are less fortunate or down on their luck. And they won’t be able to use a class warfare argument. As it stands, with as complex as they make the tax code, it pits one group of people against the other, and that is the problem in this country right now.
Chris, your focus on different income levels and different tax brackets completely misses the point that the cartoon is about specific activities that are subsidized by the tax code, not income levels. To repeat, specific activities such as purchasing a home or having a child are subsidized by the tax code.
And your framing the argument in terms of fairness or class warfare is also completely sidestepping the point. This is not a question of fairness, and not a question of whether a flat or progressive tax is better, and not a question of whether it’s good or bad for the government to be subsidizing certain activities (although obviously those questions are legitimate and important ones to ask). It’s a simple statement of reality – if solely by virtue of having bought a house you pay less in taxes than someone else with the exact same income profile, then the activity of home buying has been subsidized by the government through the tax code, and you are receiving that government subsidy. If that’s really so hard for you to deal with maybe you should rethink your notions of what it means to receive a government subsidy.
The mortgage-interest deduction is not limited to buying a house; it also permits deducting interest on a home-equity loan. At which point you’ve already bought the house; you’re just using its value for a line of credit.
Nope. I definitely don’t get your point. Your point (which seems only tangentially related to both the comic and reality) seems to be that tax credits and deductions aren’t subsidies – and cannot be – because we don’t have a flat tax. It makes no sense at all.
It seems that the only way to get off this welfare train i am riding is to abolish the income tax code.
If that is the case, count me in! (I suppose, alternatively, a flat tax with no deductions would be sufficient, as well. So, count me in on that, too!)
But, to some extent, I think the analysis of the mortgage interest deduction as a subsidy is unfair.
The tax code is a series of judgment calls that do not reflect subsidies (even if that is the effect).
Consider that the Government decides to start taxing income. They have to define what income is. Then, they have to define what it is not. If you get injured and PAID for the injury, that is not included as income. If you receive life insurance benefits, that is not included as income. Has the government subsidized these? Clearly, these are income, except that they have defined them not to be. So, they aren’t. It is all smoke and mirrors.
Except that there are reasons they were defined not to be. If you are injured in a car accident and receive $100,000.00 in damages, the Government may not want to call that income because it is to compensate you for the fact that you only have one arm now. And, they don’t want to tax that million dollars you received when your dad died because it is unseemly to take money from 5-year old orphans; they will just tax HIS estate.
So, they have reasons for not including that as income. The mortgage interest deduction served a similar function. If I understand correctly, it USED to apply to ALL types of interest (credit card, car loan, etc.). Now, why would the government give you a deduction for interest you pay? Well, when you borrow money, you don’t have income (this could be objected to as well, and there is really no right or wrong answer here, because we are just defining things as we go along). So, when you pay it back, you do not get a deduction. You could easily create a system where a loan is income and paying off the loan would get you a deduction against other income.
But, the interest you pay on that loan is a weird thing. The interest is just the cost of the loan. It is money lost on an event that is not taxable. And, interest is INCOME to the person I pay. So, the legislature reasoned that interest payments should be considered a deductible item, because it was an expense of the loan.
Then, the government decided it could make more money if it got rid of the interest deduction (or, it decided it did not approve of unsecured debt, or it did not like the prevalence of consumer debt). But, the government saw that it was politically dangerous to take away the mortgage interest deduction. After all, there would be a lot of people who might be upset that they cannot even afford to buy a house because the government takes too much of their money. So, they kept that part of the deduction.
Tl;dr: Still don’t think the mortgage interest deduction is a social program.
If you think it is, then basically EVERYONE is on welfare (of one sort or another). And, you should stop complaining about corporate welfare, and Romney’s off-shore bank accounts (he is only being encouraged to do so by the goverment’s policy of taxing domestic assets more highly than the Cayman Islands).
Actually, that would be a good flip-side to Amp’s cartoon: liberals who complain about corporate welfare or tax benefits for millionaires and billionaires. “See Sue complain about the tax deduction for luxury yachts as she takes drives her Prius (which she got when she traded in her Gremlin through the Cash for Clunkers Program) to the Park-and-Ride, where she took the Light Rail Train to work.”
-Jut
Jutgory @91
Really, you don’t think a program designed to produce a certain outcome because it was considered to be good for society is a social program? Because that’s what the mortgage interest credit is for.
I’ll try my go at Chris. The tax system we have now was created by our elected representatives. The tiers are based on what our representatives decided we should pay. Personally, I think we should pay more to cover what we have decided should be paid for. But the basis for the rates is what we’ve decided as a people. Now, if you are paying any rate less than the rate on the earnings you have accumulated, then you are receiving a subsidy, because other people are paying to cover the rates we agreed to as a society.
I think that getting bogged down in the minutiae of which programs are subsidies and which aren’t misses the underlying point.
Over the course of an individual’s life, they pay a quantity of taxes and fees to the various governmental entities where they live (and some to governments elsewhere). Over the same course of life, they receive a quantity of services – broadly defined, and including their share of expenditures which cannot be assigned individually but which nonetheless must be paid for. (This is a financial calculation, not a utility calculation; Amp derives negative utility from the invasion of Iraq, but he’s paying for it anyway.)
