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Problem is, it's baked in. Social en lements (SS, Medicare etc.) in the US have a very long tail.The right approach, of course, is to get the federal government out of the racket of redistributing income.
Political Alchemy, Part I: Turning Spending Increases into Tax Cuts
Posted by Daniel J. Mitc
Politicians in Washington have come up with something far more impressive than turning lead into gold or water into wine. Using self-serving budget rules, they can increase the burden of government spending and say they are cutting taxes instead.
This bit of legerdemain is made possible, thanks to the convolutions of the personal income tax, by adopting or expanding refundable tax credits. But in this case, “refundable” does not mean the government is returning money to taxpayers. Instead, it means that money is being redistributed to people who do not earn enough to be subject to the income tax.
This is hardly a trivial issue. According to the Congressional Budget Office, the amount of income redistribution being laundered through the tax code is now so large that the bottom 40 percent of the population has a negative “effective” income tax rate. In simple terms (though perhaps with profound political implications), the income tax is a revenue generator for a big share of the population.
And the problem is going to get worse if the President’s budget is approved. Buried in the fine print, on pages 188-189 of the Analytical Perspective of the Budget, you will see that the President is proposing to increase this hidden form of spending by more than $152 billion over the next 10 years.
It is worth noting that proponents argue that it is OK to classify this new spending as tax cuts because it somehow offsets other tax payments, especially the payroll tax. I’m sympathetic to lower taxes on everybody, including the poor, but surely it is better to be honest and simply cut the taxes that people pay. The current methodology, by contrast, is open to abuse. Heck, I’m surprised politicians don’t classify other forms of spending as tax cuts. Maybe corporate welfare can be reclassified as a corporate tax cut. (I better stop lest I give the political class any ideas.)
Defenders also assert that some so-called refundable tax credits, particularly the earned income tax credit, are designed to encourage work. That is partly true, but credits like the EITC are withdrawn as income climbs, and this means poor people face punitive marginal tax rates, so the overall effect on hours worked may be negligible.
The right approach, of course, is to get the federal government out of the racket of redistributing income.
http://www.cato-at-liberty.org/2010/...=Google+Reader
Problem is, it's baked in. Social en lements (SS, Medicare etc.) in the US have a very long tail.The right approach, of course, is to get the federal government out of the racket of redistributing income.
Amazing.
Well, that's one of the reasons politicians prefer the current methodology.
The interesting question is how.
"the racket of redistributing income"
Absolutely, leave that racket to the corporations and capitalists.
Free foxes guarding a free henhouse. Good idea. If you're one of the foxes.
Last edited by Winehole23; 02-05-2010 at 04:29 PM.
How do the poor face "face punitive marginal tax rates" if they are in "the bottom 40 percent of the population [that] has a negative 'effective' income tax rate"?
Cato and other politicized stink tanks are ing jokes, much like the 5 radical politicized righties of SCOTUS.
But I have great respect for effectiveness of the Movement Conservatives and their $Bs and how they are thoroughly ing up the US.
Because as they begin to earn more (some) money, their credits go away at the same time their tax rates are rising; making the tax on the margin (the next dollar earned) punitive. NOT an incentive to work/earn more.
But the actual gist of the article is that the poor should pay more taxes. Cato and others who about this never seem to address the effects of turning the negative "effective" income tax rate to positive.
What do you think the effect would be?
I think that racket would be left to anyone who believes in redistribution of wealth. Politicians wouldn't be able to do philanthropy with others people money (which is something that would give pause to any true philanthropist), but other than that, nothing would change."the racket of redistributing income"
Absolutely, leave that racket to the corporations and capitalists.
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