In the political campaigns of 2008, candidates of both parties have proposed tax credits to accomplish certain social welfare objectives. This is in contrast to the ComingTogether Plan’s approach of separating the tax system from the benefits. Why do we think our approach is better?
- We doubt that people will look favorably upon the IRS as a benefit provider. That agency is not known for its compassion.
- The benefits are expected to be spent during the year. Why should taxpayers have to wait several months into the next year to have access to that benefit? Our plan is to provide monthly funding to the accounts for this purpose.
- It looks to us like this approach is being used to disguise an increase in social programs as a tax cut.
- Some proposals include the phase out of these tax credits for at certain income levels. This is equivalent to the means testing in current welfare programs, which effectively raises the tax rate at the income level where the phase out begins. Our approach is to avoid spikes in tax rates since those discourage people from being more productive.
On the other hand, it is pleasing to see proposals that trust Americans with the means to accomplish the social goals so that the detail decisions are at the most local possible level, rather than providing a one-size-fits all government provided solution.