If an individual receives more in the course of their life than they pay in, then they are being subsidized by others. If an individual receives less than they pay in, then they are the subsidizer.
Now, as it happens, there are almost no people in the latter category. (Some mega-high earners, perhaps, who do not then turn around and bilk the government out of huge quantities of service.) This is because we are currently borrowing such a large fraction of our expenditure from future generations – in effect, requiring the next set of taxpayers to pay more for less so that we can pay less for more.
That, not whether the housing deduction subsidizes people or whether it’s a “social program”, is the critical problem facing our public fisc: we are ALL being subsidized, and we are doing it on the backs of people not yet born who have not been given a voice or a vote.
Belafon,
1. I did agree way back in one of my original posts that the deductions and credits can be considered social programs, not necessarily welfare.
2. You are describing what I also said earlier, that if you view the deduction as a subsidy to some individual, I consider the arbitrary rate levels, a subsidy, based on your income level, with the rate everyone is obligated to pay being the top rate of 35%. I don’t view it that way. I view all the rules in the code as required to define an individuals effective tax rate. And that makes lots of different groups that don’t pay the same effective rate (which if you want to say isn’t fair, because the people who pay less still benefit from the services, I would agree.) But currently in my opinion I pay more in total taxes than what I take out of the system, so I am not being subsidized right now, and hope to never be.
But I would have to agree with Robert in post 93. Because our government is deciding to provide all kinds of services to individuals, which we cannot possibly afford, even if we raised rates to double their current values, we are going to be subsidized eventually, because we are spending more than we collect, because government is promising too much to everyone.
Perfect example, the President and Democrats want to continue to give a payroll tax holiday for yet another year. This I would agree is a subsidy, because we are still promising the same SS benefits in the future, but taking no money currently. This is being done to win votes in the short term, but it is irresponsible.
Now if someone wants to come back and argue we don’t pay enough in taxes for what the government provides, I can’t disagree with that. What I would say is we are taxed plenty, we have to stop promising services to people and spending more money we don’t have. And if congress wants to provide a new service, stop parsing the language and tell us they can do it without raising our taxes. Because as we know, if you say you want to raise taxes, that is almost a death sentence for a politician. Both parties are guilty of trying to show how much they want to give people, in order to get re-elected. There are a select few in congress who actually tell the truth, that the government currently promises more in services to us than we have the money to pay for. I don’t accept this as them giving me a subsidy, I feel it is irresponsible of them to promise such things.
I’m hoping we’re done with this:
Chris: You must believe that all the money people earn belongs to the government.
Other people: No, we don’t.
Chris: Yes, you do.
Chris, you don’t seem to like it any better when other people tell you that you must believe that you have no obligation to pay taxes. Have you considered that perhaps other people know what they believe better than you do?
Closetpuritan:
You are right, we are done.
We both believe we have an obligation to pay taxes.
Where we differ is in how we define our obligation.
In my world my obligation is the total I owe on the last line of the tax code. It will be a different percentage than others, but that is what the tax code says I owe.
You and others believe your obligation is the base tax rate, and the government is kindly paying you back some of it in the form of deductions and credits. So every deduction, credit, etc., including even the standard deductions, since they are different for different groups, are subsidies from the government.
And yes people pay different amounts to the government and receive the same services. To me that is not a subsidy, it is just the government charging less for some versus others. This may not be fair, but don’t call it a subsidy, which is just another way of saying some people don’t pay their fair share and others do. Homeowner A and Renter B do both pay their fair share, according to how our tax code is written. A tax code that is constantly changing, and our current administration is saying just that, some of us don’t pay our fair share, so they are going to change their tax rate through various sections of the tax code.
I don’t charge all my clients the same rate for my services, but that doesn’t mean I am subsidizing some and not others, I am just charging a different rate. And my income is the sum total of what they pay me.
Some of my clients just negotiate a better deal. And in the case of our tax code, obviously home owners have negotiated a better deal than the renter. That does not make it a subsidy.
You can believe what you want.
Chris:
If the government waived all taxes for black people forever*, would that be a social program?
yrs–
–Ben
* As a means of recompense for lost wages, this isn’t actually a bad plan … hrm …
Robert:
Hey, so you have a fundamental error in your thinking (you’re overlooking both economies of scale and transactional increase in value) but it’s a really great error, not only because it just gave me enormous insight into right-wing views on taxation (oh, they think that the amount of value in an economy is fixed*! Oh!) but also because it helped me define an idea about a bare minimum of economically acceptable statehood. Which is really cool!
If you’re interested: An economically rational state is a state where every participant in the state gets more value from the state’s existence than they pay to the state in taxes, fees, or other costs.
Note that this is a pretty low baseline… There are a lot of states which are economically rational but clearly fail on other grounds. Still not a bad starting point in terms of idealized theory of statehood**.
* Hilariously, the same mistake that Communists often make.
** Particularly because it doesn’t require us to start with some sort of tabula rasa society, like a lot of such theories do.
Except for “black people” being an exceptionally crude proxy for people whose wealth was adversely impacted by slavery and racial oppression, sure.
Let’s compromise. Let’s have the government waive all social programs and taxes passed or proposed BY black people. Everybody wins.